"The history of Eureka lies in its future." - Lambert Molinelli, 1878

DISCLOSURE

The author/editor of the Eureka Miner owns common shares of local mining stocks, General Moly (GMO), Midway Gold (MDWCQ), McEwen Ming (MUX) and Newmont Mining (NEM); together with benchmark miner Freeport-McMoRan (FCX). Please do your own research, markets can turn on you faster than a feral cat.

Friday, April 21, 2017

Gold Nearly Scores $1,300; McEwen Mining Gold Bar Progress!


Gold is on the road again!
Eureka, Nevada

Weekly Summary updated for 4/21/17 AM (something new!)


(click on table for larger size)

My latest column in Kitco News, Montreal:


My commentary in the the Spring 2017 Mining Quarterly:


Online Edition (pages 44-46): Spring 2017 Mining Quarterly

McEwen Mining (MUX) $3.05 per share (AM)


General Moly (GMO) $0.38 per share (AM); Moly oxide (LME) $6.92 per pound

An unofficial source told me today that a much anticipated Nevada Supreme Court decision regarding water rights has been moved from April 4th to May 1st.


Friday, April 21, 2017 AM

Gold Nearly Scores $1,300

Morning Miners!

Gold nearly scored $1,300 per ounce this week. My input to the Weekly Kitco Gold Survey:

My vote is up. Target gold price $1,290 per ounce . Target Silver price $18.0 per ounce.

A dipole of positive and negative forces has suspended gold price in a tight range around the $1,280-level this week. On the positive, strong earnings reports from GE and Honeywell this morning and a hint from the Treasury that delayed tax reform may now come sooner than later are bullish equities but place downward pressure on gold price. On the negative, geopolitical tensions with North Korea and Russia, a terror attack in Paris and French presidential elections this Sunday put a solid price floor under the yellow metal.

A strong [Marine Le Pen, National Front] FN showing in first round of French voting or miscalculation in North Korea could easily boost gold above $1,300 per ounce - on Monday, Comex prices nearly touched this key level peaking at $1,297.4. More benign geopolitical outcomes and rallying stocks on strong earnings next week could push gold below Wednesday's low at $1,275.4 but not lower than a solid floor at $1,250. I believe it more likely to find gold at $1,290 next Friday.

For the week, gold raced ahead of declining oil and copper prices as well as the broader Bloomberg commodity index (BCOM). Gold also showed strength in terms of yen but loss some ground to the euro. Gold in euro terms will be highly sensitive to Sunday's election, already within striking distance of its July high last year. [see summary table above and charts below]

Additional Note:

The fate of the Chinese yuan remains a key tell for gold and copper - a material drop in valuation could boost gold and depress copper prices. Aggressive liquidity tightening by the People's Bank of China (PBOC) has eased, stabilizing the yuan below 7 USD/CNY. However, defending their currency brought China foreign reserves to a 6-year low earlier this year. A less vigorous defense is now ongoing and its recent low volatility suggests the yuan has become a currency yawn.  This morning, the yuan has weakened slightly trading at 6.8844 USD/CNY (1-month volatility* is 0.13%).

Have a great weekend!

* by comparison the euro & yen 1-month volatilites are roughly 0.8% & 1.0% respectively.

Gold Bar Country
Eureka, Nevada

McEwen Mining Gold Bar Progress!

Tuesday, McEwen Mining (MUX) released an upbeat quarterly report with an update on Eureka's Gold Bar project:

McEwen Mining Reports Q1 2017 Production Results (Press release, 4/18/2017)

"Gold Bar Project, Nevada – Advancing Towards Construction:  Permitting for the Gold Bar Project is advancing and remains on schedule to receive a Record of Decision in the third quarter of 2017. The Bureau of Land Management published the Draft Environmental Impact Statement (DEIS) in the Federal Register on March 3rd, 2017 and the 45-day public comment period is now closed for the DEIS. Comments received during the public comment period will be addressed and incorporated in the final Environmental Impact Statement."

The BLM held a meeting for public comment on the Gold Bar Project March 22 at the Opera House.

Best of luck to the McEwen team. Go Gold Bar!

Gold Price Outlook 2017

Gold started the year nicely and should remain in my revised range of $1,180 to $1,320 per ounce*. Average gold price for 2017 is expected to print above $1,200 per ounce with an outside chance to see $1,400 given an adverse outcome for European elections, evolving U.S. trade policies or geo-political shocks (e.g., North Korea, Syria).

Gold has gained ground on the embattled euro and yen. Post-election, gold in euro and yen terms is up and safely above 2013 lows (chart below) and both are above pre-election levels. It was somewhat worrisome that gold in euro terms broke below uptrend support March 9, but it has since recovered marching steadily to the highs if 2016.

An important gold ratio to watch is gold-to-S&P500 or AUSP (see "Chart to Watch" below).

Gold ratios relative to copper and oil are stabilizing near historically less extreme levels which is a healthy sign. Geo-political events and concerns about the timing and efficacy of the new administration's policies have restored glitter to gold in 2017.

Gold near my low-range of $1,180 per ounce-level is a tempting "buy."

(please do your own research, markets can turn on you faster than a feral cat!)

*My pre-election October range for gold price was $1,240 to $1,320 per ounce, Winter 2016 Edition of the Mining Quarterly:

 Storms Never Last: Positive News for Gold, Oil & Copper

My commentary in the just released Spring 2017 Mining Quarterly reaffirms an average price above $1,200 per ounce with a potential run at $1,400:


Click on the image for a larger size:


Gold in euro & yen terms trending higher

Chart to Watch

Here's a new chart to watch. Click on the image for a larger size:


Gold-to-S&P 500 Ratio

An important gold ratio to watch is gold-to-S&P500 or AUSP. The ratio bottomed in early-December of 2015 and reversed to a bullish trend, peaking February 11, 2016. It bottomed again December 20, 2016 trended higher but then bearishly bottomed again March 15, 2017. We must stay above the December bottom (0.4973)! A second uptrend is in place, currently this AM the AUSP is a strong 0.5452.

Cheers,

Colonel Possum & Mariana

Photos by Mariana Titus if not otherwise noted

Friday, April 7, 2017

Missiles Boost Gold above $1,270; Lousy Jobs Report But Miners Shine

Long Road
Eureka, Nevada

Weekly Summary updated for 4/07/17 AM (something new!)


(click on table for larger size)

My commentary in the the Spring 2017 Mining Quarterly:


Online Edition (pages 44-46): Spring 2017 Mining Quarterly

There is also a terrific column by Adella Harding (pages 5-8) about the 20 year history of Mining Quarterly

McEwen Mining (MUX) $3.22 per share (AM)


General Moly (GMO) $0.4321 per share (AM); Moly oxide (LME) $6.92 per pound

An unofficial source told me today that a much anticipated Nevada Supreme Court decision regarding water rights has been moved from April 4th to May 1st.


Friday, April 7, 2017 AM

[Note: Since I wrote this column in the wee hours, Comex gold has fallen to $1,254.1 per ounce, 11:20 a.m. Eureka time. My target price for next week remains unchanged: $1,260 per ounce]

Morning Miners!

Gold spikes above $1,271 this week as missiles fly in Syria. Comex gold is presently trading at $1,269.1 per ounce. My input to the Weekly Kitco Gold Survey:

My vote is down. Target gold price $1,260 per ounce . Target Silver price $18.3 per ounce.

Missiles over Syria boost gold above $1,271 per ounce. Today's Nonfarm Payroll Report hints inflation but slower growth with disappointing total jobs added and downward revisions for previous months [more discussion below]. Except for oil, gold gained value for the week compared to key commodities and major currencies euro, yen - all bullish indications as the yellow metal touches 5-month highs. Comex gold is currently trading at $1,269.1 per ounce.

However, the jobs report may tell a different story. Although average hourly earnings are up they have slowed from the previous month. The weakest sector was retail but there were strong gains in mining (which includes oil & gas) [see below for breakdown] and other sectors with a robust ADP private sector report for the week. The outlook may be brighter than the last 24-hour new cycle suggests. If the Syria missile strike proves to be a "one-off" punitive warning and the President Trump meetings with China's Xi Jinping go well, there could be some selling pressure on gold next week. A muted U.S. stock market reaction today supports this thesis.

Escalating U.S. involvement in Syria, a surprise FN victory in France or miscalculation in dealing with hot spots such as North Korea could drive the yellow metal considerably higher in the coming months.

Additional Note:

The fate of the Chinese yuan remains a key tell for gold and copper - a material drop in valuation could boost gold and depress copper prices. Aggressive liquidity tightening by the People's Bank of China (PBOC) has eased, stabilizing the yuan below 7 USD/CNY. However, defending their currency brought China foreign reserves to a 6-year low earlier this year. A less vigorous defense is ongoing. It will be interesting to see what effect the Trump/Xi meetings will have on the currency, if any. This morning, the yuan has weakened slightly and volatility is still quite low trading at 6.8897 USD/CNY (1-month volatility* is 0.20%).

Have a great weekend!

* by comparison the euro & yen 1-month volatilites are roughly 0.7% & 1.4% respectively.

Washroom
Eureka, Nevada

Lousy Jobs Report but Miners Shine

The monthly jobs report released by The Labor Department this morning (Employment Situation Summary) showed a surprisingly low addition of new jobs in March compared to expectations - 98,000 versus 178,000. There were also downward revisions to January and February numbers.

By a separate survey, the headline employment rate declined to 4.5% in March. Most encouragingly, the broader U6 unemployment measure (which includes everyone with a heartbeat that still hasn't left the couch to actively seek work) has fallen to 8.9% (this was up around 17% during the recession).

One of the worst sectors is Retail trade which may reflect more of the "Amazon effect" than an economy heading for trouble - more folks shopping online than going to the mall.

For example, compare Retail to Mining (which includes oil & gas exploration & production)*:

Retail trade lost 30,000 jobs in March. Employment in general merchandise stores declined by 35,000 in March and has declined by 89,000 since a recent high in October 2016 

...and,

Mining added 11,000 jobs in March, with most of the gain occurring in support activities for mining (+9,000). Mining employment has risen by 35,000 since reaching a recent low in October 2016.

In fairness, many of these jobs are related to the oil and gas industry. The Bureau of Labor Statistics also provides data that strips out those activities providing a clearer picture for the mining of mineral solids.*


(click on chart for larger image)

The above chart shows that low occurred September 2016 at 178,700 total employees with the March 2017 number at a healthier 184,200. For comparison, mining employment peaked at 223,700 December 2011.

Major industries and Manufacturing were little changed with gains in professional and business services. So-so but the Mining Sector uptick is a real positive. CNBC reported an encouraging ADP report on the private sector earlier this week:


[Wednesday, 5 Apr 2017 | 8:15 AM ET | 02:15] The year's fast start for job creation showed no signs of letting up in March as private payrolls saw another big boost, according to a report Wednesday. Companies added 263,000 jobs for the month, ADP and Moody's Analytics said. That was well above the 185,000 expected from economists surveyed by Reuters and also better than the 245,000 reported for February.

*Further Note on Mining:

The Bureau of Labor Statistics (BLS) defines mining this way:

The Mining sector comprises establishments that extract naturally occurring mineral solids, such as coal and ores; liquid minerals, such as crude petroleum; and gases, such as natural gas. The term mining is used in the broad sense to include quarrying, well operations, beneficiating (e.g., crushing, screening, washing, and flotation), and other preparation customarily performed at the mine site, or as a part of mining activity.

A big family going back to work...

Gold Price Outlook 2017

Gold started the year nicely and should remain in my revised range of $1,180 to $1,320 per ounce*. Average gold price for 2017 is expected to print above $1,200 per ounce with an outside chance to see $1,400 given an adverse outcome for European elections, evolving U.S. trade policies or geo-political shocks (e.g., Syria, North Korea).

Gold has gained ground on the embattled euro and yen. Post-election, gold in euro and yen terms are up and safely above 2013 lows (chart below) and are both above pre-election levels. It was somewhat worrisome that gold in euro terms broke below uptrend support March 9, but it has since recovered.

An important gold ratio to watch is gold-to-S&P500 or AUSP (see "Chart to Watch" below).

Gold ratios relative to copper and oil are stabilizing near historically less extreme levels which is a healthy sign. Geo-political events and/or a bump in inflation expectations could restore glitter to gold in 2017.

Gold near my low-range of $1,180 per ounce-level is a tempting "buy."

(please do your own research, markets can turn on you faster than a feral cat!)

*My pre-election October range for gold price was $1,240 to $1,320 per ounce, Winter 2016 Edition of the Mining Quarterly:

 Storms Never Last: Positive News for Gold, Oil & Copper

My commentary in the just released Spring 2017 Mining Quarterly reaffirms an average price above $1,200 per ounce with a potential run at $1,400:


Click on the image for a larger size:


Gold in euro & yen terms trending higher

Chart to Watch

Here's a new chart to watch. Click on the image for a larger size:


Gold-to-S&P 500 Ratio

An important gold ratio to watch is gold-to-S&P500 or AUSP. The ratio bottomed in early-December of 2015 and reversed to a bullish trend, peaking February 11, 2016. It bottomed again December 20, 2016 trended higher but then bearishly bottomed again March 15, 2017. We must stay above the December bottom (0.4973)! A second uptrend is in place, currently this AM the AUSP is a strong 0.5368.

Cheers,

Colonel Possum & Mariana

Photos by Mariana Titus if not otherwise noted

Friday, March 31, 2017

Gold Posts a Good First Quarter, What's Ahead for 2017?


Paleozoic Beach Front Property
Devil's Gate, Eureka

Weekly Summary updated for 3/31/17 AM (something new!)


(click on table for larger size)

My commentary in the just released Spring 2017 Mining Quarterly:


Online Edition (pages 44-46): Spring 2017 Mining Quarterly

There is also a terrific column by Adella Harding (pages 5-8) about the 20 year history of Mining Quarterly

McEwen Mining (MUX) $3.10 per share (AM)


General Moly (GMO) $0.5185 per share (AM); Moly oxide (LME) $6.92 per pound


Friday, March 31, 2017 AM 

Morning Miners!

Gold hangs tough near the key $1,250-level this week while markets are on track for a good first quarter. Comex gold year-to-date is up 8.3%. My input to the Weekly Kitco Gold Survey:

My vote is up. Target gold price $1,250 per ounce . Target Silver price $18.3 per ounce.

As the first quarter closes the S&P 500 is on track to have its highest quarterly gain since 2015. Global and domestic stock markets have reacted positively to an improving world economy and the promise of U.S. tax reform, deregulation and infrastructure spending. China manufacturing recorded its best manufacturing expansion in more than 5 years. All of this positive data has a supported a rebound in metal prices and the broader commodity indexes.

However, there is a darker side to 2017 that has supported gold price above the $1,200-level, depressed U.S. Treasury rates and stalled inflation expectations. This includes a perception of delays in executing U.S. economic reforms and fiscal stimulus which has dampened the "risk-off" attitude earlier in the year. In Europe, Brexit implementation and upcoming elections in France and Germany continue to cast a shadow on rosier economic expectations.

Comex gold is near flat for the week at $1,247.8 per ounce in early morning trading (June contract, gold intraday high for the week was Monday at $1,261). The yellow metal lost value compared to oil, copper and the Bloomberg Commodity Index. However, gold made gains in terms of euro and Japanese yen, bullishly staying above positive trend support for the quarter (see chart below). A surprise FN victory in France or miscalculation in dealing with hot spots such as North Korea could drive the yellow metal considerably higher in the coming months.

Additional Note:

The fate of the Chinese yuan remains a key tell for gold and copper - a material drop in valuation could boost gold and depress copper prices. Aggressive liquidity tightening by the People's Bank of China (PBOC) has eased, stabilizing the yuan below 7 USD/CNY. However, defending their currency brought China foreign reserves to a 6-year low earlier this year. Premier Li Leqiang's lowering of the China GDP target to 6.5% and the Fed rate hike suggest a relaxation of this vigorous defense is ongoing. This morning, the yuan has strengthened slightly and volatility is still quite low trading at 6.8830 USD/CNY (1-month volatility* is 0.21%).

Have a great weekend!

* by comparison the euro & yen 1-month volatilites are roughly 0.9% & 1.4% respectively.

Alaskite columnar formations
Devil's Gate, Eureka

Gold Price Outlook 2017

Gold started the year nicely and should remain in my revised range of $1,180 to $1,320 per ounce*. Average gold price for 2017 is expected to print above $1,200 per ounce with an outside chance to see $1,400 given an adverse outcome for European elections, evolving U.S. trade policies or geo-political shock.

Gold has gained ground on the embattled euro and yen. Post-election, gold in euro and yen terms are up and safely above 2013 lows (chart below) and are both above pre-election levels. It was somewhat worrisome that gold in euro terms broke below uptrend support March 9, but it has since recovered.

An important gold ratio to watch is gold-to-S&P500 or AUSP (see "Chart to Watch" below).

Gold ratios relative to copper and oil are stabilizing near historically less extreme levels which is a healthy sign. Geo-political events and/or a bump in inflation expectations could restore glitter to gold in 2017.

Gold near my low-range of $1,180 per ounce-level is a tempting "buy."

(please do your own research, markets can turn on you faster than a feral cat!)

*My pre-election October range for gold price was $1,240 to $1,320 per ounce, Winter 2016 Edition of the Mining Quarterly:

 Storms Never Last: Positive News for Gold, Oil & Copper

My commentary in the just released Spring 2017 Mining Quarterly reaffirms an average price above $1,200 per ounce with a potential run at $1,400:


Click on the image for a larger size:


Gold in euro & yen terms trending higher

Chart to Watch

Here's a new chart to watch. Click on the image for a larger size:


Gold-to-S&P 500 Ratio

An important gold ratio to watch is gold-to-S&P500 or AUSP. The ratio bottomed in early-December of 2015 and reversed to a bullish trend, peaking February 11, 2016. It bottomed again December 20, 2016 trended higher but then bearishly bottomed again March 15, 2017. We must stay above the December bottom (0.4973)! A second uptrend is in place, currently this AM the AUSP is 0.5279.

Cheers,

Colonel Possum & Mariana

Photos by Mariana Titus if not otherwise noted

Friday, March 24, 2017

Gold Resilient in Hesitant Markets; Eureka Miner Makes Top 60


The Eureka Miner's Market Report  was inducted into the Top 60 Mining Websites & Blogs For Mining Professionals March 22, 2017

Weekly Summary updated for 3/24/17 AM (something new!)


(click on table for larger size)

My commentary in the just released Spring 2017 Mining Quarterly:


Online Edition (pages 44-46): Spring 2017 Mining Quarterly

There is also a terrific column by Adella Harding (pages 5-8) about the 20 year history of Mining Quarterly

McEwen Mining (MUX) $3.11 per share (AM)


General Moly (GMO) $0.5190 per share (AM); Moly oxide (LME) $6.92 per pound


Friday, March 24, 2017 AM 

Morning Miners!

Gold moved above the key $1,250-level this week demonstrating resilience in hesitant markets. My input to the Weekly Kitco Gold Survey:

My vote is up. Target gold price $1,250 per ounce . Target Silver price $17.7 per ounce.

With all the market volatility caused by House Intelligence hearings and pending health care vote, the TIPs [Treasury Inflation-Protected Securities] auction yesterday provided a more steady and valuable clue on inflation expectations.

In a rising interest rate environment, lowered inflation expectations are bearish for gold price. The TIPS breakeven rate*, seen by market participants to be a gauge of these expectations, fell to a 2-month low after the auction. This rate had risen with S&P 500 after the U.S. election - both have stalled on concerns about the efficacy of  the new administration policies and plans.


TIPs Breakeven Rate Stalls (click on image forlarger size)

Regardless the outcome of today's health care vote, it is likely market attention will soon redirect to the Holy Trinity of new policies: tax reform, de-regulation and infrastructure spending. Progress on these should be bullish stocks but may revive expectations of higher inflation. A perception that delays on any or all three should provide a solid floor for gold above $1,200 per ounce.

In terms of fear factors, the French elections still cast a shadow on markets. Also, there remain concerns abroad about U.S. trade protectionism, possible currency manipulation charges and the fragility of multi-lateral trade agreements. A surprise FN victory in France or miscalculation in dealing with hot spots such as North Korea could drive the yellow metal considerably higher in the coming months. 

Gold is up 1.2% for the week at $1,244.6 per ounce in early morning trading. The yellow metal gained value compared to oil, copper and the Bloomberg Commodity Index. Gold in euros was up with a small loss in terms of Japanese yen.

Additional Note:

The fate of the Chinese yuan remains a key tell for gold and copper - a material drop in valuation could boost gold and depress copper prices. Aggressive liquidity tightening by the People's Bank of China (PBOC) has eased, stabilizing the yuan below 7 USD/CNY. However, defending their currency brought China foreign reserves to a 6-year low earlier this year. Premier Li Leqiang's lowering of the China GDP target to 6.5% and the Fed rate hike suggest a relaxation of this vigorous defense is ongoing. This morning, the yuan has weakned slightly but volatility is still low (1-month volatility** is 0.24%) trading at 6.9899 USD/CNY.

Have a great weekend!

*The breakeven rate is the difference in yield between inflation-protected and nominal debt of the same maturity (in this case 10-year securities). If the breakeven rate is positive it suggests traders are betting the economy may face inflation in the near future. The inflation-adjusted or real yield is also an important factor. The real yield for a 10-year TIPS at auction close was 0.466%; the breakeven rate was 1.95%. Although down for 2017, inflation expectations are viewed as stable.

TIPs Real Yield

** by comparison the euro & yen 1-month volatilites are roughly 0.9% & 1.2% respectively.

Red Metal Stalls

Comex copper lost 2.2% on the week to trade at $2.6335 pounds per ounce this morning. It fell behind gold price by 3.4%. Some of the recent supply disruption concerns eased this week but demand outlook is less clear. Managing Director Janet Mirasola of Sucden Futures Inc. NY  had this to say this morning in her market pre-brief:

The Red One so far has had muted reaction to the ending of a strike at the world's largest Copper mine, Escondida in Chile leading many to believe that the settlement may already have been priced in. Bear in mind however that those grabbing disruptive headlines will not longer give a base of support for the algos and short term traders looking for direction.

The high for Comex copper was Monday (3/20) at $2.7100; the low was Wednesday (3/22) at $2.585. The red metal at $5,800 per tonne ($2.63) remains a key level to watch.



The Spirit of Eureka, Nevada

Gold Price Outlook 2017

Gold started the year nicely and should remain in my newly revised range of $1,180 to $1,320 per ounce*. Average gold price for 2017 is expected to print above $1,200 per ounce.

An important gold ratio to watch is gold-to-S&P500 or AUSP (see Chart to Watch below).

Gold has gained ground on the embattled euro and yen. Post-election, gold in euro and yen terms are up and safely above 2013 lows (chart below) and are both above pre-election levels. It is somewhat worrisome that gold in euro terms broke below uptrend support March 9, but it has since recovered

Gold ratios relative to copper and oil are stabilizing near historically less extreme levels which is a healthy sign. Geo-political events and/or a bump in inflation expectations could restore glitter to gold in 2017.

Gold near my low-range of $1,180 per ounce-level is a tempting "buy."

(please do your own research, markets can turn on you faster than a feral cat!)

*My pre-election October range for gold price was $1,240 to $1,320 per ounce, Winter 2016 Edition of the Mining Quarterly Storms Never Last: Positive News for Gold, Oil & Copper

Click on the image for a larger size:


Gold in euro & yen terms regaining value post-election

Chart to Watch

Here's a new chart to watch. Click on the image for a larger size:


Gold-to-S&P 500 Ratio

An important gold ratio to watch is gold-to-S&P500 or AUSP. The ratio bottomed in early-December of 2015 and reversed to a bullish trend, peaking February 11, 2016. It bottomed again December 20, 2016 trended higher but has now bearishly bottomed again March 15, 2017. We must stay above the December bottom (0.4973)! Some progress upwards was made this week, currently this AM at 0.5293.

Cheers,

Colonel Possum & Mariana

Photos by Mariana Titus if not otherwise noted

Friday, March 17, 2017

Gold Gets Its Mojo Back; Red Metal Rises on Supply Disruptions


Spring 2017 Mining Quarterly

The Eureka Miner's Market Report is one of the Top 60 Mining Websites & Blogs For Mining Professionals

Weekly Summary updated for 3/17/17 AM (something new!)


(click on table for larger size)

My commentary in the just released Spring 2017 Mining Quarterly:


Online Edition (pages 44-46): Spring 2017 Mining Quarterly

There is also a terrific column by Adella Harding (pages 5-8) about the 20 year history of Mining Quarterly

McEwen Mining (MUX) $3.19 per share (AM)


General Moly (GMO) $0.5000 per share (AM); Moly oxide (LME) $6.92 per pound


Friday, March 17, 2017 AM 


Top O' the Morning Miners!

Gold got its mojo back this week. My input to the Weekly Kitco Gold Survey:

My vote is up. Target gold price $1,240 per ounce . Target Silver price $17.5 per ounce.

A sharp reversal in the U.S. dollar Wednesday following remarks by the Federal Reserve boosted gold and commodities*. A sense that the Fed will not accelerate tightening for the time being suggests the the high in early-January may indeed remain the "Trump dollar top."***

In terms of fear factors, a positive outcome in Dutch elections took some momentum from the nationalist movement in Europe but the French elections in France still loom large. There is also a witches' brew bubbling around U.S. policy ahead of this weekend's G20 meeting of finance ministers and central bankers in Baden-Baden, Germany. There are concerns about U.S. trade protectionism, possible currency manipulation charges and the fragility of multi-lateral trade agreements. Taken together, an indeterminant outcome for the meeting likely supports higher gold prices next week. 

Increasing inflationary pressures in the U.S. and abroad, a surprise FN victory in France or miscalculation in dealing with hot spots such as North Korea could drive the yellow metal considerably higher in the coming months.

Gold is up 2.4% for the week at $1,229.9 per ounce in early morning trading. The yellow metal gained value compared to oil but lost some ground to copper on supply disruption worries for the latter. Gold in euros was very strong with a small loss in terms of Japanese yen [see discussion & charts below].

Additional Note:

The fate of the Chinese yuan remains a key tell for gold and copper - a material drop in valuation could boost gold and depress copper prices. Aggressive liquidity tightening by the People's Bank of China (PBOC) has eased, stabilizing the yuan below 7 USD/CNY. However, defending their currency has brought China foreign reserves to a 6-year low. Premier Li Leqiang's lowering of the China GDP target to 6.5% and the Fed rate hike suggest a relaxation of this vigorous defense is likely. This morning, the yuan has weakned a bit but volatility is still low (1-month volatility** is 0.26%) trading at 6.9899 USD/CNY.

Have a Happy St. Paddy's

*one-month correlation of gold with oil & copper is high; +0.79 & +0.72 respectively.

** by comparison the euro & yen 1-month volatilites are roughly 0.6% & 0.8% respectively.

***Interesting column Sunday night in Bloomberg News:

Yellen Surprises Hedge Funds Who Cut Gold Bets Before Rally



Red Metal Rises

Comex copper gained 3.6% on the week to trade at $2.6885 this morning surpassing gains in gold price. Besides a weakening U.S. dollar, copper prices have been boosted by global supply disruptions. Managing Director Janet Mirasola of Sucden Futures Inc. NY  had this to say yesterday morning in her market pre-brief following the FOMC meeting:

Euro bourses and base commodities are following the overnight trend higher off the early opening with the Black, Red and Shiny Ones [oil, copper & gold] all gaining strength from the currency factor while the Red One continues to feed on supply disruptions in Chile and Peru with continued reduced production in Indonesia affecting three of the world's biggest mines.

Comex copper scored an intraday high of $2.6975 per pound yesterday.


Stormy Weather
Eureka, Nevada (2010)

Gold Price Outlook 2017

Gold started the year nicely and should remain in my newly revised range of $1,180 to $1,320 per ounce*. Average gold price for 2017 should print above $1,200 per ounce.

An important gold ratio to watch is gold-to-S&P500 or AUSP. The ratio bottomed in early-December of 2015 and reversed to a bullish trend, peaking February 11, 2016. It bottomed again December 20, 2016 trended higher but has now bearishly reversed. Confirming a double-bottom in the coming months would be a significant positive for the lustrous metal; latest developments are less positive - we must stay above the December bottom! (see chart below).

Gold has gained ground on the embattled euro and yen. Post-election, gold in euro and yen terms are up and safely above 2013 lows (chart below) and are both above pre-election levels. It is somewhat worrisome that gold in euro terms broke below uptrend support March 9 - something to monitor carefully, although much of this loss has recovered this week.

Gold ratios relative to copper and oil are stabilizing near historically less extreme levels which is a healthy sign. Geo-political events and/or a bump in inflation expectations could restore glitter to gold in 2017.

Gold near my low-range of $1,180 per ounce-level is a tempting "buy."

(please do your own research, markets can turn on you faster than a feral cat!)

*My pre-election October range for gold price was $1,240 to $1,320 per ounce, Winter 2016 Edition of the Mining Quarterly Storms Never Last: Positive News for Gold, Oil & Copper

Click on the image for a larger size:


Gold in euro & yen terms regaining value post-election

Chart to Watch

Here's a new chart to watch. Click on the image for a larger size:


Gold-to-S&P 500 Ratio (updated 3/17/2017) 

An important gold ratio to watch is gold-to-S&P500 or AUSP. The ratio bottomed in early-December of 2015 and reversed to a bullish trend, peaking February 11, 2016. It bottomed again December 20, 2016 trended higher but has now bearishly reversed. Confirming a double-bottom in the coming months would be a significant positive for the lustrous metal; latest developments are less positive - we must stay above the December bottom (0.4973)! Low for the week was 0.5052 on Wednesday.

Cheers,

Colonel Possum & Mariana

Photos by Mariana Titus if not otherwise noted

Friday, March 10, 2017

Mining Employment Up! Triple Whammy for Gold, Holds Near $1,200


Battered but not beaten
Eureka, Nevada (June 2010)

Weekly Summary updated for 3/10/17 AM (something new!)


(click on table for larger size)

My commentary in the just released Spring 2017 Mining Quarterly:


McEwen Mining (MUX) $2.9350 per share (AM)


General Moly (GMO) $0.5000 per share (AM); Moly oxide (LME) $6.92 per pound


Friday, March 10, 2017 AM 

Morning Miners!

Gold got a triple whammy this week but is showing resilience around $1,200 per ounce.

My input to the Weekly Kitco Gold Survey:

My vote is up. Target gold price $1,205 per ounce . Target Silver price $17.0 per ounce.

A triple whammy for gold this week pressured by falling commodities, less-dovish comments by ECB Mario Draghi and the almost certainty of a Fed rate hike next week following today's strong employment report. Comex gold is presently trading at $1,201.7 per ounce. Dipping to a 5-week overnight low [$1,194.5], the yellow metal is showing good resilience by holding its head above the key $1,200-level after suffering a 2% loss for the week.

Comments by China's Premier Li Leqiang at Monday suggesting a lower GDP target and less restrictive control of their currency kicked off a commodity retreat led by oil which fell below $50 per barrel. Copper, already in a downtrend, fell to new lows by Thursday. Gold, now positively correlated with both*, felt the gravity of declining commodities.

Mario Draghi's confidence in the European economy and expressing, "no anxiety of the euro breaking up" relieved worry about upcoming European elections favoring far-right candidates. This in turn bearishly dropped gold in euros to below trend support Thursday [see graph below]

The better-than-expected U.S. employment report boosted Treasury yields and stocks this morning causing additional pressure on gold. The yellow metal has now lost all gains relative to the S&P 500 for 2017 [see Chart to Watch below].

However, with all these bearish influences, gold has not declined as much as its commodity cousins and is buoyed some by by increasing inflationary pressures in the U.S. and abroad. Most importantly, there is still concern about a surprise outcome in France elections or miscalculation in dealing with hot spots such as North Korea. Gold is likely to regain ground above the $1,200 level.

Additional things to watch:

The fate of the Chinese yuan remains a key tell for gold and copper - a material drop in valuation could boost gold and depress copper prices. Aggressive liquidity tightening by the People's Bank of China (PBOC) has eased, stabilizing the yuan below 7 USD/CNY. However, defending their currency has brought China foreign reserves to a 6-year low. Premier Li Leqiang's lowering of the China GDP target to 6.5% and an upcoming Fed rate hike suggest a relaxation of this vigorous defense is likely. This morning, the yuan has strengthened a bit but volatility is higher (1-month volatility** is still a low 0.23%) trading at 6.9083 USD/CNY.

Have a good weekend!

*one-month correlation of gold with oil & copper is +0.73 & +0.48 respectively.

** by comparison the euro & yen 1-month volatilites are roughly 0.4% & 0.8% respectively.

Mining Employment Up!

The Labor Department's monthly jobs report was better-than-expected adding 235,000 jobs versus an expectation in the range of 200,000-220,000. Headline unemployment was little changed at 4.7% but there was breadth across sectors except retail.

Here's some great news, "Employment in mining increased by 8,000 in February, with most of the gain occurring in support activities for mining (+6,000). Mining employment has risen by 20,000 since reaching a recent low in October 2016."

Although this includes all the folks that extract wealth from the earth, including oil & gas, it is a welcome relief to see the mining employment bottom in the rear view mirror!


Window View
Eureka, Nevada (2010)

Gold Price Outlook 2017

Gold started the year nicely and should remain in my newly revised range of $1,180 to $1,320 per ounce*. Average gold price for 2017 should print above $1,200 per ounce. This morning gold fell to $1,194.5 but has since recovered around the key $1,200-level.

An important gold ratio to watch is gold-to-S&P500 or AUSP. The ratio bottomed in early-December of 2015 and reversed to a bullish trend, peaking February 11, 2016. It bottomed again December 20, 2016 trended higher but has now bearishly reversed. Confirming a double-bottom in the coming months would be a significant positive for the lustrous metal; latest developments are less positive - we must stay above the December bottom! (see chart below).

Gold has gained ground on the embattled euro and yen. Post-election, gold in euro and yen terms are up and safely above 2013 lows (chart below) and are both above pre-election levels. It is somewhat worrisome that gold in euro terms broke below uptrend support Thursday (circle on chart) - something to monitor carefully.

Gold ratios relative to copper and oil are stabilizing near historically less extreme levels which is a healthy sign. Geo-political events and/or a bump in inflation expectations could restore glitter to gold in 2017.

Gold near my low-range of $1,180 per ounce-level is a tempting "buy."

(please do your own research, markets can turn on you faster than a feral cat!)

*My pre-election October range for gold price was $1,240 to $1,320 per ounce, Winter 2016 Edition of the Mining Quarterly Storms Never Last: Positive News for Gold, Oil & Copper

Click on the image for a larger size:


Gold in euro & yen terms regaining value post-election

Chart to Watch

Here's a new chart to watch. Click on the image for a larger size:


Gold-to-Silver Ratio (updated 3/03/2017) 

An important gold ratio to watch is gold-to-S&P500 or AUSP. The ratio bottomed in early-December of 2015 and reversed to a bullish trend, peaking February 11, 2016. It bottomed again December 20, 2016 trended higher but has now bearishly reversed. Confirming a double-bottom in the coming months would be a significant positive for the lustrous metal; latest developments are less positive - we must stay above the December bottom! Currently, gold has lost all its 2017 gains relative to the S&P 500 (AUSP on Dec. 30, 2016 was 0.5144 compared to today's 0.5060).

Cheers,

Colonel Possum & Mariana

Photos by Mariana Titus if not otherwise noted