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TSX Venture Exchange & Gold

Central banks are investors’ best friends right now.  With major indices around the globe performing so well, including the Dow which is now just 200 points off its all-time high, it’s just a matter of time before money starts flowing back into the speculative Venture Exchange.  For the first time since August, the Venture’s 30 and 40-day moving averages (SMA’s) are rising in tandem and providing strong support slightly below Friday’s close of 1228.  The Venture gained 2 points for the week and continued to base between 1220 and 1240 as shown in John’s chart below.

Technically, the upcoming week will be an important one for the Venture with the strong possibility of a reversal to the upside in the 50-day SMA.  Since the onset of the bear market in March, 2011, we have seen only two such reversals – very early in 2012, which led to a sharp advance to the 1700 level during the first quarter, and again last summer when the Venture climbed nearly 200 points from the beginning of August to the end of September.  While following the Venture recently has been akin to watching paint dry, this drawn-out basing action is creating the foundation for a significant move higher that can be sustained.  Investor patience is key.  It was generally the wrong time to be a buyer in this market in late 2010/early 2011 when everyone was in the game, chasing stocks higher – even companies with nothing more than cow pasture.  Now’s the right time to be a buyer because sentiment is at such a low level, and the buying stampede has yet to begin.

Gold

We’ve noted before that the commercial traders are seldom wrong, and last week they cut their short positions to an extent that the COT chart is now the most favorable it has been since last August – just prior to the sizeable rally in bullion.  We could still see some more choppiness for a little while longer, but Gold has exceptionally strong support above $1,600 and that’s critical.

Silver gained 66 cents to $31.84.   Copper surged 11 cents to $3.75.  Crude Oil jumped $1.89 a barrel to $97.77 while the U.S. Dollar Index slid half a point to 79.21, leaving it just above a critical support area.  A technical breakdown in the Dollar Index appears almost certain this quarter given a classic head-and-shoulders top formation.

As usual, we’ll be posting John’s short-term and long-term Silver charts Monday morning.

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.