TSX Venture Exchange and Gold
In a shortened trading week due to Good Friday, the Venture continued to display some positive signs as it inched slightly higher to finish at 683 Thursday. As markets reopen Monday, the Index may have a couple of major factors in its favor as it attempts to gain traction above 680 resistance – a weakening U.S. Dollar Index and higher Gold prices following Friday’s disappointing U.S. jobs report.
It’ll be interesting to see how the Oil market, with an opportunity for reflection over this long weekend, reacts to the “framework” nuclear agreement with Iran (this deal, which is still at least a few months away from being finalized, is already facing stiff opposition from members on both sides of the aisle in the U.S. Congress). Technically, WTIC appears poised for a rally, and that would be another immediate supportive factor for the Venture. Iranian Oil sanctions aren’t being lifted anytime soon. Even if a final agreement does emerge and actually gets implemented (Congress has to agree to lift American sanctions), energy experts believe that any appreciable impact on an already glutted global Oil market is highly doubtful for at least 6 months and probably more than a year. It’s estimated that Iran has approximately 20 million barrels of Crude in storage that it could potentially release on the market. But that’s a longer-term issue.
The correlation between the Venture and WTIC has been extremely high in recent months as seen in this 15-year monthly comparative chart, so any rally in Crude is almost certain to give the Venture a lift.
Venture-Dollar Index Dynamic
It’s no coincidence that the Venture turnaround started Wednesday, March 18, when the Fed emerged from its 2-day policy meeting with a statement that was dovish enough to take the wind out of the sails of the greenback. The Dollar Index clearly hit a temporary top last month of just under 101 after its fastest rise, since last summer, in 40 years. The likelihood of an extended greenback correction has now increased substantially after Friday’s dismal jobs report which confirms that U.S. economic growth slowed considerably during Q1. This most certainly puts a Fed rate hike off the table until at least late this year.
Additional dollar weakness this month would create the conditions for a Venture breakout through important chart resistance around 707.
If some companies can also show some success on the exploration front – there’s nothing like a blockbuster drill hole to get investors excited, that’s what this market needs – then the Venture has a chance to snap out of a 7-month slump in a powerful way.
Significantly, Venture support in the 650’s (Fib. level) held during a rocky first half of March as it did during January. John’s 4-month daily chart shows RSI(14) with solid up momentum and plenty of room to move higher at 54%. The breakout above resistance at 680 still requires confirmation.
Note the increasing buy pressure (CMF) and the bullish trend as shown by the ADX. In addition, the Venture is now almost 10 points above its 20-day moving average (SMA) which is in an excellent position to reverse to the upside this coming week.
Venture 6-Month Chart
This 6-month chart shows how the Venture is still grappling with its 50-day SMA, currently at 684. This SMA has flattened out and is threatening to imminently reverse to the upside. Since pushing above a downtrend line in January, the Venture has traded within a narrow range of 51 points which includes very strong support around 660. This market just needs a catalyst to take off to the upside and clear critical resistance slightly above 700.
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 carry out exploration or 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 eventually create a supply problem and therefore great opportunities in Gold and quality Gold stocks. 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.
Gold
Gold kicked off April on a positive note Wednesday, rebounding from a low of $1,179 as the market responded well to a weaker than expected ADP monthly private payrolls report which obviously foreshadowed Friday’s much weaker than expected March jobs report from the Labor Department. Bullion’s first chance to react to Friday’s numbers will come during electronic trading Sunday night.
For the week, Gold was up $4 an ounce as it closed at $1,202. Confirmation of a potential breakout above $1,200 must be confirmed Monday. Fib. resistance levels to watch on the 6-month daily chart are $1,217, $1,240 and $1,264.
Silver slowed down slightly last week, losing 22 cents to close at $16.75 (updated charts Monday morning). Copper fell 3 cents to finish at $2.73. Crude Oil added 27 cents a barrel to finish at $49.14 while the U.S. Dollar Index fell more than half a point to 96.74.
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 and will continue to support prices. Despite Gold’s largest annual drop in three decades in 2013, the fundamental long-term case for the metal remains solidly intact based on the following factors:
- Growing geopolitical tensions, fueled in part by the ISIS and al Qaeda, and a highly dangerous and expansionist Russia under Vladimir Putin, have put world security in the most precarious state since World War II;
- Weak leadership in the United States and Europe is emboldening enemies of the West;
- Currency instability and an overall lack of confidence in fiat currencies, except King Dollar at the moment;
- Historically low interest rates;
- Continued strong accumulation of Gold by China which intends to back up its currency with bullion;
- Massive government debt from the United States to Europe – a “day of reckoning” will come;
- Continued net buying of Gold by central banks around the world;
- The Oil price plunge since last year which may cause destabilization of certain Oil-dependent economies;
- Mine closings, a sharp reduction in exploration and a lack of major new discoveries – these factors should contribute to a noticeable tightening of supply over the next couple of years.
Looks like a potential head and shoulders forming on the Gold price which would coincide with a drop to 1100-1000 for the final flush out. Let’s hope the USD get its legs cut out from under it to push GOLD above the 1300 top in January.
Personally, I think we’ll probably get a push to 1275-1300 in the next couple months which will track the correction in the USD and then by May-June the H-S pattern will form with the final push to the floor in Q2-Q3 and a new long term bull market forming in Q4.
Ride the short term rally in the next few months with well known speculative small-med cap companies such as KAM, ATC, AR, FR, AKG, AMM, LVN, ITH, MAY, AUM. Stay away from the micro caps as they may not have the volume to ride this short term wave. If you’re long term on the micro’s its not a bad time to invest but I think there will be better opportunities in Q2-Q3 to bottom fish.
Comment by Andrew M — April 4, 2015 @ 8:45 am
in 22.5 hrs we will find out what gold’s reaction will be to the USA’s dismal jobs report on Friday!
Comment by Tony T — April 4, 2015 @ 3:42 pm
This play which is essentially a
non-commodity play with a Cdn micro-cap O&G company could Im my view be a fifty bagger from here.
The math is simple for this .04 cent stock
$1.8 Billion statement of claim divided by 17% for Petromin Resources.
Chatter is this arbitration will never proceed and be settled much sooner then later.
Read at Stockhouse website
The U.S. lawyers (very high profile)
Winston website
They approached TerraWest and after doing their due diligence decided to represent them
I would appreciate BMR gangs opinion once you’ve had a chance to do your due diligence
Keep up the good work here and thanks…Don
Comment by Don — April 4, 2015 @ 9:55 pm
I think that we will hear from GGI this week. I also wonder about the fact that Teck and Antofagasta held talks of some sort. There is a connection between these two companies and the sheshlay region. Wishful thinking perhaps. Richard l
Comment by richard l — April 5, 2015 @ 8:28 am
I believe we will, as well, Richard. My take on the Bloomberg report is that there was some substance to it, that at the very least Antofagasta initiated some discussions with Teck (though I can’t ever envision a merger between the two). It’s a fact that Antofagasta is looking hard at British Columbia. And I don’t believe it’s just a strange coincidence that Dr. Razique, who was working on behalf of Antofagasta at projects in B.C., Quebec and the U.S., is now focused intently on the Sheslay district and specifically the Hat Property through Doubleview. Things are going to heat up in that area again very soon in a major way given developments on the ground and the potential that we know exists—the market just has some catching up to do.
DBV’s great advantage at this point is how the Hat has matured over the last several months as a growing deposit with increasing grades, and how it appears certain they’re about to deliver the best hole ever drilled so far in the district (#23 – I’m expecting 500 m of the best grades yet). GGI’s big advantage, besides their financial strength with a fully funded program, is scale – a property nearly 3 x the size of the Hat and Sheslay combined, and all the same geochem/geophysical signatures, so the Grizzly could literally host multiple deposits across a vast area. 3 drill holes and they will have their discovery IMHO. And somewhere in the district is a high-grade starter area, which is critical. This will become a new B.C. mining camp.
Comment by Jon - BMR — April 5, 2015 @ 9:08 am
Gold on the move. Curious to see how the venture Will do this week.
Comment by tony t — April 5, 2015 @ 4:48 pm
As a shareholder I wrote DBV. I never did hear back from them. This coupled with weak support of their stock and poor promotion at least in my opinion prompted me to sell the stock at a small loss. I would not buy it again no matter what they do.
Comment by Hugh — April 5, 2015 @ 8:26 pm
Hugh, I don’t know how many times I’ve heard from investors about sending emails to companies that never get a response. This could be for any number of reasons, but I will repeat yet again – email is the worst form of communication with companies. Pick up the phone, or – better yet – speak to management in person if you have that opportunity. Email is NOT the way to go – you may get a generic response, if one at all. It’s unfortunate you sold your DBV for the wrong reasons. I believe they’re about to deliver the best hole the Sheslay district has seen to date. Things have fundamentally changed on the ground there, but you have to understand the market is behind the curve at the moment. That’s good, because when you’re a step ahead of the market, that’s how you make money.
Comment by Jon - BMR — April 6, 2015 @ 1:47 am
Hugh- I concur with Jon. You must call him and it takes many attempts to get a hold of him. He is very very busy and is always on the go. I have been told by companies before that they prefer phone over email as its a lot quicker and less time consuming. Farshad is a CEO. Can you imagine a CEO receiving tons of emails from shareholders while trying to prepare the next drilling program, setting up funding, talking to brokers, meeting business people, making the necessary filings and taking care of all the duties they have??? Unfortunately you are about to learn a valuable lesson that you don’t sell a very promising stock like DBV which could start to move to the upside very soon because of an unanswered email.
Comment by d4 — April 6, 2015 @ 3:06 am
Hugh- I would prefer a CEO/President ignore a few emails once in a while to ensure they don’t neglect important company business than drop the ball on stuff and experience delays. With all the emails these guys receive, can you imagine if they put these a priority over important business? If they did I would sell as its the company business that will create sustained shareholder value.
If you sold last week, I probably bought your shares as I was an active buyer on 2 days last week…thanks.
Comment by d4 — April 6, 2015 @ 3:36 am
IMT, volume right off the bat this morning. Drill could be in the sweet zone today.
Comment by Dan — April 6, 2015 @ 5:48 am
Indeed, Dan, I suspect it is…you can tell by the trading this morning…Venture is breaking out as well…this is going to be a good week…
Comment by Jon - BMR — April 6, 2015 @ 6:03 am