Resource World Magazine

22 www.resourceworld.com A P R I L / M A Y 2 0 1 4 AT T H E M A R K E T R o d B l a k e The Ides of March. Originally an early Roman one-day of celebration marking the mid-point of the month of March that grew over time to be a phrase of forewarning of impending doom or mis- fortune as used by William Shakespeare in his play Julius Caesar – "Beware of the Ides of March". And we all know how that worked out for Julius Caesar. In the world of resource stocks, this famous phrase coincides nicely with the seasonal market top that often follows the giant Prospectors and Developers Conference, or PDAC, that takes place in Toronto, On- tario in early March of every year. In more years than not, the PDAC has marked the top of the seasonal advance of the resource market that usually be- gins in early January and runs until somewhere near the middle of March. This seasonality has many commonali- ties such as new money coming into the sector following the tax loss sales of the previous year, rising resource prices, (es- pecially natural gas and precious metals), and the optimism of the North American exploration season to come. Historically, it seems that most of the new money comes into the resource markets in the first three months of the New Year. Then, with investors all-in, they anxiously wait for the summer field season to drive the market higher. The trouble with this theory is that when the buying slows, the selling pressure takes over as there is always a new supply of sellers that come from the four-month hold period coming off of the corporate financings that were done when the mar- ket was lower in the previous fall. Add to this the seasonal pressure of resource prices that usually peak in the first few months of the year and then drift lower until mid-summer. Case in point, as I write this piece near the end of March, the price of gold bullion has already fallen from a mid-month short- term top of US $1,392/oz to about US $1,330/oz. Similarly, the price of copper, which was trading in the US$ 3.40/lb range at the start of 2014, has now fallen below US $3.00 to about US $2.93/lb. Please don't get me wrong. I'm a long- term bull on resource prices and resource securities. Both are just coming out of an agonizing three-year bear market and I feel that over time they will reach those peaks of yesteryear once again. But in the short-term, the TSX Venture Exchange, the broadest index of resource securities, has risen from 885 to 1,045 in the first quarter of 2014, a move of over 18%. We're due for our annual seasonal cor- rection. Hopefully a very short one – or perhaps just a sideways pause before the markets move higher once again. Mild corrections or pauses are a good thing as they let the market comfortably rebal- ance. A deep correction, however, would be devastating to this still fragile re- source market. We've had a good start to the year, but beware the Ides of March. Et tu, Brute. Rodney Blake is an Investment Advisor with Canaccord Genuity Wealth Manage- ment, a division of Canaccord Genuity Corp., Member Canadian Investor Protec- tion Fund. The information contained in this article is drawn from sources belivied to be reliable, but the accuracy and com- pleteness of the information is not guaran- teed, nor in providing it does Rodney Blake, Canaccord Genuity Corp., or its subsidiar- ies, or affiliated companies, assume any li- ability. This information is current as the date appearing in this article, we do not accept assume any obligation to update the information or advise on further devel- opments relating to these securities. This article should not be considered personal investment advice or solicitation to buy or sell securities. Canaccord Genuity or hold- ings of its respective directors, officers and employees and their associations, from time to time, may buy or sell any securi- ties mentioned herein. The views expressed are those of the author and not necessarily those of Canaccord Genuity Corp. Rodney Blake can be reached at 604-643-7567 or rod.blake@canaccord.com n BEWARE the Ides of March

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