BullMarketRun - June 17, 2012 June 17, 2012
TSX Venture Exchange and Gold
The Venture Exchange under-performed the broader markets and gave up 43 points last week, closing at 1251. Bulls can justifiably argue the Index is basing and going through a normal and healthy re-test of the mid-May support zone; bears are looking for a potential drop below the 1215 May 16 low. The coming week’s trading should provide important answers as to the near-term direction of this market.
Investors will have lots to chew on in the coming days – important election results in Greece, France and Egypt (early indications are, as of 12:00 pm Pacific, that Greece’s two traditional and pro-bailout parties – New Democracy and PASOK – will have enough seats to form a coalition); the G20 meeting; and any potential moves by central banks. The FMOC meets Tuesday and Wednesday, possibly Bernanke’s last chance to pull another rabbit out of the hat before the upcoming U.S. elections. This could very well be a “watershed” week for the markets. For what it’s worth, we believe the markets bottomed in mid-May and a strong rebound is in the works.
Below is John’s updated CDNX chart. A reversal to the upside in the daily SMA(20) is certainly encouraging. The Index is showing resilience but what’s needed in the near future for the Venture to really gain some traction, and for more volume to come into this market, is a strong push above 1300.
Gold
Gold recovered all of its losses from the week prior as it jumped $32 an ounce to close Friday at $1,627. The next significant resistance level is the June high of $1,642. Notice the downtrend line on John’s chart – that’s ultimately what Gold needs to bust through in order to regain some serious momentum. The COT structure is positive (commercial traders have cut back significantly on their short positions) and we’re about to enter a seasonal period of strength for Gold, so higher prices do appear to be in the works. But Gold does have some significant technical resistance to work through.
Silver gained 21 cents last week to close at $28.74. Copper ended a six-week slide, jumping 12 cents a pound to $3.42. Crude Oil was essentially unchanged at $84.03 while the U.S. Dollar Index fell nearly a point to 81.59.
After an impressive run through the entire month of May, which coincided with oversold stock markets, the Dollar Index has cooled off considerably which suggests traders are expecting some sort of easing move from the Fed. Looking at John’s chart, there’s a strong probability of more immediate downside in the Dollar Index which suggests the coming week could be positive for Gold and the equity markets – we’ll see.
Finally, here’s another look at John’s long-term Crude Oil chart posted the other day. This is a very interesting 10-year monthly chart that shows how the big recent drop in WTIC has brought it right down to critical support levels. If history is any indication, Crude Oil could bounce around this support line for a little while before taking off to the upside during the second half of the year. A drop below the support line would likely take Crude into the mid-$70 range but OPEC may not want to see it that low. There is speculation in some quarters that the “screws are being put” to Iran by the Saudis and others which perhaps has magnified the recent drop due also to a perceived global economic slowdown.
The “Big Picture” View Of Gold
As Frank Holmes so effectively illustrates at www.usfunds.com, Gold is being driven by both the Fear Trade and the Love Trade. The transfer of wealth from west to east, and the accumulation of wealth particularly in China and India, is having a huge impact on Gold.
The fundamental case for Gold remains incredibly strong – currency instability and an overall lack of confidence in fiat currencies, governments and world leaders in general, an environment of historically low interest rates and negative real interest ratesthat won’t end anytime soon (inflation is greater than the nominal interest rate even in parts of the world where rates are increasing), money supply growth, massive government debt from the United States to Europe, central bank buying, flat mine supply, physical demand, investment demand, emerging market growth, geopolitical unrest and conflicts, and inflation concerns…the list goes on. Massive central bank intervention appears increasingly likely to prevent a breakup of the euro zone and to kick-start the global economy. It’s hard to imagine Gold not performing well in this environment.
Source: https://www.bullmarketrun.com/?p=10387
Guy