In a shortened Christmas trading week, the Venture climbed 24 points over three sessions to get back above the 1200 level on a closing basis (1202) for the first time since December 3. The fact that the Venture held critical support this month and could not be knocked down to a new 52-week low, despite the pressures of tax-loss selling, weakness in Gold, and mainstream media hysteria over the so-called “fiscal cliff”, is extremely encouraging. This bodes very well for the first quarter of 2013 and a more healthy market in general throughout the year. We view the last seven months in particular as a giant bottoming pattern, and the reversal to the upside during the fourth quarter in the 1,000-day moving average (SMA) tells us the trend is changing for the better. A rising tide will not lift all boats, however, so as always it’s best to stick with companies that have active exploration programs and are enjoying success on the ground.
Below is an updated 7-month Venture chart. The 1260 level that was touched in late November is key – that’s the current 100-day SMA and it’s also very close to the top of the down trendline that has been in place for a year-and-a-half. Confirmation of a significant new uptrend will occur once the Venture is able to clear that important technical hurdle. Prior to 1260, there is also some resistance at 1220.
Gold
Gold struggled in December but will still manage to post its 12th consecutive yearly advance, albeit a very modest one – less than 6% which will be the lowest return since 2008 and just a fraction of its nearly 30% return in 2010. But the “big picture” outlook for Gold remains very bullish, in our view, given record low interest rates and a host of other factors including an expanding Federal Reserve balance sheet. There’s also an important correlation between the Gold price and the U.S. debt ceiling as pointed out by the chief strategist for Morgan Gold, Edmund Moy, in an interview with CNBC:
“Since 2008, Gold has correlated the best with our national debt ceiling,” stated Moy, who’s also a former director of the U.S. Mint (2006 to 2011). He expects bullion to make a new run in 2013. “Whenever Gold has been above or below the debt ceiling, it will normalize to wherever that debt ceiling is,” he said, explaining recent correction. “If Congress lifts that debt ceiling to $18 trillion, I see Gold rising to $1,800.”
Gold has shown strong support around $1,640 and closed Friday at $1,656. Below is a 6-month daily chart from John. Note how Gold’s RSI(14) has been in a down trendline since late November – we’ll be watching closely for a break above that down trendline in the near future which would suggest renewed strength.
Silver finished the week at $30.03. Copper closed at $3.56. Crude Oil continued to rise, finishing at $90.80, while the U.S. Dollar Index closed at 79.68.
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. QE3 has arrived, and massive central bank intervention is now taking place 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.
