BullMarketRun.com

Sheslay Valley, NW British Columbia

TSX Venture Exchange & Gold

Gold climbed higher last week, providing support for the Venture as U.S. equity markets retreated significantly.  The S&P 500, in fact, suffered its worst weekly decline (2.6%) since 2012.  The Dow tumbled 410 points Thursday and Friday, losing 2.4% for the week, while the Nasdaq shed 3.1% last week.  Biotechnology and Internet-related plays have been hit hard during what appears to be a global shift from high growth “momentum” stocks into “value” stocks with strong fundamentals and reasonable market caps.  Certain companies in the resource/exploration space should benefit from this shift.  The Venture gave up only 9 points or just under 1% to finish at 998 while the TSX also lost less than 1%.

Venture 9-Month Daily Chart

Below is an updated 9-month CDNX daily chart from John.  Sell pressure is declining in a similar way as it did in late December.  In addition, RSI(14) appears to have bottomed and is now threatening to push above a downtrend line on this short-term chart.  So it’s quite possible that the late March closing low of 985, at the 300-day moving average (SMA), may hold, which also corresponds with Elliott Wave Theory.  If not, the Venture is underpinned by other technical support including rising 100 and 200-day SMA’s at 970 and 950, respectively, and Fib. retracement levels (from the 1050 March high) between 945 and 983.

The fact that the Venture is holding up so well in the face of a sell-off in U.S. equity markets is highly encouraging.  If the stock market in Greece can climb 45% in a year, so too can the Venture.  Overall, the Venture has a very bullish technical posture following the first quarter of 2014.  We see big things on the way, powered in part by fresh discoveries.

Speaking of discoveries, we’re in the heart of what we’re convinced will emerge as the most exciting Canadian exploration story of the year in 2014.  The Sheslay Valley in northwest British Columbia has enormous scale to it with mineralization evident from one corner to the other.  Doubleview Capital Corp. (DBV, TSX-V) continues drilling its Cu-Au porphyry discovery at “Anomaly B” and has the potential, based on publicly-available geological, geophysical and geochemical data, to make another discovery more than 2 km to the west-northwest at “Anomaly C” during this current round of drilling.

Meanwhile, Prosper Gold Corp. (PGX, TSX-V) and Garibaldi Resources Corp. (GGI, TSX-V) are gearing up to begin their own drill programs, while other juniors in the area are busy accumulating data.   We have some spectacular pictures from a helicopter fly-over of the entire trend that we’re compiling and will post in the coming days.  Off to the west of the Sheslay Valley, a high-grade Gold play could be in the works and we’ll soon be informing our readers of that.  Most investors have yet to discover what’s unfolding here – the emergence of a potential world class mining district – but once critical mass sets in, look out.  Geologically, this is one of the most prospective areas in the entire world.  Literally many billions of pounds of Copper and many millions of ounces of Gold could be proven up in the Sheslay Valley with deposits on more than one property, creating unusually attractive economies of scale.  The fact that the three most advanced companies in this district have a current combined market cap of only $31 million speaks to the enormous wealth-building opportunity the Sheslay Valley may offer investors at this early stage.  One company alone could ultimately command a market cap of $300 million or more through one large Cu-Au porphyry deposit consistent in grade and tonnage to others in this mineral-rich province.  The Northwest Transmission Line is a game-changer in northern B.C. and will encourage new exploration and facilitate the development of new projects, so the Sheslay Valley’s time has arrived.

The Seeds Have Been Planted (And Continue To Be Planted) For The Next Big Run In Gold Stocks

There’s no better cure for low prices than low prices.  The great benefit of the collapse in Gold prices in 2013 is that it forced producers (at least most of them) to start to become much more lean in terms of their cost structures. Producers, big and small, have started to make hard decisions in terms of costs, projects, and rationalizing their their overall operations.  Exploration budgets among both producers and juniors have also been cut sharply.  In addition, government policies across much of the globe are making it more difficult (sometimes impossible) for mining companies to put Gold (or other) deposits into production, thanks to the ignorance of many politicians and the impact of radical and vocal environmentalists (technology has made it easier for groups opposing mining projects to organize and disseminate information, even in remote areas around the globe).   Ultimately, all of  these factors are going to create a supply problem – think about it, where are the next major Gold deposits going to come from? On top of that, grades have fallen significantly just over the past decade.

It doesn’t take a rocket scientist to figure out that the next huge bull market in Gold stocks is just around the corner due to demand-supply dynamics, much leaner producers who will suddenly become earnings machines, and a junior market that will be healthier simply because a lot of the “lifestyle” companies sucking money out of investors will simply disappear or get taken over by individuals or groups who are actually competent and serious about building shareholder value.   A healthy “cleansing” in the market has been taking place.  As this continues, more and more seeds are being planted for an incredible future move in well-managed Gold producers and explorers that could make the dotcom bubble look like a tea party.  As for the juniors, focus on the small universe of companies that have the ability to execute both on the ground and in the market.  Companies that are strong financially, have superior exploration prospects, competent management and clean share structures.

Gold

Gold enjoyed a strong week, closing at $1,318.  Bullion has very solid chart and Fib. support around $1,275 while important resistance is at $1,350, just above a downtrend line. That will be the key area for Gold to push above and remain above in order to create the conditions for a sustained advance.

The “Big Picture” remains very positive in our view.  The question is timing.  When will Gold be ready to put on a show?  Many analysts are still bearish on bullion but that has to be considered bullish from a contrarian standpoint.

Below is an updated 1-year daily chart from John.  Over the past 10 months it appears that bullion has been forming a bullish cup-with-handle pattern with the handle now under construction and the $1,270’s acting as support.  The Russia-Ukraine situation is heating up, and that could give Gold a further boost in the coming week.

The Financial Times reported today that Mario Draghi has signaled that the ECB is getting ready to unleash new unconventional monetary policy in a bid to fight low inflation.  “The strengthening of the exchange rate would require, to make our monetary policy stance to remain equally accommodative, it would require further monetary policy accommodation,” Draghi said at a press conference in Washington today. “The strengthening of the exchange rate requires further monetary stimulus. That’s an important dimension for our price stability.” Draghi’s words came after he was pressured all weekend over the dangers of allowing inflation to slide lower – by the IMF, finance ministers and central bank governors from all over the world.

Silver finished the week at $19.96 while Copper closed at $3.03.  Crude Oil strengthened to $103.74 while the U.S. Dollar Index continues to struggle – it closed at 79.49 and appears destined to vigorously test critical support at 79.

The “Big Picture” View Of Gold

As Frank Holmes so effectively illustrates at www.usfunds.com, the long-term bull market in Gold has been driven by both the Fear Trade and the Love Trade.  The transfer of wealth from west to east, and the accumulation of wealth particularly in China and India, has had a huge impact on bullion.  Despite Gold’s largest annual drop in three decades in 2013, the fundamental long-term case for the metal remains solidly intact – currency instability and an overall lack of confidence in fiat currencies, governments and world leaders in general, an environment of historically low interest rates, a Fed balance sheet now at $4 trillion and still expanding, money supply growth around the globe, massive government debt from the United States to Europe, central bank buying, flat mine supply, physical demand (especially from China), emerging market growth, geopolitical unrest and conflicts…the list goes on.  However, deflationary concerns around the globe and the prospect of Fed tapering had a lot to do with Gold’s plunge during the spring of 2013  below the technically and psychologically important $1,500 level, along with the strong performance of equities which drew “momentum traders” away from bullion.  June’s low of $1,179 was likely the bottom for Gold.  Extreme levels of bearishness emerged in the metal last year.  With the long-term bull market remaining intact, we expect new all-time highs in Gold as the decade progresses.  Inflationary pressures should eventually kick in around the globe after years of ultra-loose monetary policy.