BullMarketRun.com

TSX Venture Exchange and Gold

It was another slow week for the Venture Exchange, despite impressive moves in a few issues.  The Index declined slightly each day last week (it was off 23 points for the week to close at 1206) and has posted losses in 10 out of the last 12 sessions.  However, strong support exists at 1200 and common sense suggests that if the Index couldn’t be knocked down to a new low in December amid tax-loss selling, weakness in Gold and the over-hyped “fiscal cliff” drama, it’s not about to happen now.  What this speculative market needs, however, is a catalyst – a spark, whatever you want to call it – that will convince the many investors sitting on the sidelines to jump back in.  That catalyst could be anything from a discovery to a sudden increase in Gold and Silver prices.  This market is in the midst of a healing process and this requires investor patience.  Looking out over the next several months, we see some tremendous opportunities given the fact sentiment right now is so negative and many investors are frustrated and discouraged.  It’s the opposite environment to what existed in late 2010 and early 2011 when everyone was so bullish.  It was a good time to be a seller back then.  Right now, some investors are wisely preparing to make potential fortunes by accumulating beaten-down quality companies that could easily double or triple by mid-year under improved market conditions.

Below is a 2-month daily CDNX chart from John that shows a convergence of support around the 1200 level.  As we’ve mentioned previously, a key thing to watch for as the month progresses is a reversal to the upside in the 50-day moving average (SMA).  That hasn’t occurred just yet but that moment could be close at hand.  A convincing move on strong volume through the important 1240 resistance area would definitely signal a bullish new trend.

Gold

Gold finished relatively unchanged last week at $1,667.  The COT structure (commercial traders) is looking a lot more favorable as they have cut back their short positions recently to levels not seen since just prior to last summer’s major move to the upside. Gold is finding solid support in the immediate vicinity of its 200-day moving average which is slowly rising.  As John points out in his 6-month daily chart below, Gold for several weeks has been trading in a symmetrical triangle and a resolution to this current pattern is drawing near.  Important resistance of course at $1,700.

Silver fell 41 cents last week to close at $31.43 (John will have his usual short-term and long-term Silver charts tomorrow morning).  Copper stayed relatively unchanged at $3.74.  Crude Oil slipped over $2 a barrel to $95.72 while the U.S. Dollar Index gained a full point to 80.21.

Margins will decline this coming week for most of the metals traded on the New York Mercantile Exchange and its Comex division, including Gold, Silver, Copper and Platinum.  Exchange operator CME Group said the changes, announced late Thursday, will go into effect after the close of business on Tuesday. The lower margins were made as part of the “normal review of market volatility to ensure adequate collateral coverage.” Margins are the performance bond that futures traders must put up to be in a position and act as collateral, or protection from default.

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.