TSX Venture Exchange and Gold
Volume picked up modestly on the Venture last week with the Index continuing to flirt with the technically important 1240 resistance area. Intra-day, the Venture climbed as high as 1247 in early trading Monday before being knocked down 17 points to 1230 at the close. But it stayed at or above that level the rest of the week which was very positive. Friday’s close at 1235 (a 5-point loss for the week) was slightly above the rising 10-day moving average (SMA) with the rising 20-day SMA at 1220 also providing support. This market should begin to pick up some serious momentum once the 50-day SMA reverses to the upside, and this has a good chance of occurring by the end of the month or early February.
Below is an updated 7-month daily CDNX chart from John. Volume and buying pressure continue to gradually increase, while the RSI(14) trend is positive. There’s every reason to believe a move through 1240 will occur very soon.
Gold
Gold pushed higher again last week, climbing $22 an ounce to $1,685. It broke above a down trendline, as shown in John’s 6-month daily chart below, the EMA-20 has reversed to the upside, and the RSI(14) trend is positive. The combination of these three technical factors could give Gold the energy it needs now to break above resistance at $1,700. Fundamentally, monetary printing presses around the globe are working overtime. In the United States, an increase in the debt ceiling is on the way and the Fed’s balance sheet is increasing by $85 billion a month. The potential for a near-term upside breakout, in our view, is very high at the moment.
Silver posted a strong gain last week of $1.45 an ounce to $31.89 (John will have his usual short-term and long-term Silver charts Monday morning). Copper held steady at $3.64. Crude Oil gained $2 a barrel to $95.56 while the U.S. Dollar Index rebounded half a point to 80.06.
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 keep the euro zone intact and to kick-start the global economy. It’s hard to imagine Gold not performing well in this environment.
