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TSX Venture Exchange and Gold

The Venture Exchange snapped a four-week losing skid with a modest 10-point jump to close the first quarter of 2012 up 5.5% to 1566 (Gold was up 6% while the TSX Gold Index was down 6.7%).  Traditionally, a positive first quarter has almost always been a bullish sign for the Venture Exchange.  In fact, the market has posted yearly gains in 8 occasions out of 9 since 2001 when the first quarter has been positive.  Yes, March was a disappointment with a 106-point loss (6.3%) but a turnaround is certainly in the works based on historical patterns. Below is an updated CDNX chart from John (3-month weekly chart) that shows a normal Fibonacci retracement from the gains since December.  The market is now at its 10-day moving average (SMA) which has provided resistance almost the entire month – immediately closing above that level as April begins would help generate some fresh momentum.

Gold

Gold appears to be in the process of developing a very bullish inverted head and shoulders pattern.  For the week, the yellow metal posted a gain of $6 an ounce to $1,699.  Fibonacci support at $1,643 was tested on numerous occasions in March and held (see what could be the right shoulder of the H&S pattern

The latest COT structure for Gold is bullish – commercial short and large spec long positions are at a relatively low level again – similar to the levels that prevailed before the strong rally in Gold and Silver that occurred in January and February.

Silver was down 28 cents for the week and closed at $32.28.  Copper gained 3 pennies to $3.84.  Crude Oil sold off to $103.02 while the U.S. Dollar Index fell one-third of a point to 78.95.

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), money supply growth, 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.