Gold is stronger today, hitting a high of $1,441…as of 8:45 am Pacific, the yellow metal is ahead $13 an ounce at $1,437…Silver is 22 cents higher at $37.70 while the U.S. Dollar Index is off one-quarter of a point to 75.87…crude oil is firmer, up $1.51 a barrel to $105.78…new U.S. claims for unemployment benefits fell last week, generally in line with expectations and further evidence a material improvement in the labor market is underway…the all-important jobs report for March comes out tomorrow…unemployment claims have held beneath the 400,000 level that is generally associated with steady job growth three weeks in a row, with the four-week moving average below that mark for the fifth straight week…HSBC is cutting growth targets and raising inflation forecasts following dramatic rises in commodity prices that threaten the global recovery…HSBC chief economist Stephen King told CNBC, “Never before have we seen such large increases in the cost of raw materials so soon after the end of a deep and protracted recession in the Western world”…”It’s a marriage made in economic hell,” he wrote in a bearish note to investors…”Business and consumer confidence may currently be very high but they may not stay at these levels for very long. Already, the Michigan consumer confidence survey has shown the third biggest decline in expectations since the series first began in 1978″…major markets continue to shrug off a wide variety of troubles including a continuing U.S. housing crisis, rising global inflation, debt problems, Middle East unrest, and the disaster in Japan…the Dow is up 6.7% for the quarter, its best quarter since 1999…the Fed has cheapened the Dollar and there appears to have been a flight to safety in the Dow this quarter…the S & P has gained 5.6%, its best first quarter since the more than 13% gain when the tech bubble was brewing in 1998…the CDNX is flat for the first quarter after very strong gains in the third and fourth quarters of last year…since the CDNX is an extremely reliable leading indicator, King’s comments cannot be taken lightly as this market seems to be telling us there could be problems down the road – just how soon we don’t know…the CDNX is currently up 6 points at 2292…it has shown impressive resilience this week after dropping below 2300 amid Gold’s four-day slide…the key thing to watch for in the CDNX is if it can close above 2330 on stronger volume for at least two consecutive days…there’s also the possibility by mid-to-late next week that the CDNX’s 20-day SMA could reverse to the upside…that is also an important technical event to watch for…so while we still remain cautious with the CDNX, and for good reason given a number of factors including the lower volume of late, there is the chance this market could ignite again very soon…quoting a very wise phrase from John, our chart expert, as investors we have to let the market tell us what it wants to do as opposed to telling the market what we think it should do…Gold Bullion Development (GBB, TSX-V) is off half a penny at 42 cents…the last two months have been difficult for GBB, in terms of its share price, but we encourage investors to keep focused on one very important dynamic which is the ever-increasing zone of mineralization at Granada…by this summer GBB will have a NI-43-101 resource estimate in its hands for the LONG Bars Zone and we believe that will be a game-changing event…we’re in the Gold bull market of a lifetime…the LONG Bars Zone is a potential multi-million ounce deposit, near-surface and in one of the best jurisdictions in the world for mining and exploration…yes, we wish there were more rigs on the property and even more money in the bank, but the Gold is there in abundance based on results to date and we’re certain the 43-101 will confirm that…Visible Gold Mines (VGD, TSX-V) has optioned the Joutel Property from Agnico-Eagle Mines (AEM, TSX)…Joutel is a former producer (it hosted the Eagle, Eagle Quest and Telbel Gold mines that combined for 1.1 million ounces between 1974 to 1993) and the property that launched Agnico-Eagle…to the best of our knowledge, this is the first time that Agnico-Eagle has optioned Joutel which likely has a lot to do with the fact that Robert Sansfacon is Visible Gold Mine’s senior geologist…we met Sansfacon during our trip to Rouyn-Noranda in January and he is a superb geologist and extremely well respected in the industry…he was with Lac Minerals for many years and played a key role in the discovery of Osisko’s (OSK, TSX) Malartic deposit…if anyone can unlock the value of Joutel, it’s Sansfacon…he must believe he can find extensions there…this is an extremely interesting development and it’s just another reason why we find Visible Gold Mines such an exciting opportunity…the company is armed with nearly $9 million in cash and has made it clear it intends to become a leader on the Gold exploration front in northwest Quebec…it has the business, geological and marketing expertise to do just that…Visible Gold Mines has a drill program in progress at Silidor, just a few kilometres west of Rouyn-Noranda, with another drill program underway shortly on ground optioned from Cadillac Mining (CQX, TSX-V) near Vantex Resources‘ (VAX, TSX-V) Moriss Zone Discovery…Visible Gold Mines has all the ingredients to develop into a major success story and we’ll be covering it in more detail in the coming days and weeks…technically, the stock’s 40-day SMA has reversed to the upside after being in decline since December…it appears the 50-day is about to reverse very soon as well, so a major turnaround here appears imminent after VGD got as high as 70 cents in early December…Visible Gold Mines is currently up 2 pennies at 41 cents on volume of 340,000 shares…Gold Canyon Resources (GCU, TSX-V) is up 4 cents at $3.34…there is growing speculation based on impressive results to date that GCU’s Springpole Project contains 5+ million ounces of Gold…do your due diligence on this one, folks, as quickly as possible because if those numbers prove out, Gold Canyon will be at much higher levels…GoldQuest Mining (GQC, TSX-V), which we haven’t mentioned for a while, is holding steady in the mid-30′s…investors are anxiously waiting for the first set of assay results from GoldQuest’s Escandalosa Property in the DR…Escandalosa is an exciting geological target and the company has an excellent chance to significantly increase resources there from 400,000 ounces to potentially 1 million ounces or more…GQC also has other projects of merit it’s developing in both the DR and Spain…Richfield Ventures (RVC, TSX-V) hit another new all-time high this morning of $7.60…the stock is currently up 29 cents at $7.50…we suspect funds have been aggressively accumulating recently…the stock is now up 525% since we introduced it to BMR readers in December, 2009…
March 31, 2011
March 30, 2011
Gold, attempting to end a four-session losing streak, got as high as $1,431 this morning but has since pulled back and is now unchanged for the day at $1,419 as of 9:10 am Pacific…Silver has been volatile as well, climbing to nearly $37.80, falling to $37, and rebounding now to $37.34 for a 21-cent gain…the U.S. Dollar Index is up one-tenth of a point to 76.22…investors added 33.8 million ounces of Gold to their holdings in 2010, a 23% jump from 27.3 million ounces in 2009, according to the CPM Group which has been bullish on the yellow metal since November, 2000…Gold backing ETF’s increased to 70.5 million ounces by the end of 2010, up 11.3 million ounces from the previous year and representing one-third of physical investment demand for Gold…the U.S. labor market showed signs of further recovery in March as private employers added jobs and planned layoffs fell, according to the ADP Employer Services report…the key U.S. jobs report for March is coming out Friday…ADP reported that U.S. private employers added 201,000 jobs in March, largely in line with expectations…while encouraging, these job growth numbers in our view will have to continue for many more months and accelerate before the Fed becomes comfortable with the idea of ending its “quantitative easing” strategy…the unemployment rate is still stubbornly high and the U.S. housing mess keeps getting worse…American CEO’s, however, are confident about the future…in a survey released this morning, U.S. chief executives’ view of the economy brightened in the first quarter with 92% expecting sales to rise over the next six months and more than half looking to add jobs…the Business Roundtable’s quarterly CEO Economic Outlook index surged to 113 – the highest in the nearly 10 years the group has been doing the poll…markets are strong across the board today…the CDNX got as high as 2290 but has pulled back with Gold reversing…as of 9:10 am Pacific, the CDNX is 2 points higher at 2280…the “buy signal” we’re looking for with the CDNX is a push through last week’s high of 2328 on heavy volume…this market needs a jolt of excitement right now such as a major new discovery and area play…the speculative fervor has waned considerably recently…in this lacklustre market there are still opportunities, however…companies that are drilling aggressively, releasing excellent drill results and growing their deposits are being rewarded…a case in point is Richfield Ventures (RVC, TSX-V) which climbed another 80 cents yesterday to close at new all-time high of $7.33…it’s currently off 8 cents at $7.25…Richfild’s Blackwater Gold deposit in central British Columbia is already at 4 million ounces (NI-43-101, indicated and inferred) and current drilling will upgrade those resources and likely add more…Richfield has gained 511% since we introduced it to BMR readers in December, 2009…another company that has done well recently is Gold Canyon Resources (GCU, TSX-V) which appears to be well on its way to outlining a multi-million ounce deposit at its Springpole Project approximately 110 kilometres northeast of the Red Lake mining camp…the latest results released yesterday show this robust system is coming together nicely with deeper drilling expected to commence early next month…Fraser MacKenzie’s mining analyst sees the possibility for at least 5.5 million ounces…Springpole is a potentially new style of Canadian Shield Archean Gold deposit (alkaline intrusion) that could really add ounces in a hurry…the Portage Zone in particular is looking very interesting…GCU is up 6 cents this morning at $3.30 after getting as high as $3.38…we put this one in front of our chart specialist and John sees $3.40 as a key area…
Adventure Gold (AGE, TSX-V) continues to look strong…trading action in AGE since the end of January has been impressive indeed and the stock held key support during the mid-March meltdown…AGE is currently up 4 pennies at 68 cents…a turnaround in AGE’s 20-day SMA could come as early as next week and that’s always been a bullish sign for the stock…Currie Rose Resources (CUI, TSX-V) is off half a penny at 13.5 cents, half a penny above its 300-day moving average…CUI’s 100-day SMA recently turned negative, generating some technical selling, but the long-term trend remains bullish given the 200 and 300 day SMA’s which continue to rise and are in no danger of declining…accumulation at current levels makes sense for investors with at least a three-month time horizon as we see strong potential for CUI to strengthen considerably by summer with drilling starting up again in Tanzania during the second quarter…we are especially excited by the prospects for the company’s Sekenke Project which has never been drilled and surrounds two former high grade Gold mines…Abcourt Mines (ABI, TSX-V), which sold off yesterday to 16.5 cents, is up a penny-and-a-half to 18 cents (the financing price) on volume of nearly 2 million shares…Abcourt has too much going for it to not really bust loose at some point this year…
March 29, 2011
Gold, trying to reverse a three-day slide, has traded between $1,410 and $1,425 so far today…as of 9:35 am Pacific, the yellow metal is off $4 an ounce at $1,417…Silver is down 15 cents at $37.01 while the U.S. Dollar Index is flat at 76.30…U.S. consumer confidence fell in March after hitting a three-year high in the prior month as expectations about jobs and income growth worsened, according to a private sector report released today…the Conference Board, an industry group, said its index of consumer attitudes fell to 63.4 in March from a revised 72.0 in February…the median of forecasts from analysts polled by Reuters was for a reading of 65.0…forecasts ranged from 55.0 to 72.0…the “expectations” index slipped to 81.1 from 97.5, while consumers’ expectations for inflation in the coming 12 months hit its highest level since October, 2008…a slew of U.S. economic data is coming out this week with the all-important jobs report slated for Friday…hopefully that number won’t be an April Fool’s surprise…a total of 13% of all U.S. homes at the moment are vacant which underscores the depth of the housing problem…home prices in the U.S. continue to fall, particularly in areas of high unemployment, negative equity is rising, foreclosure inventory is surging and consumer confidence in housing is non-existent…the turnaround may not come for years and this is certainly something the Fed is watching closely as it weighs its monetary options…the CDNX is off a point at 2281…the problem with the CDNX right now appears to be “buyers’ exhaustion” after such a powerful and sustained advance from last summer…global risks have also heightened over the past couple of months and this is not helping matters for the world’s most speculative market…how this “fixes itself” we’re not entirely sure but sometimes it’s through a nasty correction that ends with sellers capitulating…hence, our stance recently with regard to the CDNX has been quite cautious…we’re waiting for that “all clear” buy signal and it just hasn’t come yet…patience is a virtue and sometimes it’s necessary to avoid the temptation of throwing cash into the market…having said that, things can change quickly and we’re always on the lookout for opportunities…one thing is certain as far as we’re concerned – the long-term CDNX bull market remains completely intact…long-term investors can rest easy in our view…a couple of weeks ago we mentioned Gold Canyon Resources (GCU, TSX-V) when it was sitting around $2.70…the company has been getting some very impressive drill results from its Springpole Gold Project 110 kilometres northeast of the Red Lake mining camp…more results were released this morning and included 150 metres grading 2.56 g/t Au in a vertical infill hole that was testing the southeast portion of the Portage Zone…all six holes reported today bottomed in mineralization and deeper drilling (up to 700 vertical metres below surface) will commence early next month…Springpole is an alkaline intrusion hosting a Gold system that represents a potentially new style of Canadian Archean Shield Gold deposit…the potential for something quite substantial clearly exists…Pinetree’s Sheldon Inwentash is no dummy and he keeps aggressively buying GCU…Grand Canyon opened at $3.35 this morning, pulled back to $3.15, and is now trading up 19 cents at $3.32 on nearly 1.3 million shares…Abcourt Mines (ABI, TSX-V) has arranged a $3.5 million financing on a “best efforts” basis at 18 cents through Industrial Alliance Securities…the financing could go as high as $5.5 million…ABI is currently off 2 pennies at 16.5 cents…for patient investors, ABI offers impressive upside potential with a growing Gold deposit at Elder-Tagami and one of Canada’s best Silver assets at Abcourt-Barvue where considerable new resources could still be uncovered through aggressive exploration…Visible Gold Mines (VGD, TSX-V) is a company we’re watching very closely that we’re expecting big things from starting in the second quarter of this year…VGD is in a strong cash position (nearly $9 million) and is one of the few companies we have come across that is blessed with what we call a “triple dynamic” – it is loaded with business, geological and marketing expertise as we discovered during our latest trip to Rouyn-Noranda…this is a company focused on building shareholder value by becoming one of northwestern Quebec’s exploration leaders…we’re completing all of our own due diligence on VGD and we will be reporting extensively on this situation in the weeks ahead…technically, the stock has found tremendous support in the mid-30′s and the declining 50-day SMA has flattened out and potentially could reverse to the upside as early as next week…VGD is currently half a penny lower at 38 cents…Currie Rose Resources (CUI, TSX-V) is off half a penny at 14 cents…CUI is down substantially in the first quarter of this year but the company is now preparing to launch a major new exploration program in northwest Tanzania, likely beginning with its Sekenke Project which surrounds two former high grade mines…the rainy season in that part of Tanzania has not been as bad as usual which is good news as Currie Rose may be able to start exploration quicker than expected…a Phase 1, 5,000 metre drill program at Sekenke will begin during the second quarter…from a technical standpoint, Currie Rose is very close to its 300-day rising moving average at nearly 13 cents which provides excellent support…Greencastle Resources (VGN, TSX-V) is unchanged at 22 cents…the company came out yesterday with its first news release since November 30…Greencastle actually had net income of $627,000 in fiscal 2010 and net assets increased 22% to $9.7 million…working capital as of December 31 was nearly $8 million or 17.5 cents per share…President and CEO Tony Roodenburg stated, “The challenge now is to unlock value in our Gold exploration assets, and we hope to announce some initiatives in this area in the second quarter…Richfield Ventures‘ (RVC, TSX-V) Blackwater project is shaping up to be a significant discovery, and we are looking forward to getting groundwork started on our Nechako property nearby”…Greencastle is currently unchanged at 22 cents and we expect a better second quarter for this company as well…one of the volume traders on the CDNX this morning is Crown Gold Corporation (CWM, TSX-V) which has announced it has signed a letter of intent to sell three Nevada properties (Monte Cristo, Sugarloaf and Blue Sphinx) to an arms-length private Canadian company, Argentium Resources, for $16 million in cash and securities ($2.5 million in cash)…CWM’s current market cap is only $11 million with the stock up 2.5 cents this morning at 12.5 cents on volume of 6 million shares…this should give encouragement to Greencastle which has two very good Gold properties of its own in Nevada (Indian Creek and Jewel Ridge)…
March 28, 2011
John: Usually at BMR when we present a chart of a company’s trading or of an Index we are trying to identify a major move. This may be a price reversal, a breakout from a consolidation or a reversal of trend. Technical analysis (TA) does not recommend guessing that a breakout from a triangle will be to the upside or the pattern in progress will be a head and shoulders that will be completed in the near future. TA waits for the pattern to be completed and meet all the requirements for confirmation. That does not mean the investor cannot be made aware of the probabilities and be prepared for when the confirmation occurs, thus having a chance to maximize profits or minimize losses.
Tonight I’m presenting a 1-month daily chart of the CDNX to point out a few of the TA indicators that are not always obvious to the average investor.
First, let us look at the run-up in February and March on the left hand side. On Feb. 25 there was a strong white shaved top candle with heavy upside volume and high buying pressure. This was followed by 3 doji candles (indecision) which should make the investor instantly aware that there is indecision in the trading, especially with 3 in succession. The third doji on March 1 gave the first indication that weakness was entering this market. Not because of the red candle (body of the doji is so small) but because there was a slight drop in volume plus a drop in buying pressure. This was followed by a gallant attack by the bulls with 2 white candles but with lower volumes and declining buying pressure – a clear indication of weakness in the near-term uptrend. Then, on March 7, the CDNX gapped up at the open but declined during the day, creating a red candle. This was an exhaustion gap signaling that the short-term uptrend was at an end. The volume was high and the buying pressure significantly lower than the previous session.
The short-term downtrend started on March 7 and was followed by 3 more red candles, each with increasing volume but with decreasing buying pressure (on March 10 we warned of a potential 20% correction in the CDNX). Nothing here indicated when it would end. The next session on March11 gapped down at the open and climbed during the day to close at its high. Did this strong move indicate a reversal? The bullish engulfing chart pattern suggested this was possible but TA requires this pattern to be confirmed by a white candle, a large gap up or a higher close the following day. On the surface this looked like a textbook bullish engulfing but note the lower volume. Even though the buying pressure increased over the previous day the volume was not there. Higher volume is critical. The third day was a red candle, thus the bullish engulfing pattern was not confirmed. This demonstrates how critical it is not to assume and to wait patiently for confirmation.
On March 15 the Index gapped sharply down at the open, dropped to a support level and then rose during the day to create a clear candle. This day had high volume indicating the possibility of a sell-off and reversal. This was confirmed over the next 2 trading sessions, and a rally ensued that took the CDNX to an intra-day high of 2328 March 24.
Looking at today’s action, the combination of the red candle, a small increase in volume, declining buying pressure and an increase in -DI (red line) all point to a down day tomorrow. The risk of a 3-wave correction and a drop to 1850 in the coming weeks cannot yet be ruled out – it remains a distinct possibility. This analysis shows that by reading the interactions of patterns, candles, volume and indicators you can be made aware of the probability of major moves and trend changes and be prepared to trade accordingly to maximize your profits or minimize losses.
Gold’s inability to follow-through after hitting a new all-time high last Thursday of nearly $1,450 is generating more profit-taking this morning…as of 8:40 am Pacific, the yellow metal is off $12 an ounce at $1,418…it has recovered somewhat after dropping as low as $1,410…Silver is also off its lows of the day but still down 34 cents at $36.98…the U.S. Dollar Index is weak, too, off one-quarter of a point to 76.09…a slew of economic data is coming out of the U.S. this week including a much anticipated jobs report Friday…some positive news was released this morning on a couple of fronts…pending home sales unexpectedly gained 2.1% in February, according to the National Association of Realtors…economists had expected the index, which leads existing home sales by a month or two, to fall 1% after a previously reported 2.8% decline…and U.S. consumer spending rose slightly more than expected in February for the eighth straight month of gains as households tapped their savings, according to government data, while inflation accelerated at its fastest pace since June, 2009…the Commerce Department said spending rose 0.7 percent after an upwardly revised 0.3 percent gain in January…the CDNX is tipping its hand, falling below important support at 2300…it’s currently off 23 points at 2291…we continue to be very cautious regarding the Venture Exchange at the moment given the trading action this month and the drop-off in volume during the rally that took the Index from an intra-day low of 2054 March 15 to an intra-day high of 2328 March 24…Gold Bullion Development (GBB, TSX-V) is off half a penny at 45.5 cents…GBB posted its first weekly gain last week for the first time since early February, climbing a nickel to 46 cents…while the 10-day SMA has reversed to the upside, a positive development, the 200-day SMA is now trending downward for the first time in a year-and-a-half and that’s a troubling issue…the LONG Bars Zone is as promising as ever, though, so any additional weakness in GBB could present some outstanding opportunities for patient investors…Greencastle Resources (VGN, TSX-V) is sitting on working capital of 17.5 cents per share according to its year-end financials which were released last Thursday…this includes $5.1 million in cash and $2.6 million in marketable securities including over 1 million shares in Evrim Resources (EVM, TSX-V), formerly Avaranta, which began trading on the Venture Exchange January 25…Evrim looks interesting and we suggest investors perform some due diligence on it…Greencastle is currently off a penny at 21 cents, giving it a market cap ($9.5 million) less than $2 million above its working capital…Visible Gold Mines (VGD, TSX-V) continues to be one of the most exciting opportunities we see along the Cadillac Trend…investors need to watch VGD carefully as its game plan is an aggressive one and it’s armed with nearly $9 million in cash…the company is focused on the Rouyn-Noranda region and is currently drilling its Silidor Property with a second drill program expected to start by the end of this week near Vantex Resources‘ (VAX, TSX-V) Moriss Zone Discovery at the Galloway Project…what impresses us the most about VGD is that it has assembled a very strong team of business, geological and marketing personnel who understand what it takes to build shareholder value…VGD is currently unchanged at 39 cents…Adventure Gold (AGE, TSX-V) continues to perform very well in this market…it’s up 6 cents this morning at 70 cents on healthy volume of 270,000 shares…Richfield Ventures (RVC, TSX-V) is also holding up well and any weakness should be viewed as a buying opportunity given its very significant and growing deposit at Blackwater…RVC is 7 cents higher at $6.55…GoldQuest Mining (GQC, TSX-V) hit resistance Friday at 40 cents and has pulled back to 36 cents this morning…GQC continues to be one of our favorites, however, given the geological potential of its properties in the Dominican Republic…Seafield Resources (SFF, TSX-V) is off half a penny at 32.5 cents…it has been a difficult first quarter for Seafield – the stock is down 45% so far this year – but we’re confident that more drill results from Dos Quebradas will reveal the very strong upside potential of that property…Seafield has rock-solid technical support at its rising 300-day SMA at 28 cents…Abcourt Mines (ABI, TSX-V) is off half a penny at 19 cents where it has some technical support…the announcement Friday of a financing on a best-efforts basis “in the context of the market” to raise between $3.5 million and $5.5 million has created some uncertainty which markets simply don’t like…
Gold is off its lows of the day but the yellow metal is still down $13 an ounce at $1,417 as of 7:05 am Pacific. The action in the CDNX this month has suggested to us that there’s an increased risk of a broad market sell-off or short-term weakness in the precious metals. This morning, John examines the technical health of the TSX Gold Index.
John: On Friday, the TSX Gold Index (SPTGD) opened at 399.22, rose to a high of 401.75, fell to a low of 396.59 and then closed at 397.29. It was down -0.44 (0.11%) on volume of 46.2 million shares.
Looking at the 3-year weekly chart we see that the Index has been trading within an upsloping channel since February, 2009. Between May and December, 2010, the trading pattern was an upsloping wedge which is a reliable bearish reversal pattern.
At the beginning of January of this year there was a breakdown from the wedge and between then and now the trading is consolidating within a symmetrical triangle. One has to be careful with a symmetrical triangle because it can break to the upside or downside with equal expectation. The most powerful breakouts occur when the trading is between a half and three quarters toward the apex of the triangle, so this could break in the next 3-4 weeks. If it breaks to the upside it should be accompanied by high volume to verify reliability. The symmetrical triangle is often a continuation pattern, meaning that its breakout will be in the direction of the previous move, in this case down. On the other hand we see that it is closely supported by the SMA(50) moving average so there is no clear indication in which direction the break will occur. The declining volume during the triangle formation confirms the consolidation.
Looking at the indicators:
The RSI is hovering around the 50% level during the consolidation – neutral.
The Chaikin Money Flow (CMF) shows that the selling pressure is increasing during the consolidation – bearish.
The ADX trend indicator has the +DI and the -DI entwined and the ADX (black line) trend strength indicator is falling, indicating the short-term trend is weak and neutral but the long- term trend is bullish.
Outlook: The long term-trend is bullish but the breakout from the triangle could be bearish for the short-term.
March 27, 2011
GoldQuest Mining (GQC, TSX-V)
GoldQuest enjoyed a decent week, gaining 6.5 cents to close at 40 cents…volume was on the light side, however, and it’ll have to increase substantially in order for GQC to plow through resistance at the 40-cent level…the prospects for GQC this year are very bright given the company’s pipeline of quality Gold projects in the Dominican Republic where a mining boom is clearly in full swing…GoldQuest has been conducting a Phase 2 drill program at its promising La Escandalosa Property in the DR since mid-December and initial results are expected soon…based on the success of the last drill program, GoldQuest is getting closer to the centre of the mineralizing system at Escandalosa and we’re expecting results that could ultimately elevate this project to the 1 million+ ounce category…400,000 inferred ounces have already been outlined (43-101) based on just 25 drill holes…approximately 40 holes are being drilled in the current program…Escandalosa is a flat-lying, near-surface deposit where the Gold should be easy to extract…as Chairman Bill Fisher told us in a February interview, “the economics could be really quite compelling”…proving up a 1 million ounce deposit at Escandalosa could give GoldQuest production of at least 100,000 ounces a year…GQC’s other promising priority projects in the DR are Las Animas and Jengibre which are next in line for drilling after Escandalosa…GoldQuest released a 43-101 resource estimate March 2 on its Toral zinc-lead-silver deposit in Spain…it showed slightly lower grades but much higher overall tonnage than the previous historical non-compliant estimate…as a result, total resources came out 15% higher…resources in the indicated category are 4.04 million tonnes grading 11.8% lead and zinc (5.3% lead, 6.5% zinc) as well as 41 g/t Ag and 0.11% Cu… inferred resources are 4.67 million tonnes grading 9.8% lead and zinc (4.44% lead, 5.4% zinc), 32 g/t Ag and 0.14 Cu…Toral has significant exploration and development upside as a majority of the historical drilling (40,000+ metres) was conducted over one relatively small part of the property…the zone of sulphide mineralization is open along strike to the northwest toward a known lead deposit as well as along strike to the southeast and downdip…the project is also an ideal candidate for a fast-track to production…the deposit is close to a power line, highway and rail line…a large smelter is located just 300 kilometers away by rail…GoldQuest is up 105% since we introduced it to BMR readers last fall…
Greencastle Resources (VGN, TSX-V)
Greencastle gained 3 pennies last week to close at 22 cents and may soon try to challenge its 50-day SMA which is currently declining and sitting at 24 cents…VGN’s strong underlying fundamental value is clearly shown in the latest financials which were released Thursday…as of December 31, Greencastle held $5.1 million in cash and marketable securities worth $2.6 million…some of those securities are likely shares in Seafield Resources (SFF, TSX-V) while the company disclosed it held 1,148,000 shares of Evrim Resources Corp. (EVM, TSX-V), formerly Avaranta, which started trading on the Venture Exchange January 25…at 22 cents, Greencastle’s market cap ($10 million) exceeds its working capital by just $2 million…the potential of higher oil prices in the coming months could bolster Greencastle’s monthly cash flow of $100,000+ as it receives royalties from heavy crude production at Primate in Saskatchewan…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 a news release from Greencastle since November 30…however, with approximately $8 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 at current levels…Greencastle will shine again soon enough…the long-term chart remains very encouraging with rising 200 and 300-day SMA’s 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 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…investors need to be patient, however, as they often do with Roodenburg’s plays…Greencastle is up 57% since we added it back in to the BMR model portfolio five months ago…
Adventure Gold (AGE, TSX-V)
Adventure Gold had a quiet week, closing Friday at 62 cents for a weekly gain of 3 pennies…the stock remains in an overall long-term uptrend with the supporting 100-day moving average (SMA) at 51 cents…the rising 50-day SMA at 55 cents provides excellent support as well…the company released results recently from the first two holes at its Pascalis Colombiere Gold Property near Val d’Or…both holes were drilled approximately 150 metres west of the former L.C. Beliveau Mine and intersected Gold-bearing structures at various depths which is encouraging…the system is showing strong similarities to the one observed at L.C. Beliveau…hole #13 returned 5.4 g/t Au over 20 metres which included 2.9 metres grading 34.6 g/t Au…hole #14 intersected 7 g/t Au over 4.8 metres…results from seven more holes are pending…six of them were drilled west of the former mine while the other, which may prove to be very important, was drilled at depth to test the geometry of the Gold system below the underground workings…this former mine was a low cost producer and holds excellent potential for extensions laterally and at depth…it’s still early but Adventure Gold appears to be on track with its exploration goals at this property based on these early results…we expect AGE will begin drilling its Granada Extension Property in the near future…last month’s results from Gold Bullion and the latest drill map on the GBB web site reveal exciting new potential over the far western portion of GBB’s Preliminary Block Model which supports Adventure Gold’s geological interpretation that it holds part of the western extension of the LONG Bars Zone…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 82%…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 still 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 try to gain traction after a brutal sell-off March 8 that essentially chopped the share price in half…Sidon climbed half a penny last week to close Friday at 7 cents…the company has arranged a private placement of up to $2 million at 8 cents and has also announced it has signed an option to acquire 80% of a property adjacent to Canaco’s (CAN, TSX-V) Handeni Project…initial drill results from Morogoro, announced March 8, fell short of market expectations…the six shallow holes that were drilled in December did not produce significant results, the best hole showing 3 metres grading 1.7 g/t Au…the company has drilled four deeper holes with results for those still pending…what the initial six holes have given Sidon, however, is a better understanding of the Morogoro geological structure which should help in future drilling…exploration, especially at such an early stage, is never easy and disappointing initial results don’t necessarily mean a property doesn’t hold excellent potential…the company is also trying to develop a placer operation at Morogoro…ground near Canaco’s discovery also helps…there is certainly hope here for better days ahead…from a technical standpoint, previous support between 9 and 10 cents will now provide resistance over the short term…Sidon is up 40% since we introduced it to BMR readers a year ago at a nickel…
Seafield Resources (SFF, TSX-V)
Seafield closed Friday at 33 cents for a loss of 1.5 cents for the week…consistent with the drop-off in overall CDNX volume, Seafield is going through its longest stretch of the year (eight sessions) without trading at least 1 million shares in a day…the rising 200-day SMA at 31 cents provides strong technical support…secondary support is at 28 cents…on March 7, the company reported assays from the first three holes completed at Dos Quebradas with hole #2 intersecting a whopping 511 metres grading 0.58 g/t Au…the hole ended in mineralization…hole #1 delivered 269 metres grading 0.37 g/t Au while hole #3 was drilled to define the eastern limit of mineralization and returned no significant results…a total of nine holes have now been drilled at Dos Quebradas with 11 planned for this phase of drilling…significant intercepts well outside areas of historical drilling would start to get the market excited…last month, the company reported that a second drill rig would start testing the nearby Santa Sofia Property by the end of February…the company has identified a promising porphyry target measuring 1,050 metres in length and 850 metres in width at Santa Sofia…a third target, La Loma, also appears very interesting…the geological case for Seafield’s Quinchia land package is compelling and we’re looking forward to more results from Dos Quebradas and elsewhere…the company has already outlined a 43-101 resource of nearly 800,000 ounces at its Miraflores Property, a number that’s expected to increase following the 12-hole, 4,000 metre program recently completed there…patient investors have an opportunity to do extremely well with this play given the geological merits of Quinchia and the real potential for 5 million+ ounces from several potential deposits…the company is sitting on approximately $15 million in cash and has a very modest market cap of $50 million…Seafield has gained 450% since we made it the first company in the BMR model portfolio in the summer of 2009…
Gold Bullion Development (GBB, TSX-V)
Gold Bullion posted a weekly gain for the first time since early February as the stock closed Friday at 46 cents, an increase of a nickel over the previous Friday…on another positive note, the 10-day moving average (SMA) has reversed to the upside…however, the 20-day (currently 46 cents) continues to decline while a more troubling issue is that the 200-day, after rising for more than a year-and-a-half, has now started to fall and that’s going to intensify the overhead resistance and possibly create some downward pressure on the stock…the company added board strength last week as Ronald Goguen Sr., the founding shareholder of Landdrill International Inc.’s predecessor company and Atlantic Canada’s Entrepreneur-of-the-Year in 1995, became a GBB director…Gold Bullion also announced it remains focused on generating a 43-101 resource calculation for the LONG Bars Zone by early summer and that “more detailed press releases will be issued on each property (Granada and Castle) shortly”…as our recent article demonstrated, results from over 80 drill holes clearly demonstrate that the LONG Bars Zone continues to have multi-million ounce potential…mineralization remains open in every direction with six kilometres of untested strike length going east…continuity between the Preliminary Block Model and the Eastern Extension has been established in our view, though much more drilling in the Eastern Extension is still required…at 46 cents, Gold Bullion’s market cap is only $73 million…this seems cheap given the 2.4 to 2.6 million ounce potential of just the Preliminary Block Model area as outlined by GBB nearly a year ago…the 43-101 will help…while we’re disappointed GBB isn’t in a stronger cash position and that there are still just two drill rigs at Granada nearly a year after the Phase 2 program started, the fact remains that Gold Bullion is sitting on a potentially huge near-surface Gold deposit in one of the best jurisdictions in the world for mining and exploration and during the greatest bull market in history for the yellow metal…
Cadillac Mining (CQX, TSX-V)
Cadillac fell for the third week in a row, closing Friday at 19 cents for a loss of a penny-and-a-half for the week…the opportunity with Cadillac is immense in our view given the company’s strategic land package in northwestern Quebec, the astute acquisition of a former Gold-Silver mining camp in Utah, and the tight share structure…the current market cap is only $4.85 million which allows for plenty of upside potential…management’s challenge is to “seize the moment” and capitalize on the excellent opportunities the company clearly has in order to drive shareholder value…technically, while the chart has suffered some short-term deterioration recently, the stock is strongly supported by a rising 200-day SMA at 15 cents…Richmont’s (RIC, TSX) success at its Wasamac Property west of Rouyn-Noranda is very bullish for Cadillac which is now preparing an exploration program including diamond drilling for its adjacent 100%-owned “Wasa” claims…Richmont has started a new 35,000 metre drill program of its own to upgrade and further expand resources at the growing Wasamac deposit where the principal structure hosting Gold mineralization 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 at depth could host a significant high-grade extension of Richmont’s deposit…this is what Cadillac will be examining…in addition they’ll be going after some highly prospective VMS targets on the property…the infamous Horne Creek 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 excellent potential and we’re pleased to see they intend on proceeding with a drill program…actions speak louder than words, however, and investors want to see some positive developments as quickly as possible…other CQX ground along the Cadillac Trend is about to be drilled…Visible Gold is expected to start a 9,000 metre drill program by the end of the coming week as part of the agreement they worked out with Cadillac in December on over 7,000 hectares of land in the Rouyn-Noranda region…the first four holes of that program will be drilled on ground adjacent to Vantex’s (VAX, TSX-V) Moriss Zone discovery at the Galloway Project west of Wasamac…we encourage readers to listen to our informative interview with Cadillac President and CEO Vic Erickson posted March 4…Part 2 of that interview is coming soon…
Abcourt Mines (ABI, TSX-V)
It was an interesting week for Abcourt…the stock appeared to be on the verge of breaking out Thursday when it got through resistance at 23 cents on an intra-day basis…it climbed to a new 52-week high of 25.5 cents on volume of over 4 million shares but then closed at 23 cents before dropping Friday on news the company has filed a preliminary short form prospectus to raise between $3.5 and $5.5 million at an undetermined price…this took the wind out of the sails of the stock which fell 3.5 cents Friday to close at 19.5 cents, a gain of 1.5 cents for the week…boosting its cash position will help Abcourt but this is a company that needs to tell its story more effectively in order to maximize shareholder value…Abcourt is sitting on some tremendous assets that simply aren’t being fully valued by the market…technically, all the moving averages are in bullish alignment and the stock has closed above its 100-day SMA, currently at 17 cents, since the first trading day of the year…the 50-day SMA at 19 cents provides support and there is also a very strong zone of technical support from 14.5 cents (the 200-day SMA) through to 17 cents…Abcourt released more positive assay results recently from its ongoing 10,000 metre drill program at its Elder-Tagami Gold Project near Rouyn-Noranda…mineralization continues to expand to the west of the former underground Elder Mine…the Tagami area to the north, meanwhile, has major potential so by later this year we’re expecting a substantial increase in resources at this project…the latest 43-101 resource estimate of 216,000 ounces was released in the summer of 2009…the possibility of Abcourt expanding that resource beyond 500,000 ounces certainly exists given the encouraging results to date…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)…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 was unchanged for the week at 15 cents…the stock is now trading between its 200-day SMA at 16.5 cents and its 300-day SMA at 12.5 cents…both long-term moving averages are rising which is a positive sign though the 100-day has recently started trending downward…the rainy season has not been as severe as usual in northwest Tanzania and that’s good news as Currie Rose prepares to launch a major drill program during the second quarter…one of the key technical events we’re looking for with CUI over the coming weeks is a reversal in the 50-day SMA which has been in sharp decline since January and is now starting to flatten out at 17.5 cents…significant accumulation started in Currie Rose during February as demonstrated by the CMF indicator…while its Tanzanian properties are the market’s major focus, Currie Rose could benefit over the coming weeks and months from continued good exploration news from Trueclaim Exploration (TRM, TSX-V) which is currently conducting an 8,000 metre drill program at the Scadding Gold Property near Sudbury…Trueclaim, which released assay results March 4 including 15.78 metres grading 5.36 g/t Au near-surface, is in the process of earning a 51% interest in Scadding by carrying out a $2 million work commitment…Trueclaim can acquire a full 100% interest by completing a feasibility study, paying $2 million to Currie Rose, and giving Currie Rose a 3% net smelter royalty…CUI announced a joint-venture deal January 25 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…while Currie Rose has had its market cap shaved considerably, from a high of nearly $40 million to the current $13 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…Currie Rose has all the cash it needs ($2 million) to complete an initial major round of drilling (10,000 metres) this spring and summer in Tanzania, so there will not be any dilution of the stock at current levels as confirmed by President and CEO Harold Smith…
Richfield Ventures (RVC, TSX-V)
Richfield has been on fire recently (we suspect funds have been accumulating) and finally cooled off slightly last week, losing 16 cents to close Friday at $6.48…over the immediate term, technicals suggest the stock is likely to at least test its 20-day SMA and possibly even its 50-day SMA but any weakness should be viewed as an opportunity given the fact this company is developing such a world class deposit…Richfield released a 43-101 resource estimate for Blackwater on March 2…using a 0.4 g/t Au cut-off grade, the estimated global indicated resource is 1.83 million ounces of Gold (53.46 million tonnes grading 1.06 g/t Au) with an additional 2.34 million ounces in the inferred category (75.45 million tonnes grading 0.96 g/t Au) for a total of 4.17 million ounces…some 20 million ounces of silver are also in the indicated and inferred categories…initial metallurgical testwork has indicated an average of 92-per-cent Gold recovery using conventional whole ore direct cyanidation…the company has also contracted a series of consultants to prepare a Preliminary Economic Assessment (PEA), planned for completion in the fourth quarter of 2011…the study will consider the potential for a large-scale, open-pit mine and ore processing facility…with cash on hand of nearly $17 million, the company has ample reserves to complete a 30,000 metre drill program this year as well as the PEA…given the state of the Gold market and the likelihood of continued exploration success at Blackwater, Richfield’s current market cap of $281 million still gives it considerable upside potential for the balance of 2011… 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…the gain since then has been 440%…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 significantly higher than the current $6.48 per share…
TSX Venture Exchange and Gold
The Venture Exchange (CDNX) continued its climb last week, gaining 70 points or 3% to close at 2314. While the rally since the yearly low of 2054 March 15 has been impressive in terms of total points (260 or 13%) over just nine trading sessions, volume has declined considerably and that’s a major concern. A market that rises on decreasing volume is a signal that buying pressure is faltering, plain and simple. While the overall and long-term Venture Exchange bull market remains intact, significant near-term risks exist.
In addition, the CDNX is now under-performing the broader markets (the CDNX is up just 1% this year vs. gains of 5.5%, 4.4% and 3.3% for the Dow, TSX and Nasdaq, respectively) after significantly out-performing those markets over the last half of 2010. This raises a “cautionary flag” as the CDNX is an extremely reliable leading indicator. Investors are seeing more geopolitical and other risks right now and that has them less inclined at the moment to throw their money into speculative and risky junior mining stocks. This can change very quickly, however.
The 2314 close Friday puts the CDNX just a few points below its slightly rising 50-day moving average (SMA) and just a few points above the 20-day SMA which continues to fall. The Index is currently in a zone of resistance but it’s also underpinned by support at 2300. The final four trading days of the month should determine which way this market is going to turn – it will either break to the upside and take a run at the previous high of 2465, or it will weaken and fall below 2300. We will patiently wait for the market to tell us what it wants to do. The possibility of a three-wave correction, taking the Index down about 20% from current levels, still exists. For this market to head higher, volume must increase while the RSI and Slow Stochastics indicators must break above their resistance trendlines as John’s chart that we posted Friday morning clearly indicates:
Let’s review in point form why we still remain cautious over the immediate to short-term regarding the CDNX:
- The market has clearly met powerful resistance between 2438 (the Feb. 22 high) and 2465 (the March 7 high). It is now in a new zone of resistance in the immediate vicinity of the 50-day SMA;
- Exhaustion appears to have set in – the CDNX climbed 83.5% over eight months. Buying pressure was at a level (“pivot point”) where other pullbacks have started;
- The CDNX is now significantly under-performing the major markets. Given the fact the CDNX is such a reliable leading indicator, this suggests to us an increased risk of a major broad market reversal or even a correction in precious metals and commodities across the board;
- The CDNX fell below its 50-day SMA March 10 for the first time since the start of the big run last summer. In almost all cases over the last decade, with the notable exception of 2009, a drop below the 50-day SMA following a significant uptrend has preceded a major correction. The market did fall sharply after March 10 to a low of 2054 March 15 – the question is, was this the end of the correction or just the first leg of the correction?
- The CDNX’s 50-day SMA started to decline March 14, a negative sign, though it has recently reversed again. The sell-off started in earnest when the market first fell below its 50-day SMA, so naturally this is now an area of resistance (2321) which is why the market reacted when it got as high as 2328 Thursday;
- The 20-day moving averages continues to decline which is a problem for this market right now – a reversal in this pattern is imperative and would attract fresh buying interest. The 10 and 50-day moving averages have reversed to the upside and those are positive developments. The 100, 200 and 300-day SMA’s remain in bullish alignment which confirms the long-term trend;
- Volume on the rally since March 15 has been relatively low;
- It can be interpreted that the CDNX is in the midst of a 3-wave, A-B-C correction based on the chart patterns;
- The current market pattern has similarities to the May-June, 2006, correction when the CDNX fell nearly 30%;
- Too many individual stocks are technically weak;
- The fact the CDNX would experience weakness at a time when Gold is hitting new all-time highs, and commodities in general have been very strong, is a serious negative development;
- The geopolitical backdrop is not positive – major confusion and uncertainty on the world stage quickly chase investors away from the world’s most speculative market, the CDNX.
Fundamental factors could quite possibly create a very difficult environment for stocks over the coming days and weeks, though markets have a tendency sometimes to climb a “wall of worry” for an extended period. Continued unrest and uncertainty in the Middle East, the potential of rising oil prices due to this unrest as well as demand/supply dynamics, debt problems from Europe to the United States, U.S. budgetary battles, inflation concerns and rising interest rates in some parts of the world, austerity measures introduced by certain governments, and now the near-term negative affects of the problems in Japan are all factors that could create a bumpy road ahead for the markets. In Canada, a critical federal election is now set for May 2. At the very least the market wants to see a strong Conservative minority government and anything short of that will cause considerable anxiety among many investors.
Gold hit a new intra-day all-time high of nearly $1,450 Thursday before pulling back and finishing the week up $10 an ounce at $1,430. Silver enjoyed a strong week and jumped $2.04 to 37.28. Silver has had a spectacular run recently, and one thing that concerns us is that steep rises like we’ve seen in Silver and such out-performance against Gold have often occurred before corrections in precious metals.
The fundamental case for Gold remains 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), rising oil prices…the list goes on. It’s hard to imagine Gold not performing well in this environment. However, one cannot rule out the possibility of another correction prior to a fresh advance that takes Gold beyond $1,500.
Despite signs of an improving U.S. economy, the Fed is expected to error on the side of caution and maintain its accommodative monetary policy for an extended period which is bullish for precious metals and commodities in general. The Fed will want to see payroll gains in excess of 200,000 for at least six to nine months and a significant decline in unemployment before withdrawing its massive monetary support (QW2). The current U.S. economic expansion is just 20 months old (expansions since WW2 have tended to be at least 60 months) and there are still significant risks to the economy including troubling high levels of debt at every level of government, a housing market that is still very weak (one in four mortgages are underwater and prices continue to decline in many areas) and now an increase in oil prices which has the potential of hitting consumers hard. Interest rate increases in the U.S. appear to be out of the question until at least sometime next year. Overall, this is the type of environment that’s very supportive of Gold and a speculative commodity-driven market such as the CDNX which is why we see any pullback in the CDNX, minor or major, as merely a correction within a powerful ongoing bull phase. Any hint of a global economic slowdown, due to a combination of factors, may convince the Fed to launch QE3 after QE2 expires in June.
A couple of interesting developments last week on the Gold front:
The Utah legislature passed a bill allowing Gold and Silver coins to be used as legal tender in the state, according to the true value of the metal in the coins and not by the face value stated on the coin. Similar proposals have been developed in Colorado, Georgia, Indiana, Iowa, Missouri, Montana, New Hampshire, Oklahoma, South Carolina, Tennessee, Vermont, and Washington.
In India, standard 24-carat Gold coins have been selling extremely well at more than 466 post offices throughout the country. Despite the high price, Indian consumers have been buying small quantities of coins to give during the festival season.
March 25, 2011
Gold has traded in a range of $1,430 to $1,439 so far today while Silver is 48 cents higher at $37.65…Gold retreated yesterday after climbing to a new all-time high of nearly $1,450 while Silver reached a new 31-year high of $38.18…Silver has enjoyed a spectacular run recently, and one thing that concerns us is that steep rises like we’ve seen in Silver and such out-performance against Gold have often occurred before corrections in precious metals…in addition, the action in the CDNX this month suggests an increased probability of either a near-term correction in precious metals or the broader markets in general…so we continue to remain cautious and we’ll be looking for the CDNX to give us more definitive answers in the days ahead…a clear short-term signal, one way or the other, bullish or bearish, is what we’re imminently expecting…as of 8:00 am Pacific, Gold is $5 higher at $1,436…the U.S. Dollar Index is up over one-tenth of a point to 75.86 while crude oil is 41 cents lower at $105.19…U.S. consumer sentiment in March fell to its lowest level in more than a year as gasoline and food prices rose, according to a survey released this morning…the index was slightly lower than March’s preliminary reading while inflation expectations remained elevated…even so, the survey from Thomson Reuters and the University of Michigan said there was no decline in buying plans which is important…the U.S. economy grew more quickly (3.1%) than previously estimated in the fourth quarter as businesses maintained fairly solid spending and restocked shelves to meet rising demand, while corporate profits increased 3.3 percent, a government report showed today…consumer spending, which accounts for more than two-thirds of U.S. economic activity, grew at a revised 4% rate in the final three months of 2010 instead of the previously announced 4.1%…New York and Toronto markets are both higher this morning while the CDNX has gained 8 points to 2312…Abcourt Mines (ABI, TSX-V) enjoyed a powerful move yesterday, getting through resistance at 23 cents and climbing to a new 52-week high of 25.5 cents, but the stock has backed off this morning after the company announced plans to raise up to $5.5 million at an undetermined price…ABI is currently down 3 pennies at 20 cents…financings always make investors a little nervous which is why the stock has weakened this morning but we have long-term faith in this situation as Abcourt is developing assets that we believe, by any reasonable measure, are undervalued by the market…Archean Star Resources (ASP, TSX-V) has finally started trading on the Venture Exchange…Archean Star of course is a spin-off from Kent Exploration (KEX, TSX-V) and is exploring the large Gnaweeda Gold Project in western Australia…Kent holds approximately 40% of Archean’s 28 million outstanding shares…new drill results are pending from Gnaweeda so we’ll be keeping a close eye on that situation…Kent, which has a current market cap of just $6 million, is drilling its Alexander River Property and we expect the company will also start generating cash flow this summer from its Flagstaff Barite Project in Washington State…Seafield Resources (SFF, TSX-V) continues to languish in the low-to-mid-30′s…technically, however, Seafield’s long-term uptrend remains intact with rising 200 and 300-day moving averages…the stock bounced off its 300-day SMA March 15 and 16…Seafield has been in a consistent decline during the first quarter of this year but we anticipate Q2 will be a lot kinder with improving short-term technicals and more results from Quinchia…Seafield is currently off half a penny at 34 cents…Richfield Ventures (RVC, TSX-V) has been holding steady in the $6.50 range for the past couple of weeks, a positive trading pattern that we’ve seen prior to strong upside moves in this stock since the summer of last year…while it’s still facing some technical headwinds, Gold Bullion Development (GBB, TSX-V) is looking stronger and has moved above its 20-day SMA for the first time since the stock suddenly plunged in mid-February…GBB is up a penny-and-a-half at 48 cents…from a fundamental standpoint, there’s no question in our mind that the LONG Bars Zone is as attractive as ever…we’ll be posting a detailed CDNX analysis Sunday in Part 1 of our Week In Review with Parts 2 and 3 updating GBB, CQX, ABI, CUI, RVC, GQC, VGN, AGE, SD and SFF…depending on market conditions, we may highlight some additional situations as well…