TSX Venture Exchange and Gold/Silver
The Venture Exchange recorded its third straight weekly advance, climbing another 19 points (1.5%) to close Friday at 1252. From a technical perspective, the Venture is currently in an uptrend with 10 and 20-day supporting moving averages at 1228 and 1208, respectively. We believe we correctly identified the yearly low in this market at 1154 intra-day June 28. A rounding bottom formation, and strong evidence of sellers’ exhaustion, is more convincing evidence that the risk/reward ratio with the Venture at the moment has turned very favorable. “Smart money” has been jumping in recently but the general public is still nervous about the speculative market – a good sign. When they’re all excited and everyone’s buying, that’s the time to aggressively lock in profits. Back in late June, I remember having lunch with a very sophisticated and successful pro trader on Howe Street who said market sentiment at that point was about the worst he’d seen in 40 years. He also predicted a bottom had formed and that the Venture would have a powerful finish to the year. We’ll see what happens, but those were words of wisdom from a wealthy investor who I suspect will be proven right.
Below is a 4-month daily chart from John that shows strong buying pressure but temporary resistance right around Friday’s close at 1252. It’ll be interesting to see what happens early in the coming week, but some minor consolidation and a test of the 10-day SMA certainly can’t be ruled out. That’s normal in any uptrend. Volume does need to increase significantly for this market to really take off and bust through stiffer resistance at the declining 100-day SMA just under 1280. That’s a scenario we expect will unfold in September.
Two interesting things to point out – the 50-day SMA has flattened after being in decline since early April, and a reversal to the upside appears imminent – anytime within the next 5 to 10 trading sessions. The 1000-day SMA has flattened out at 1500 after a 4-year decline. This is highly important if you look at this SMA from a long-term perspective. Chances are, it will begin rising again by October which would be a powerfully bullish sign for the Venture. Watch this reliable indicator very closely. Aggressive global central bank action, coupled with the right political dynamics out of Washington and the euro zone, could produce a “risk-on” environment and a big move higher in the markets in the fourth quarter. Keep in mind, there is a lot of cash sitting on the sidelines – consider that the market’s fuel reserve.
Gold
Gold staged a powerful advance last week, busting through two critical resistance levels ($1,620 and $1,640) and closing Friday at $1,671 for a gain of $55 an ounce. The bulls are back in control (Gold is at its highest level in 16 weeks) and this does mean higher prices are coming, but some minor consolidation is very possible before we see the yellow metal power through $1,700. You can see on John’s six-month chart below that short-term overbought conditions may need to unwind modestly to set the stage for another sharp advance. Bloomberg reported on Thursday that Gold investors were the “most bullish in nine months” as its survey of 29 of 35 analysts indicated that they expected prices to rise – only three were bearish toward the metal.
It’s interesting to point out that the Gold-to-Brent crude oil ratio has historically averaged about 16.5x. According to this ratio and using an approximate Brent price of $115 per barrel, the price of Gold should be roughly $1,900, on par with its all-time high close in 2011.
Lately, we’ve been yelling from the rooftop with regard to Silver and how it was oversold technically and ready to explode from the $26-$27 support level. Well, Silver finally did explode last week, gaining $2.73 an ounce to close at $30.82. A powerful “Wave 5” move appears to be underway in Silver which is also now rising faster than Gold (expect that trend to continue). John will have an updated long-term Silver chart in Monday’s Morning Musings. After last week’s strong advance, a slight pullback is very possible but smart traders and investors will use that to add to positions and accumulate shares in quality Silver stocks – producers and explorers.
Copper edged up a nickel last week to $3.41. Crude Oil gained 14 cents to $96.01 while the U.S. Dollar Index fell a full point to 81.62.
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. Massive central bank intervention appears increasingly likely to prevent a breakup of the euro zone and to kick-start the global economy. It’s hard to imagine Gold not performing well in this environment.
Jon my first ever question for you. It’s been bothering me & although
i never did want to pose a question, here i am & it must tell you
that i am indeed bothered.
You mentioned pre drilling that once the drilling started, within a
couple of days, RBW would be able to report visuals. What happened
please ?
Thanks in advance. R !
Comment by Bert — August 25, 2012 @ 1:54 pm
I very much welcome your question, Bert. First off, the company just gave a visual report and a short update. They have intersected quartz-mica schist/gneiss, “as expected” (which hosts the International mineralization). Did I speculate in the last few weeks that at some point during the drill program (at some point, not 2 days after drilling begins) would RBW possibly provide visual reports (which could take different forms)? Absolutely, and that was in the context of a comment that was made that since assays won’t come until (as someone stated) October or November, what could possibly move the share price in the meantime? (the answer, of course, is often speculation). I stated it wouldn’t surprise me, given the nature of the mineralization at the International, that at some point a visual report of a high-grade “hit” could occur (or maybe some core pictures). That, of course, is totally up to the QP. Keep in mind, though, Bert, that companies have to be very careful when reporting information like this. You can hit some great-looking mineralization (I’ve seen it before) and the assays turn out to be very disappointing. Or, alternatively, you can hit some mediocre-looking rock which you don’t think will assay very well and it does. That’s the business. Any geologist will tell u that. So it’s a risky game in reporting visuals. Did GoldQuest report visuals before their first hit at Romero? No. I think the last thing any company wants to do is hype-up some visuals (a good example is White Tiger last year, look at the chart) from drilling and then under-deliver. That hurts credibility. I think Bob Morris delivered the perfect update Friday. It was short, sweet and to the point – just the facts, and no more than he needed to say. A very confident report but no “hype”. They may have hit some real sweet spots in the first couple of holes but want more time to analyze, or want to wait for assays. This is just speculation on my part, but I see a couple of important clues in the NR that things are looking good. The fact they’re expanding the drill site locations, and that they’re intersecting the quartz-mica schists as expected. At some point down the road, as this drill program continues, I believe we’ll get more clues. This is still early in the game, my friend, and I’m sure the geos are looking for patterns and closely examining structure. This is a great property, Bert, so have faith. A lot of people bailed too early on GQC and lost out on a lot of profit. Don’t try to over-think RBW. If you can’t sleep at night, simply sell and move on to something else. Then you don’t have to worry, unless the next thing becomes a worry too. There are plenty of RBW buyers around. I added to my personal position Friday after I read the news.
Comment by Jon - BMR — August 25, 2012 @ 2:51 pm
BMR says all the right things about RBW. My sixth sense tells me, this is a real thing… I have 50% of my portfolio in RBW and expect at least 250% profit out of it. We need a lot of patience….
Comment by Theodore — August 25, 2012 @ 4:00 pm
Jon
Thank you again !
The only thing i didn’t want to read though was, ”if i am unable
to sleep at night, to sell”. I do sleep without fear of RBW, because
i feel i have a good grasp of the market & can exit without much of a
loss. Please be reminded, i already sold out once & you claimed to be
the buyer. After the fact, i am able to state, what a good move that
was on my part. This is not being stated to offend, but if i felt as
confident about any play as you do about RBW, i would not tell a friend
to sell, even if he or she couldn’t sleep at night. Forgive me Jon, but i
want to call that constructive criticism. Recently my mind has struggled,
not necessarily with what you have mused, but being a busy body, i do
find out things. Like the saying, there’s a million stories in the naked
city. I try not to be specific, instead try to converse in general terms,
except recently about the financing, because i do owe it to you & my cyber
friends, not to make specific claims, until i am absolutely certain of my
facts. I just admitted to being uncertain, therefore i will keep on keeping
on. R !
Comment by Bert — August 25, 2012 @ 4:09 pm
Bert, you’re welcome, and thank you as always for your feedback which is appreciated. In terms of my comment about “if you’re unable to sleep at night” over RBW, that’s a totally general expression regarding investing in any junior exploration stock (or any investment for that manner including a business). If you can’t sleep at night, you need to get out of it – very simple. I always tell people that. I’m glad to hear you’re sleeping without fear of RBW! So am I. The slow but steady rise in RBW over the past year has been impressive and I’d rather see that kind of action than a premature parabolic move. At some point, given the technical patterns and the fundamentals that should come into play, I suspect we will see a dramatic upside move in RBW. At the right time. There’s lots going on here, and the International has great capability of producing a whopper of a hole. Hang on for the ride.
Comment by Jon - BMR — August 25, 2012 @ 4:48 pm
Absolutely, Theodore, well-stated.
Comment by Jon - BMR — August 25, 2012 @ 4:50 pm
Theodore
How many senses do you have ? There are 5 overall senses,
sight, hearing, touch, taste & smell… Your 6th sense must
be in the sub-sense category. Anyway, i appreciate your having
even a sub-sense for Rainbow. R !
Comment by Bert — August 25, 2012 @ 5:03 pm
Another day, another dollar & yes, thank God we are
surrounded by water. By the way, i didn’t lay awake
last night thinking about Rainbow, but it is on my
mind this morning. I have again visited BMR’s disclaimer
and i will use part as my punch line quote We’re continuing
with our plans to ultimately build a very unique investment
and money-management resource site that goes considerably
beyond what we have now. unquote So i ask myself the
following, after 3 years building up their reputation, do
i really think they would waste it all by picking & siding
with a loser, after all, they seem to have chosen it as
their signature investment opportunity. My answer has to be
”No”, so there you go, i feel better already. Although they
do bring forward numerous stocks, it appears obvious that
Rainbow is presently their choice to further help fulfill their
dream of a very unique investment site. In fact, both Jon & John
claim they have taken positions in RBW & i have no reason to doubt
their claim, and it does help to confirm our faith in the company.
In fact, except for Jon having a position in GQC, i don’t think they
hold other stocks, further proof of their faith in RBW. Now we await
proof that there is a pot of gold or even silver at the end of that
Rainbow. R !
Comment by Bert — August 26, 2012 @ 4:41 am
My sixth sense forecast for coming week!
RBW.. Low 23 cents High 27 cents, Close at 27 cents
GQC.. Low $1.60 High $1.81, Close at $1.66
GBB.. Low 8.5 cents, High 10.5 cents, Close at 9.5 cents
EVR.. Low 10 cents, High 12 cents, Close at 10.5 cents
CUI.. Low 4.5 cents, High 5 cents, Close at 5 cents
Comment by Theodore — August 26, 2012 @ 6:03 am
whats the time frame for assay results 4- 6 weeks???
Comment by BRIAN — August 26, 2012 @ 10:17 am
RBW is doing multi-element assaying so 6 weeks from here, Brian, seems reasonable in my view…..end of September to mid-October…..this would probably allow for any re-checks on high-grade numbers as well…..
Comment by Jon - BMR — August 26, 2012 @ 10:26 am
it will be snowing here by then
Comment by BRIAN — August 26, 2012 @ 12:55 pm
Haven’t u heard of climate change (lol)? Actually, if RBW chose to, it could drill thru the winter at the International – just a matter of keeping the roads clear. The access is better than ever.
Comment by Jon - BMR — August 26, 2012 @ 12:58 pm