Gold has traded between $1,407 and $1,418 so far today…as of 8:30 am Pacific, the yellow metal is up $4 an ounce at $1,414…Silver is 55 cents higher at $33.93 while weakness continues in the greenback…the U.S. Dollar Index has hit a new 4-month low and is currently off more than one-third of a point at 76.93…the fact the U.S. Dollar has not seen safe-haven buying given the unrest in the Middle East is very bearish and suggests further weakness down the road…this is another bullish factor for Gold…a slew of U.S. economic reports are coming out this week including non-farm payrolls for February on Friday…this morning, the Commerce Department reported that U.S. consumer spending rose less than expected in January (0.2%) as households took advantage of the largest increase in incomes in more than a year-and-a-half to rebuild savings…crude oil prices have eased somewhat amid reassurances about supply from Saudi Arabia…J.P. Morgan upped its forecast Friday for 2011 Brent Crude by nearly 14%…increasing oil prices will further add to worldwide consumer price inflationary pressures which has to be viewed as a positive for Gold…the CDNX is closing the month on a strong note…the Venture is 13 points higher at 2389 as of 8:30 am Pacific…this follows a powerful reversal Friday which bodes well entering the month of March…we’re keeping a close eye on GoldQuest Mining (GQC, TSX-V) this week for possible news on a couple of fronts…in our interview with Chairman Bill Fisher earlier this month, he indicated he was hoping to have initial drill results from La Escandalosa in the DR in time for PDAC which begins March 6…the company will be displaying some core from Escandalosa and Las Animas at PDAC…the 43-101 resource estimate for the Toral zinc-lead-silver deposit in Spain is also due anytime now…Julio Espaillat who was President and General Manager of Globestar’s DR subsidiary, officially starts his new position as GoldQuest’s President and CEO tomorrow…the DR is very much in the early stages of a mining boom and another company we like there of course is Everton Resources (EVR, TSX-V)…GoldQuest is up a penny this morning at 44 cents while Everton is still battling resistance at the 40-cent level…it’s currently up 1 penny at 38 cents…Cadillac Mining (CQX, TSX-V) is up 1 cent at 34 cents…we spoke with President and CEO Victor Erickson over the weekend, in preparation for a major interview early this week, and it’s not hard to sense his excitement regarding the Wasamac Property and his company’s claims that adjoin Richmont’s (RIC, TSX) rapidly growing deposit…Cadillac is finalizing plans for a geophysics and diamond drilling program at its Wasa claims while Erickson is also very encouraged that Visible Gold (VGD, TSX-V) is initiating a 9,000 metre drill program on CQX ground elsewhere along the Cadillac Trend as part of the two companies’ joint-venture arrangement last December…between its properties in northwestern Quebec and a former Gold-Silver mining camp in Utah that Cadillac has secured (Erickson has major plans for the Goldstrike Project), CQX is poised for its best year ever…with a market cap of just $8.5 million, the lowest of any company we currently follow, the risk-reward ratio with Cadillac is hugely attractive…Erickson and Andre Audet (VP, Exploration) are hanging on tightly to their shares which should be a signal to the market…neither sold a single share in the run late last year from a nickel to 50 cents…Adventure Gold (AGE, TSX-V) continues to impress…AGE is up another 2 pennies this morning to 71 cents and is now ahead 112% since we introduced it to BMR readers five months ago…Adventure Gold is working hard on several fronts and the odds of the company “hitting” on at least one of those projects appears very good…Gold Bullion Development (GBB, TSX-V) is up a penny at 57 cents as the rebuilding continues after the February 15 drop…January and February have been rough months for GBB but we’re looking for a rebound in March which was also its breakout month last year…we’re continuing our work on a major GBB article…Greencastle Resources (VGN, TSX-V) is slowly firming up…we’re still waiting for VGN to ramp up its Gold exploration activity but in the meantime the company is benefiting from higher oil prices…the stock has been trapped between its 50 and 200-day moving averages since late January…odds are much greater it will break above the 50-day, currently at 28 cents, as opposed to falling below the 200-day which is currently rising and at 20 cents…the fundamentals with Greencastle are very strong but patience is required as the company works on getting things going in the Gold space…Greencastle is up 1.5 cents this morning at 25 cents…one of our favorite Silver stocks, Great Panther Silver (GPR, TSX), has more than doubled since we pointed out a potential big opportunity with this play in late January when it fell as low as $1.79 during the precious metals sell-off…we’re examining some other Silver opportunities as well right now…of course Abcourt Mines (ABI, TSX-V) is sitting on one of the best Silver assets in the country (Abcourt-Barvue) near Val d’Or and even higher Silver prices could make this company a potential takeover target if it’s not able to bring Abcourt-Barvue back into production itself…accumulation of this stock has been very significant since December…Abcourt’s Elder-Tagami Gold Project is also a very valuable asset as well…drill programs continue at both Elder-Tagami and Abcourt-Barvue…ABI is currently unchanged at 19 cents…the rising 50-day SMA at 18 cents provides excellent support…in a late breaking development, Manitou Gold (MTU, TSX-V), a company we have mentioned here before on numerous occasions, was halted this morning and came out with a spectacular assay result of 53,700 g/t Au over a 0.55 metre core length in hole #26 at its Kenwest Property in northwestern Ontario…the remarkable 1,566 ounces per tonne intersection is part of an 8.45 metre wide section of quartz veining contained within a broad alteration zone in a structure just 45 meters below surface…the hole intersected 8.45 meters of mineralization averaging 4.9 g/t Au with the high-grade sample cut to 50 g/t Au…Manitou last closed at 34 cents and re-opens for trading at 9:30 am Pacific…
February 28, 2011
February 27, 2011
GoldQuest Mining (GQC, TSX-V)
This could be an interesting week for GoldQuest as Chairman Bill Fisher stated to us in our interview with him earlier this month that initial drill results from Escandalosa were quite possible by the start of PDAC in Toronto May 6…GoldQuest will definitely be showing off some core at the show…a 43-101 resource estimate for the Toral zinc-lead-silver deposit in Spain is also due anytime now…new President and CEO Julio Espaillat officially starts March 1, so that increases the likelihood of an eventful month of March for GoldQuest on the news front…the stock continues to look very strong technically and buying pressure as indicated by the CMF is now increasing after a one-month decline…GQC dipped just below its rising 50-day moving average (SMA) last week as it did in early January just before a major move to the upside…in the case of GoldQuest, it seems the stock likes to occasionally do that…this is a terrific-looking chart…with a market cap of only $44 million, GQC has an immense amount of upside potential given the quality of projects and geological targets this company has in the DR…a 43-101 on the Toral deposit will be a boost as well if the number closely matches the historical estimate of 5 million tonnes grading 9% zinc, 6% lead and 45 g/t Ag…GoldQuest was up a penny for the week at 43 cents and made a nice intra-day reversal late in the trading session Thursday when it rose from a low of 38 cents to close at 45 cents…GQC has all the ingredients to become a huge winner this year as the bull markets in Gold and the CDNX intensify…
Greencastle Resources (VGN, TSX-V)
Greencastle is beginning to firm up slightly with an improved chart and the realization that the fundamentals with this company are very strong…rising oil prices also help Greencastle’s monthly cash flow as it receives royalties from heavy crude production at Primate in Saskatchewan…Greencastle was up 1.5 cents last week to 23.5 cents…the stock is supported on the downside by a rising 200-day moving average (SMA) while the 100-day SMA at 26.5 cents will provide some resistance but it’s still rising…Greencastle tripled in value over a six-week period from late October to early December…since the beginning of January, though, the stock has struggled due mostly to impatient investors frustrated with the lack of news…there hasn’t been news from Greencastle since November 30…however, with approximately $6 million in working capital, three Gold properties and monthly cash flow from an oil royalty, it doesn’t take a rocket scientist to figure out that VGN is a bargain in the low 20′s…volume has been light on the move down which confirms there’s nothing to be concerned about here…Greencastle will shine again soon enough…the long-term chart remains very bullish with rising 200 and 300-day moving averages (SMA) that are in no danger of reversing…it’s also interesting to note that President and CEO Tony Roodenburg, a large shareholder in VGN, has refrained from selling any of his holdings in recent months despite the fact the stock price more than tripled in value on high volume…this is different from past runs in the stock and adds further credence to our view that we haven’t seen the highs in this cycle yet from Greencastle – it’s poised for what we believe could be a massive breakout sometime during the first half of this year…Pinetree Capital has also accumulated more shares in Greencastle, so there’s every reason to be very optimistic regarding this company’s prospects in the days, weeks and months to come…Greencastle is up 68% since we added it back in to the BMR model portfolio four months ago…
Adventure Gold (AGE, TSX-V)
John has been right on the money with his chart work on Adventure Gold recently…this stock is looking extremely bullish and jumped another dime last week to 69 cents on strong volume…some of the results from Granada released by Gold Bullion recently have positive implications for Adventure Gold and we’ll be going over that in more detail as part of a major article very soon…of course AGE is also waiting for results from one hole drilled completely on its property (eastern extension) and a few others that intersected that property at depth…there’s a lot more to Adventure Gold, however, than just Granada…a 2,500 metre drill program started at Pascalis-Colombiere (eastern part of Val d’Or mining camp) in December and is testing the former L.C. Beliveau Mine at depth (below 300 metres) as well as near-surface parallel Gold structures to the west…Pascalis-Colombiere is just 1.5 kilometres east of Richmont’s (RIC, TSX) operating Beaufor Gold Mine which has produced over 1 million ounces in its lifetime…it’s safe to assume Richmont will be watching developments at Pascalis-Colombiere with interest…Adventure Gold’s property has significant upside exploration potential…the geological setting is favorable for the identification of new high-grade Gold bearing veins and structures or bulk-style ore shoots…there are many untested areas and excellent potential at depth…L.C. Beliveau was a very profitable former producer…if AGE can prove up something significant through extensions to this deposit, we see a potential deal with Richmont which would be the natural choice to bring the mine back into production…we first mentioned Adventure Gold to our readers in an article September 29, just a couple of days following the company’s announcement that it had acquired land at Granada, when the stock was trading in the low 20′s…we officially added AGE to the BMR model portfolio at 34 cents October 28, so the gain since then is 103%…Adventure Gold has been around only since late 2007 and we are impressed by the company’s solid portfolio of properties (19 in six strategic areas in Quebec and Ontario)…also of immediate interest is AGE’s partnership with Lake Shore Gold (LSG, TSX) on the Meunier 144 Property where deep drilling is currently testing the down plunge extension of Gold zones located at the Timmins and Thunder Creek deposits…the current initial deep drill hole onto the Meunier JV property is continuing…when completed it’s estimated the hole will provide a deep cut on the projected target area at about a vertical depth of 2,600 metres…this will enable shallower wedge cuts to be considered if significant mineralization is found to be present in this area…the initial deep hole was collared on LSG’s Timmins mine property last August…if this deep hole succeeds, AGE could absolutely explode…
Sidon International (SD, TSX-V)
Sidon continues to trade in a tight range, strongly supported by its rising 200-day moving average (SMA) at 12 cents…the stock has gradually pulled back after a big day February 16 when it rose to 16.5 cents on over 7 million CDNX shares…Sidon was off a penny for the week, closing Friday at 13 cents…investors are anxiously waiting for drill results from Morogoro East where drilling started in early December…that’s not an unusual delay so we’re not concerned at this point…the stock has shown clear trading patterns since the spring of last year and has been quite volatile…however, the primary trend remains up and Sidon has consistently found support at or just above the 200-day SMA…BMR will be interviewing President and CEO Kamal Alawas as soon as he is able to confirm a time with us…he could be waiting for news prior to speaking with us and that’s perfectly understandable…the company reported zones of disseminated sulphides of pyrite and pyrrhotite as well as some chalcopyrite and arsenopyrite over intervals of 30 to 70 metres throughout all six holes it drilled at MEG…we caution that visuals are not always reliable but there’s reason to be optimistic that Sidon could be on to something…the company is also trying to develop a placer operation at Morogoro and has also acquired ground near Canaco’s (CAN, TSX-V) discovery…this company has come a long way since last March when we first introduced it to BMR readers at a nickel, and its new web site is just one more indication of how impressively Sidon has developed and matured…we see exciting possibilities for 2011…the company raised over $1 million through the exercise of options and warrants in November and December…
Seafield Resources (SFF, TSX-V)
Seafield has been clawing its way back after dropping to a low of 31 cents February 14 on panic selling when an unfavorable article came out on Colombian Country Manager Ian Park…that was an unfortunate attack and some nervous investors were unnecessarily hurt…those who have done their homework and know the underlying value of Seafield jumped in at the height of the fear February 14-15 and picked up some cheap stock…Seafield climbed a penny-and-a-half last week to close at 43.5 cents…for now there is some obvious technical resistance in the high 40′s near the declining 50-day moving average (SMA)…what excites us most about Seafield is its Dos Quebradas Property as well as the adjoining Santa Sofia and La Loma targets…drilling continues at Dos Quebradas while a second rig has been brought in to commence drilling at Santa Sofia…the geological case for Seafield’s Quinchia land package is compelling and we’re looking forward to initial results from Dos Quebradas…patient investors have an opportunity to do extremely well with this play given the geological merits of Quinchia…
Gold Bullion Development (GBB, TSX-V)
Gold Bullion held its ground last week and staged a potentially bullish reversal Friday after dropping to a post-news low of 51 cents…the stock closed at its high of the day Friday at 56 cents for a weekly loss of just 2 pennies…in this type of situation, following the technical damage that was recently inflicted on the stock, a recovery could take a few weeks to really gain traction so investors need to be patient…a significant turnaround sometime in March is likely based on technicals and fundamentals…it’s very encouraging that GBB is now bouncing off previous RSI, Stochastics and CMF support levels…we’re continuing to review the latest drill results (56 holes in total) in preparation for a major write-up but our faith in the Granada Gold Property remains as strong as ever…for long-term investors, the sell-off should be viewed as a gift as the results do not diminish Granada’s multi-million ounce potential in our view…in fact, they strongly support that potential…this deposit will be all about volume, so it’s absolutely critical that Gold Bullion does whatever it takes to accelerate the pace of drilling…for 10 months now, just two rigs have been operating at Granada and that’s not following the Osisko model…we’re very comfortable with the results but the pace of exploration needs to pick up at Granada (Osisko discovered this in its early days as well) as that is what will drive shareholder value…the LONG Bars Zone truly presents an incredible opportunity for Gold Bullion…
Cadillac Mining (CQX, TSX-V)
It was an eventful week for Cadillac as news came out regarding its properties in northwestern Quebec and Utah…of particular significance, Cadillac announced it’s going to proceed with an exploration program consisting of geophysics and diamond drilling at its 100%-owned Wasa Property which adjoins Richmont’s (RIC, TSX) Wasamac deposit that now boasts current 43-101 resources of 1.4 million ounces…Richmont has started a new 35,000 metre drill program of its own to upgrade and further expand resources…in addition, Visible Gold (VGD, TSX-V) has announced it’s ready to initiate a 9,000 metre drill program covering CQX ground elsewhere along the Cadillac Trend as part of their exploration deal that was completed in December…as far as Wasamac is concerned, the principal structure hosting Gold mineralization at that deposit plunges north at a dip between 50 and 55 degrees toward Cadillac’s claims…while there’s no guarantee, of course, there’s certainly the possibility that Cadillac’s Wasa claims could host an extension of Richmont’s deposit…this is what Cadillac will be exploring in addition to some highly prospective VMS targets on the property…the infamous Horne fault runs right through the Wasa claims and Cadillac discovered a zone last year (by deepening the only hole they’ve ever drilled on the property) that’s interpreted to be a feeder system typical of those seen under VMS systems in the Noranda camp…Cadillac’s Wasa clams have great potential and we’re pleased to see they’re going to “seize the moment” and drill for a possible discovery…besides northwestern Quebec, Cadillac has secured an entire former mining camp in Utah near the Nevada border (the “Goldstrike District”) which has Carlin-type potential…Goldstrike produced over 200,000 ounces of Gold and Silver from numerous open pits in the late 1980′s and early 1990′s…the area has never been properly explored and Cadillac is planning a major exploration program in order to unlock the potential value of Goldstrike…the company gave more details on Goldstrike in a news release Thursday…this is a well-run company with high quality projects and a market cap of only $8.25 million…the risk-reward ratio here is incredibly attractive which is why we are following Cadillac so closely…the stock was ahead 1.5 cents for the week at 33 cents…the 20-day moving average (SMA) has reversed to the upside after the recent normal retracement that took CQX from a high of 50 cents to a low of 21 cents…
Abcourt Mines (ABI, TSX-V)
Abcourt was off 1 cent for the week at 19 cents, a penny and a bit above its rising and supporting 50-day moving average (SMA)…given what silver is doing, we believe it’s only a matter of time before this stock has its day in the sun…Abcourt released assay results February 15 from six more holes at its Abcourt-Barvue Silver-Zinc Property near Val d’Or, and results continue to be very encouraging…the holes were all drilled 150 to 200 metres from surface and five of them intersected two zones of high grade silver and zinc…Hole #16 cut 152.26 g/t Ag over 12.7 metres…the heavy accumulation that began in Abcourt in December was no fluke in our view…this is a company with significant assets that could justify a substantially higher valuation…nearly 60 million shares of ABI changed hands on the CDNX in December and January – record volume for this stock, accompanied by a price jump from 14.5 cents…we’ve seen these type of volume surges before and they are always a very positive sign…Abcourt is being accumulated, and our best guess is that some savvy players like the assets in the ground…the 10,000 metre drill program at Abcourt-Barvue continues with the goal of upgrading and augmenting existing 43-101 reserves and resources…the company is also trying to justify an expansion of the proposed mill from 650,000 tonnes to one million tonnes…Abcourt-Barvue is a former producer and one of the best silver assets in the country with nearly 20 million ounces in all-category reserves and resources (plus nearly 300,000 tonnes of zinc)…in addition, the company holds the former producing Elder Gold Mine near Rouyn-Noranda which it hopes to put back into production within 18-24 months (considerable infrastructure is already in place as we saw during our recent site visit)…drilling continues at both Elder and the adjacent Tagami Property where there is strong potential for a significant discovery…Abcourt completed a $4 million financing at the end of December…with 110 million shares outstanding, its market cap currently sits at just $22 million…continued drilling success and even higher prices for Gold, silver and zinc would be exciting developments for this stock which has a history of major moves…from mid-2005 to early 2006, Abcourt rocketed from 15 cents to nearly $1.40…
Currie Rose Resources (CUI, TSX-V)
Currie Rose continues to build an impressive base after its January drop to a low of 15 cents…the key technical event we’ll be looking for in March with CUI is a reversal in the 50-day moving average (SMA) which has been in a sharp decline since January and currently sits at 22.5 cents in a zone of technical resistance…significant accumulation has been taking place in Currie Rose given the CMF indicator which shows steadily increasing buying pressure since early this month…RSI and Stochastics indicators are looking positive as well…Currie Rose was unchanged for the week at 18.5 cents…the company last came out with news January 25, announcing a joint-venture deal with Australian-based Liontown Resources for Currie’s Jubilee Reef Gold Project in Tanzania…CUI’s focus is on the Sekenke and Mabale Hills Projects, so finding a partner for Jubilee Reef made sense…the deal commits Liontown to at least 5,000 metres of drilling at the property this year which will give Currie Rose a minimum of 23,000 metres of drilling at all of its properties in 2011…an 8,000 metre program is in progress at its Scadding Gold Property near Sudbury which was optioned to Trueclaim Exploration (TRM, TSX-V)…this property will be getting some major exposure with a segment on “Today in America” which is expected to air nationally on the FOX Business Network and regionally on CNN Headline News…while Currie Rose has had its market cap shaved considerably, from a high of nearly $40 million to the current $16 million, what hasn’t changed is the quality of this company’s project portfolio which remains as high as it ever was in our view…
Richfield Ventures (RVC, TSX-V)
Richfield hit a new all-time high of $5.50 last Tuesday before pulling back slightly from that resistance area to close the week down a dime at $5.30… everything continues to look very positive with Richfield which has commenced an expanded new drill program at its very exciting Blackwater Project in central British Columbia….on February 8 the company released the final seven holes from its 2010 drilling at Blackwater… a one-kilometre mineralized zone from east to west has now been defined…the latest results included 206 metres grading 1.56 g/t Au in BW-114 and 39 metres of 2.74 g/t Au in BW-112 which was collared 100 metres east of known mineralization…the company will be drilling at least 30,000 more metres this year and is also working on a Preliminary Economic Assessment which should be completed by the fall…given the state of the Gold market and the likelihood of continued exploration success at Blackwater, we don’t believe the stock will be hanging around current levels for very long…we were very pleased to see that Richfield got a well-deserved buy recommendation recently from GMP Securities which has initiated coverage on RVC with a 12-month target price of $11.10 per share…BMR introduced Richfield to its readers in December, 2009, when the stock was trading at only $1.20…GMP sees the potential for at least five million ounces of Gold at Blackwater which is located in central British Columbia…the primary trend remains up with Richfield and there’s every reason to expect more excellent drill results throughout 2011…we believe the company’s ultimate objective is to find a buyer who can put this deposit into production…if good drill results continue as we expect they will, we’re confident that objective will be met and the takeover price could be much higher than the company’s current market cap of approximately $230 million…
John: Today we analyze a 10-year monthly comparative chart of the TSX Gold Index ($SPTGD), the focus in candle format, and the Gold (continuous contract), a thick green line, to determine their present relationship and the historical relationship over a 10-year period.
Looking at the chart we see that from 2001 to 2008, until the Market Crash, the price of Gold consistently trailed the Gold Index. The drop in the Index in 2008 from a high of nearly 400 to 150 (a loss of 62.5%) was devastating to the investors of Gold producing mining stocks. Even though the Index recovered and more than doubled within 3 months, many investors were shy to step back into the market. The price of Gold was not hit so hard as it dropped from slightly above $1,000 to just below $700, a drop of 30%.
The chart shows that 2009 was the year for the start of the recovery for the Index as it moved within an upsloping channel (blue top sloping line and green bottom upsloping line) but during that year there was high volatility, a sign of trading and distribution. Gold moved up as well during the year at about the same gradient as the Index. For the Index, 2010 was different. There was less volatility and more stability and it climbed at a gradient slightly steeper (black dotted line) than that of Gold (black line). This was the year that true investors really started to accumulate shares of the producers. It appears the huge sell-off in 2008 really hurt the producers, thus it took time for the Index to completely recover. The volume has consistently increased from 2001 but in recent years some of this has been trading and distribution rather than accumulation.
February, 2011, has been a bullish month for the Index and with Gold maintaining a high price level we could see a good move to the upside over the next few months. At Friday’s close of 395, the Gold Index is at strong support. It appears an important bottom was made January 25 at 365 when the Index fell just slightly below its rising and supporting 300-day moving average (SMA), not shown on the chart.
Looking at the indicators (TSX Gold Index):
The RSI recently bounced up from the support level at 40% and has room to move before becoming overbought – bullish.
The Chaikin Money Flow (CMF) shows the buying pressure increased from being negative in 2003 to a high of 0.34 (rather bullish) in 2007, then it started to decline and reached nearly zero in October, 2008. The buying pressure increased to a high of 0.24 in March but has since declined and the average over 2010 was approximately 0.1. Look for buying pressure to increase again this year.
The ADX long-term indicator is in stable bullish orientation with the +DI (green line) at 20 and above -DI (red line) at 15, and the ADX trend strength indicator flat at 22. This is in a good position for a bullish move up for the +DI.
Outlook: I expect the TSX Gold Index Index and Gold itself will continue to move higher in concert for at least the first half of this year as the outlook for both is bullish.
CDNX and Gold
The CDNX began the week on a bearish note with an intra-day reversal Tuesday after the market reached its highest level (2438) since early July, 2008. After a 14-point advance early in the trading day Tuesday (Monday was a holiday), the CDNX then shed 77 points as North American markets had a hiccup over events in Libya. The CDNX closed down 60 points Tuesday at 2364, stabilized Wednesday, then plunged 38 more points Thursday. The sell-off Thursday brought the CDNX into a zone of very strong technical support with various indicators showing a quick turnaround was likely. Sure enough, the CDNX reversed course Friday and rose 47 points to close the week at 2376, a loss of 48 points. Technically, the outlook is very bullish entering the new week and the start of a new trading month on Tuesday as John outlined in his chart yesterday. The pullback this past week has unwound overbought conditions, laying the groundwork for a decisive move through resistance around 2450 that John previously pointed out. We’re very confident we’ll see his Fibonacci target of 2790 sometime during the second quarter of 2011. That’s a 17% move from current levels and in that kind of bullish environment, some individual stocks will double or triple in value or more.
Gold enjoyed a strong week and hit a high of $1,419 before settling Friday at $1,410. Silver raced above $34 to a new 30-year high last week, closing Friday at $33.38.
With high debt levels, low inflation and high unemployment in the United States, the Federal Reserve is going to be in no hurry to end its quantitative easing program and should keep short-term interest rates at historic lows well into 2012. The Commerce Department last week revised U.S. GDP growth in the fourth quarter to 2.8% from 3.2%. Economists were expecting a slight upward revision. The slower growth rate confirms the Fed’s concern that the pace of growth remains too slow to significantly lower a 9% unemployment rate.
Charles Evans, President of the Federal Reserve Bank of Chicago, stressed the need for continued “dovish” monetary policies. While Evans did not specifically refer to a third round of quantitative easing (QE3), he hinted at such a move by saying that “the message that comes out of what I think of as high-quality research on this subject is that policy ought to remain accommodative for really quite a while, even a while after conditions start to improve.”
The fundamental case for Gold remains so incredibly strong – currency instability and an overall lack of confidence in fiat currencies, an extended period of negative real interest rates (inflation is greater than the nominal interest rate, even in China and India despite increasing rates there), 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 (with the volatile Middle East being the focus right now)…the list goes on. It’s hard to imagine Gold not performing well in this environment.
Technological uses for Gold are becoming more recognized. The World Gold Council announced updates on new commercial uses for Gold in automotive emissions control systems which began being used during the first quarter of this year. Other recent developments that could increase Gold demand include uses in catalysts and nanoparticles to clean contaminated water supplies, reduce mercury emissions and improve the efficiency of production of other common chemicals.
Generally, March is not a seasonally strong period for Gold but we’ll see if the yellow metal can buck the trend this year. Gold has been down three of the past four years in March while over the last decade, only 2004 and 2006 produced good months in March for the yellow metal.
Gold is hardly in a bubble and has much higher to go in our view over the long term. Despite the fact Gold surged to a new all-time high of around $1,430 last December, it’s up only 14% over the last six months since the Fed launched QE2. Oil is up 32% during that time while Silver is up a remarkable 69% which is why one of our favorite Silver stocks, Great Panther Silver (GPR, TSX), has performed so well. Silver has been doing some catching up with Gold recently as John’s 10-year monthly comparative chart below illustrates:
February 26, 2011
John: On Friday the CDNX gapped up at the open from Thursday’s close at 2342, dropped only as low as 2340, and then powered higher to close at its high of the day at 2376. It gained 47 points (2.02%) for the best percentage gain of any North American market Friday. Despite the weakness Tuesday through Thursday which rattled some investors, the CDNX is about to enter March on an extremely solid technical footing.
Looking at the 3-month daily chart, we see that Friday’s trading was a strong white candle erasing Thursday’s drop. The candle formation of the last 2 days is similar to that of January 25 & 26 and constitutes a reversal pattern. After the Jan. reversal the CDNX climbed for the next 9 sessions before unwinding an overbought condition in 2 sessions and then climbed again to become very overbought by February 18. This was completely unwound over the next 3 sessions leading to Friday’s reversal.
Notice that since the Jan. reversal the average daily volume declined during the “cleansing” processes but increased during uptrends. This is very bullish. The Bollinger Bands are both flat, similar to the Jan. reversal. This also indicates that this is a true turnaround. Both the daily SMA(50) and SMA(100) moving averages (not shown here) are pointing up and supporting the uptrend. There is certainly immense technical support on the CDNX around the 2300 level as we have mentioned repeatedly.
Looking at the indicators:
The RSI(5) is in a “W” formation at 52% and pointing up. The reversal is similar to that of the previous month – very bullish.
The Slow Stochastics (SS) has the %K (black line) flat at 28% and the %D (red line) pointing down at 39%. It appears that a reversal crossover is imminent – bullish.
The Chaikin Money Flow (CMF) indicator shows the buying pressure is quite strong and bullish at 0.334. It increased Friday on slightly reduced volume – very bullish.
The weekly ADX trend indicator (not shown here) confirms that the long- term trend is very strong with the +DI at 42, the -DI at 10 and the ADX trend strength indicator high at 56 and pointing up – very bullish.
Outlook: Following a healthy 3-day pullback, a reversal to the upside is underway with the CDNX. February should finish strong Monday and we’re expecting a bullish March.
February 25, 2011
Gold has traded between $1,399 and $1,411 so far today…as of 7 am Pacific time, the yellow metal is up $2 an ounce at $1,404…Silver, after a big tumble yesterday, is recovering today…it’s currently up 62 cents at $32.73…the U.S. Dollar Index is up one-third of a point at 77.40…some key U.S. economic data came out this morning…the Commerce Department has revised downward GDP growth in the 4th quarter to 2.8% from 3.2%…economists were expecting a slight upward revision…the slower growth rate confirms the Federal Reserve’s concern that the pace of growth remains too slow to significantly lower a 9% unemployment rate…this will help keep the Fed vigilant in terms of maintaining its accommodating monetary stance…oil prices have flattened out slightly below $100 a barrel with Saudi Arabia assuring the market that it will cover for any fall in Libyan exports caused by the turmoil in that country…it has been a rough week for the CDNX which went into a bearish short-term reversal Tuesday after climbing as high as 2438…we see no reason why this pullback is any different from the ones we saw in January or November which opened up some attractive buying opportunities…the CDNX has tremendous technical support around the 2300 level, so we do expect an imminent reversal to the upside…important indicators such as RSI, Stochastics and the CMF have come down to areas of strong support, and the 20-day moving average continues to advance as it did through the November and January weakness…after 30 minutes of trading today, the CDNX is up 22 points at 2351…Morning Musings is slightly abbreviated this morning due to business travel today…some very late buying yesterday in GoldQuest Mining (GQC, TSX-V) raised our eyebrows as the stock quickly moved from a low of 38 cents and closed at its high of 45 cents…some market participants could be anticipating initial drill results from Escandalosa and it makes sense that those results could come prior to the start of PDAC which begins March 6 in Toronto, based on our interview recently with Chairman Bill Fisher…a 43-101 resource estimate on GQC’s Toral lead-zinc-silver deposit is also due…there was news on a couple of fronts yesterday concerning Cadillac Mining (CQX-TSX-V)…the company has announced it’s preparing an exploration program including geophysics and diamond drilling for its Wasa Property which adjoins Richmont’s (RIC, TSX) 1.4 million ounce Wasamac deposit…the structure which hosts Gold mineralization at Wasamac dips northerly onto Cadillac’s ground…Cadillac will be pursuing not only Gold targets at Wasa but VMS targets as well…in addition, Visible Gold (VGD, TSX-V) announced late in the trading day yesterday that it’s ready to initiate a 9,000 metre drill program covering other ground held by Cadillac which CQX and VGD have formed a partnership on…Cadillac is currently off 2 pennies at 29.5 cents…we’re interviewing President and CEO Victor Erickson in Vancouver this weekend…we continue to explore Visible Gold in more detail as we like what we see so far with that company…we expect VGD to become one of the most aggressive explorers along the Cadillac Trend…Visible Gold is well financed and has assembled a powerful team on the ground…the stock is up 2.5 cents this morning to 38 cents…Gold Bullion Development (GBB, TSX-V) continues to find support in the low 50′s which is encouraging…Abcourt Mines (ABI, TSX-V) is looking very healthy technically as it continues to build a strong base of support around 20 cents…
February 24, 2011
Gold has hovered between $1,407 and $1,419 so far today…as of 8:15 am Pacific, the yellow metal is up $1 an ounce at $1,413…Silver is off 39 cents to $33.15 while the U.S. Dollar Index is weak again today, down over one-tenth of a point to 77.15…weakness in the greenback given geopolitical unrest does not bode well for the U.S. Dollar which traditionally has enjoyed a safe haven status…John is working on an interesting TSX Gold Index chart which we’ll be posting today…U.S. jobless claims dropped to 391,000 in the week ended February 19, down from 413,000 a week earlier…the 4-week moving average has dropped to 402,000, the lowest since mid-2008 as the U.S. economy continues to show signs of improvement but the recovery is fragile…the CDNX is off 10 points at 2357…Cadillac Mining (CQX, TSX-V) is turning aggressive and will soon be hunting for Gold at its “Wasa” claims, contiguous to Richmont’s (RIC, TSX) Wasamac Property which has had a huge increase in 43-101 resources…this is exactly what we were hoping for as Cadillac is going to “seize the moment” as outlined in their news release which just came out within the last hour…Cadillac is proceeding with a geophysics and diamond drilling program at Wasa in order to test for a possible high grade depth extension of Wasamac where Richmont currently has three rigs in operation…the Wasamac deposit, which now boasts resources of 1.4 million ounces, dips northerly at 50 to 55 degrees toward Cadillac’s ground which consists of seven claims…there are also some highly prospective VMS targets on Cadillac’s ground…the infamous Horne fault runs right through their property…Desjardins calls Wasamac a potential “game-changing asset” for Richmont, and we view Cadillac’s Wasa claims as a potential “game-changing asset” for CQX…Richmont is hungry for additional resources and there’s always the chance down the road that it may get hungry for Cadillac too or a major may just step in and grab everything if Wasamac keeps growing and Cadillac discovers something significant as well…in any event, three Richmont rigs at Wasamac and a Cadillac drill rig immediately to the north are going to make things very interesting in that part of northwestern Quebec…Cadillac has also announced it has secured the final outstanding patented claims at Goldstrike in Utah, and the company has also hired investor relations which demonstrates it’s getting serious about driving shareholder value…Cadillac is currently unchanged at 34.5 cents…the CQX chart looks very bullish and with a market cap of just $8.6 million, the risk-reward ratio with this one is extremely attractive…Everton Resources (EVR, TSX-V), which we have mentioned here on numerous occasions over the last several months, has had an impressive run this week…Everton has commenced deep drilling at its APV Property in the Dominican Republic, contiguous to the massive Barrick-Goldcorp Pueblo Deposit…EVR hit a new 52-week high of 41 cents this morning and is currently trading at 39.5 cents, up a penny…there is stiff technical resistance around the 40-cent level and EVR may need to at least partially unwind its current overbought condition before plowing through that resistance…we like Everton a lot and we’re hoping to do another interview in the near future with President and CEO Andre Audet…GoldQuest Mining (GQC, TSX-V) is down a penny at 38.5 cents…GQC is in a zone of strong technical support and we’re expecting big things out of this company as it continues its exploration in the mineralization-rich DR…Gold Bullion Development (GBB, TSX-V) is off a penny at 52 cents…we’re in the process of completing a major report on Granada after the release of more than 50 more assay results from Gold Bullion last week…as we’ve mentioned, our faith in the Granada Property remains as strong as ever and we have a bullish interpretation of the latest results…John has completed a new chart on Adventure Gold (AGE, TSX-V) which we just posted…AGE is up three pennies this morning at 61 cents…Greencastle Resources (VGN, TSX-V) continues to trade just slightly above its 200 and 300-day moving averages…investors should keep in mind that firmer oil prices this year would be a significant cash flow boost for Greencastle which earns monthly royalties from heavy crude production at Primate in Saskatchewan…the stock has languished recently due to the lack of news on the Gold front for Greencastle…with at least $6 million in working capital, monthly cash flow that could generate approximately $2 million this year, and three Gold properties at the moment, the current Greencastle price has to be considered a low risk entry point…VGN is off a penny at 22 cents…
8:00 am Pacific
John: Yesterday, Adventure Gold (AGE,TSX-V) opened at 56 cents, its low, rose quickly to a high of 63 cents and then closed at 58 cents. It gained 3 pennies (5.45%) on CDNX volume of 594,000 shares. The trading activity in this stock recently has been very interesting. As of 8 o’clock this morning Pacific time, AGE is 3 cents higher at 61 cents.
Looking at the 4 month daily chart, I have presented the Slow Stochastics (SS) behind the price to illustrate how SS crossovers can warn investors of probable reversal points especially in sideways trading situations. At the same time I’ve include another indicator, 4 instead of 3.
We see that between November 8 and February 15 the trading was within a horizontal trend channel (top blue line, bottom green line). Then on Feb. 15 there was a breakout to the upside which took the price from a low of 56 cents to 67 cents and the next day it rose again to an all-time high of 80 cents. From Feb. 16 to now the stock has been in consolidation with the volume declining accordingly.
Yesterday, the up volume increased significantly which is a bullish sign in any consolidation. The base support for this consolidation is strong at 55 cents.
Looking at the indicators: The RSI(5) shows 3 “W” formation in the last 4 months. The ones in Nov. and Feb. occurred just prior to significant breakouts and another has formed during this consolidation. The Feb. overbought condition has been completely unwound and the RSI has bounced up from support at 50%. It now sits at 57% and is pointing up- very bullish.
The Slow Stochastics (SS) shown behind price gives three clear instances where the %K (black line) has crossed above the %D (red line) to provide warnings of imminent or near-term upward price moves. At the present time there appears to be the strong probability of another crossover to the upside with %K at 39% and %D at 40% – very bullish.
The Chaikin Money Flow(CMF) indicator showed strong buying pressure during the breakout. It fell significantly during the consolidation as expected. Presently it’s at a low 0.025.
The ADX trend indicator is in bullish orientation with the +DI (green line) at 30 and above the -DI (red line) at 10. The ADX (black line) trend strength indicator is at 30 and climbing – very bullish.
Outlook: The chart pattern and all the indicators point to the probability of a move to the upside in the very near future.
Note: The writer holds a position in AGE.
February 23, 2011
Gold has traded in a range of $1,397 to $1,415 today…as of 8:10 am Pacific, the yellow metal is up $13 an ounce at $1,412…Silver is ahead 63 cents at $33.69 while the U.S. Dollar is down over one-third of a point to 77.36…the greenback has not seen the flight to safety like it has in other periods of geopolitcal unrest which gives the Gold bulls even more encouragement…HSBC stated this morning, “Given the calls for reforms and the growing diversity and complexity of the protests (in the Middle East), a significant geopolitical premium may remain in Gold for this year, and should tensions rise further, this could catapult Gold to new highs”…the CDNX, after a 60-point sell-off yesterday, has stabilized this morning and is currently up 3 points at 2367…the drop yesterday was into a zone of strong technical support, slightly below the 10-day moving average (SMA) but right at the 20-day SMA…one-day drops of that magnitude can rattle the nerves of many investors but as long as the trend continues to be strongly bullish, as it is, a 60-point haircut for the CDNX can open up some really nice buying opportunities…Cadillac Mining (CQX, TSX-V) is off a penny at 34 cents… following Richmont Mines‘ (RIC, TSX) news last week of a major expansion of resources at Wasamac, where Cadillac holds seven strategic claims, there has been steady accumulation of Cadillac which has the potential of accelerating into a stampede of buying once more investors are aware of the situation…our theory is that Richmont will build a plant at Wasamac (production of 100,000 ounces per year is possible based on the resource numbers) which would also serve their nearby Francoeur Mine…Francoeur is going into production around mid-year with the ore being trucked to Richmont’s Camflo Mill at Malartic…there would be considerable cost savings by processing the ore from Francoeur at Wasamac…Richmont currently has three rigs at Wasamac and is proceeding with a new 35,000 metre drill program in order to upgrade and expand current resources of 1.4 million ounces…Desjardins is now calling Wasamac a potential “game-changing asset” for Richmont…our hope is that Cadillac will seize the moment and drill its Wasa claims in order to test for a possible high grade extension at depth of the Wasamac deposit…the structure dips 50 to 55 degrees toward Cadillac’s claims and the deposit is open in different areas at depth…Cadillac also has VMS targets at its property…technically, Cadillac is looking very strong and a reversal to the upside yesterday in the 20-day (SMA) is another bullish sign…at 34 cents, Cadillac’s market cap is only $8.5 million and the company holds more than 7,000 additional hectares along the Cadillac Trend as well as an entire former mining camp (Goldstrike) in Utah near the Nevada border…that’s a major project that Cadillac will be pursuing with vigor…Seafield Resources (SFF, TSX-V) continues to show strength after falling as low as 31 cents on panic selling last week…Seafield is another half penny higher at 46 cents this morning as some sanity returns to that market…a second drill rig at Quinchia is going to be immensely helpful in terms of advancing this project with the focus now on highly prospective porphyry targets at Dos Quebradas and Santa Sofia…GoldQuest Mining (GQC, TSX-V) bounced off its 50-day moving average (SMA) this morning it has done consistently over the last several months…GoldQuest is one of our favorites with a quality pipeline of projects in the Dominican Republic where the company has been exploring for over a decade…initial drill results from Escandalosa are due soon along with a 43-101 resource estimate for the company’s Toral zinc-lead-silver deposit in Spain…GoldQuest is currently unchanged at 41 cents after falling as low as 38.5 cents this morning…Everton Resources (EVR, TSX-V) is also a company we like very much in the DR, and Everton enjoyed a strong day yesterday as it climbed a nickel to 37 cents on volume of over 1 million shares…Everton and its partner Brigus Gold Corp announced last week the start of a deep drilling program at its APV concession contiguous to Barrick and Goldcorp’s massive Pueblo Viejo deposit…Everton is currently up half a penny at 37.5 cents…a move through 40 cents on high volume would constitute a technical breakout…Gold Bullion Development (GBB, TSX-V) is unchanged at 56 cents…there is very strong technical support for GBB in the low-to-mid 50′s, as John has outlined, but the stock may have to trade around current levels for a little while for base-building purposes prior to another potential fresh advance…