Gold and Silver are firmer today, trying to gain some traction after sliding into oversold territory…as of 8:00 am Pacific, bullion is up $7 an ounce at $1,222 after climbing as high as $1,237…Silver is up 2 pennies at $17.75…Copper is flat at $3.07…Crude Oil has added 88 cents to $91.74 while the U.S. Dollar Index is off slightly at 84.64…
Silver’s price slump has caused the much-regarded Gold/Silver ratio to climb to 69, its highest level since June 2010…
The market’s worst fears regarding some important Chinese economic data were alleviated overnight as the HSBC/Markit preliminary gauge of factory activity for September actually surprised to the upside, rising to 50.5 from an August final reading of 50.2…expectations were for a possible contraction below 50, which is one reason metals took a strong hit yesterday…however, enthusiasm over the 50.5 number was restrained somewhat by factory employment which slumped to a 5.5-year low…
The improved outlook for manufacturers follows a weakening in China’s industrial production, energy consumption and fixed-asset investment in August…the housing market is also in a slump…these negative factors have been offset to an extent by strong growth in exports and solid performance in retail and services…still, many analysts are expecting Chinese economic growth this year to fall short of the country’s official target of 7.5%…over the weekend, at the Group of 20 meeting, Finance Minister Lou Jiwei repeated Beijing’s message that the government wouldn’t resort to broad-based stimulus measures…he added that Beijing was focused on several economic indicators and that a shortfall in one area wouldn’t necessarily force a major policy response…the government seems to be favoring targeted measures such as last week’s liquidity injections from the People’s Bank of China (PBOC)…
Favorable COT Structure
Yesterday’s updated COT report for the week ended September 16 provides encouragement – one excellent example being that for the first time since June 10, managed-money traders pushed their holdings to be net-short in Silver…so they haven’t been this bearish since Silver took off to the upside over the final three weeks in June…meanwhile, commercial traders continue to scale back their net-short positions in both Gold and Silver, and next week’s report (ending today) should be even more revealing…this sort of set-up typically indicates a reversal in prices is imminent, and indeed we’re seeing strength returning to precious metals today…it’s possible that yesterday was an important turning point for Silver as it reversed intra-day from its lows…
Chile Invests More Than $20 Billion To Revamp Copper Mines
How this all plays out should be very interesting – Chile’s President, Michelle Bachelot, has given clearance for state-owned Copper producer Codelco to invest $23.5 billion to revamp century-old mines that are running out of profitable ore…will this become another classic example of taxpayers’ money going down a bottomless pit?…Copper generates 20% of government revenue in Chile and 60% of all Chilean exports…Codelco’s costs have more than doubled over five years, in part due to falling grades…will more than $20 billion fix the problem?…we’ll see…
Russia Keeps Adding Gold Reserves
Russia continues to consistently add to its Gold holdings and has just about doubled its reserves since the 2007/2008 financial crisis…the figures suggest that Russia’s almost non-stop monthly increases have primarily come from the central bank taking in a significant proportion of the country’s domestic Gold output which averaged around 20 tonnes a month in 2013…Russia could surpass Australia this year and become the world’s second largest producer of Gold behind China…
Today’s Equity Markets
Asia
Japan was closed for a holiday but China’s Shanghai Composite added 20 points overnight to close at 2910 after the better-than-expected flash PMI report…
Europe
European markets are down significantly in late trading overseas…fresh data showed business activity in the euro zone slipped again in September, with growth in both the region’s manufacturing and services sectors slowing over the month…the flash composite PMI for the euro zone came in at 52.3 in September, according to data provider Markit, below a Reuters’ forecast of 53.5…that’s also a 9-month low…French data also confirmed that the economy stagnated in the second quarter of this year…
North America
The Dow is down 37 points as of 8:00 am Pacific…the TSX is 10 points higher while the Venture is off 3 points at 925…
TSX Gold Index Update
September has been an unusually brutal month for the TSX Gold Index, but often a month will finish in different fashion than how it started…through yesterday, the Gold Index was down 33 points or a whopping 16.3% for September vs. just a 5.7% drop in the price of Gold (from $1,288 to $1,215)…the Venture has fared a little better than the Gold Index, declining 9.4%…
Below is an updated 6-month Gold Index chart…RSI(14) conditions after yesterday’s 7th straight daily loss became even more oversold than what occurred near the end of the May when the Index hit a low of 166…the Index closed at 169 yesterday and has fallen significantly below its still-rising 200-day moving average (SMA), currently at 185…an even bigger gap has opened between the 50-day (196) and the current price, so conditions are ideal for a rally back up to these moving averages…
RSI(14) shows a 3-gradient drop and we’ll be watching for a possible move this week above the 3rd gradient…the Gold Index is up a point at 170 as of 8:00 am Pacific…
TSX Composite Index Chart
Below is an interesting TSX chart that shows how the combined 336-point plunge Friday and yesterday took the Index slightly below the bottom of an upsloping channel on the 1-year daily chart…this could very well be a “false” breakdown – it does require confirmation…so trading activity today and tomorrow will be important…keep in mind there is strong TSX chart support at 15000 and the Index is still within an upsloping channel on the 5-year weekly chart we posted yesterday…it seems the 15000 level is quite critical for the TSX, as the 915-920 area is for the Venture…
Prosper Gold Corp. (PGX, TSX-V) Update
Shortly before market open this morning, Prosper Gold Corp. (PGX, TSX-V) released results from the first 19 holes of its 2014 drill program at the Star Project in the Sheslay district…once again, a glaring lack of effective communication strategy on the part of Prosper in terms of a) explaining the significance of what’s evolving at the Star Project, and (b) the timing of the news, 20 minutes before market open which simply doesn’t allow investors enough time to properly digest results…we’ll comment more on Prosper tomorrow after we’ve had an opportunity to properly assess the numbers which at first glance do show the Star deposit extending to the north, northwest and northeast with higher grades near-surface occurring to the north…a significant system has been outlined over an area measuring 500 meters north-south and 350 meters east-west…BMR has extended an interview opportunity to Dr. Dirk Tempelman-Kluit, and we’re sure investors would appreciate his insight with regard to these results and the district in general…
PGX is off 6 cents to 19 cents as of 8:00 am Pacific – not necessary, given the results, but not surprising given how this news was packaged to investors with no market strategy behind it…leadership in the area will move toward Doubleview Capital Corp. (DBV, TSX-V) and Garibaldi Resources Corp. (GGI, TSX-V)…
Critical Elements Corp. (CRE, TSX-V) Update
We’ve been closely tracking Critical Elements Corp. (CRE, TSX-V) since early June when it was trading below 20 cents…on August 22, it hit a multi-year high of 40 cents which was the Fib. measured resistance level, and after a healthy correction that area is being tested again…
Last month the company announced that its low iron lithium concentrate has been successfully tested by ceramic and glass manufacturers…samples sent to multiple end-users for testing in May all tested positively…Critical Elements is now proceeding with plans to diversify its material output featuring at least three different products – tantalum concentrate, low-iron lithium concentrate, and battery-grade lithium carbonate…
Below is an updated 2.5-year weekly CRE chart from John…CRE is off 2 pennies at 37.5 cents as of 8:30 am Pacific…
Discovery Ventures Inc. (DVN, TSX-V) Update
Discovery Ventures (DVN, TSX-V) continues to aggressively push ahead on several fronts with its Willa-Max high-grade Gold-Copper Project in southeast British Columbia…among other developments, a surface exploration program commenced recently, and Micon International Ltd. is also updating and refining the geological modelling of the Willa resource…the interest in DVN has been driven by the obvious synergy of the the Willa combined with the Max mine and milling facilities Discovery negotiated to acquire at a bargain-basement price earlier this year…
Technically, DVN has been consolidating again recently after reacting at chart resistance around 40 cents…strong technical support exists at the 23-cent level which was a breakout point in June…RSI(14) has unwound to the 50% area…
Note: John and Jon both hold share positions in GGI. Jon also holds a share position in DBV.
Let’s not forget that the market is also taking into consideration that PGX will not drill again this year. If that is true it remains to be seen.
Comment by chris — September 23, 2014 @ 7:28 am
Totally agree Jon, PGX is having the same reaction as DBV did during their last news release…poorly written and inproperly timed for the markets. I’m hoping that DBV will come out with a better news release this time…and obviously, better cores/intercepts.
DBV seems to be taking a bit of a hit thanks to PGX. Hopefully Farshad will put those panic sellers at ease and provide the market what it’s been looking for all summer.
Comment by KevinMc — September 23, 2014 @ 7:28 am
Kevin, you hit it bang-on. A huge part of this business – of any business – is effective communication, and after not saying anything for 4 months one would think Prosper could have done better than they did this morning. Doubleview and Garibaldi have an opportunity to step up to the plate and look very good here.
Comment by Jon - BMR — September 23, 2014 @ 8:16 am
The wording of the PR suggests that drilling is still on-going, e.g. ”the first 19 holes”. Also, the PR at the start of the year said that 10,000m would be drilled.
Comment by Tom UK — September 23, 2014 @ 8:18 am
Jon, Did you sell your position in PGX to-day?
Comment by Robert — September 23, 2014 @ 8:25 am
Ok, my guesswork based on the PR is that the 1st phase of this year’s drilling has been completed. It focused on the main Star target and the ”drilling at the margin” results relate to defining the outer part of the deposit so that they can get an idea of the shape of the deposit.
More drilling will come on the other targets this year and then they will do in-fill drilling on the main Start deposit and get a 43-101. The May PR said that 10,000m would be drilled and today’s PR says that 6,200 m have been done.
This is guesswork based on what the latest PR did NOT say. I hope Dirk accepts BMR’s invitation to enlighten us properly.
Comment by Tom UK — September 23, 2014 @ 8:41 am
Yes, Robert, not that I’ve lost confidence in the Star Project (not the case at all), just very disappointed in the communication failure here. That’s the issue, that’s why I’m irritated, and I’m shifting those funds into DBV and GGI (personal decision, not investment advice). I sure hope Dirk accepts our invitation for an interview to help shed light on what I do believe are some very encouraging results from the Star. I have the utmost respect for Dirk – he’s one of the top geoscientists in the business – and I know he can explain all of this in a powerful way that would resonate with average investors. They’re building tonnage, showing some higher grades, great opportunities for expansion. These results do validate the potential of the district but Prosper’s approach this morning was disappointingly weak. I’m obviously not the only one who feels that way.
Comment by Jon - BMR — September 23, 2014 @ 9:44 am