BullMarketRun.com

TSX Venture Exchange and Gold

It was another great week for the Venture Exchange with increasing volumes and a 58-point gain to 1629, the sixth straight weekly advance.  The Index got through resistance around 1575 with the ease of a knife through butter.  Most brokers and investors aren’t aware of this at the moment, but if you look at John’s 10-year monthly chart below you’ll see how the CDNX has started an extremely bullish “Wave 3” pattern that ultimately should take the Index right up to the 2006 and 2007 highs.  As John states, the combination of the December “hammer” and the January white candle has created a powerful reversal pattern. The bear market that started in March of last year is over and a new bull run has commenced.  There will be pullbacks along the way, of course, but those will present buying opportunities for astute investors.  For now, the 10 and 20-day moving averages (SMA’s) can be expected to provide strong support.  The 50-day SMA is now reversing to the upside in a pattern similar to what occurred in January, 2009, and September, 2010.

The CDNX party is “on” and those who show up much later will allow those who arrived early, like our readers, to pocket fortunes.

So what is driving all of this?  There are a few major factors in our view that some traders and investors have picked up on, so cash that has been sitting on the sidelines has been aggressively entering the markets recently and will continue to do so.  First, there were some very respected analysts at last week’s Resource Conference in Vancouver who made a strong case that the worst of the liquidity crunch in the euro zone is over, thanks to unlimited three-year loans to banks and other measures introduced by the ECB.  Second, the Fed indicated on Wednesday that it intends to keep interest rates at “exceptionally low levels” until late 2014, compared to guidance of mid-2013 previously.  Additionally, the FOMC signaled that further accommodation would likely come from adjustments to the balance sheet.  There is certainly a renewed belief among traders and investors that the Fed stands ready to support financial assets is helping contain festering euro zone worries.  Third, the U.S. economy is holding up well and China is now more focused on growth than inflation as monetary policy in the world’s second-largest economy has gone into “easing” mode.  Negative real interest rates around the globe are here to stay for an extended period and that’s very bullish for Gold and commodities in general which creates a very positive environment for the Venture Exchange.

Sentiment has clearly changed on the CDNX.  We know that based on market reaction to news from various companies and sharp increases in trading volumes.

Gold

Speaking of Gold, the yellow metal shot through resistance at $1,700 last week to close Friday at $1,737.  The weekly gain was $70, bringing Gold’s advance for the month to 11%.  So much for those who predicted the end of the Gold bull market just weeks ago when it fell below its 200-day moving average (SMA).  Each time that has occurred over the last decade or so (about half a dozen times), Gold has been an incredible buy.  This time was no different. Forced selling by European banks was a driving force in Gold’s weakness over the final few months of last year.

We fully expect Gold to hit a new all-time high in 2012 but it will likely need to catch its breath in the near future.   The next two major areas of resistance are $1,750 and $1,800.  So we do expect Gold to calm down a bit but build a strong base for the next major leg up.

Silver, which is up 22% this month, gained another 79 cents last week to close at $33.99.  Copper jumped 14 cents to $3.87.  Crude Oil was up $1.23 to $99.56 while the U.S. Dollar Index fell by more than a point to 78.84.

The “Big Picture” View Of Gold

As Frank Holmes so effectively illustrates at www.usfunds.com, Gold is being 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, is having a huge impact on Gold.

The fundamental case for Gold remains incredibly strong – currency instability and an overall lack of confidence in fiat currencies, governments and world leaders in general, an environment of historically low interest rates and negative real interest rates that won’t end anytime soon (inflation is greater than the nominal interest rate even in parts of the world where rates are increasing), massive government debt from the United States to Europe, central bank buying, flat mine supply, physical demand, investment demand, emerging market growth, geopolitical unrest and conflicts, and inflation concerns…the list goes on.  It’s hard to imagine Gold not performing well in this environment.  The Middle East is being turned on its head and that could ultimately have major positive consequences for Gold.