"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), 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, November 3, 2017

Gold $1,278 on Weaker-than-Expected Jobs Report; What Drives Gold price Now?


Ruby Hill (2014)
Eureka, Nevada

Friday, November 3, 2017 AM

Morning Miners,

Ah, those crazy numbers!

This morning's monthly jobs report from the Labor Department surprised to the downside. The nonfarm payrolls showed an advance of 261,000 jobs compared to expectations of 312,000. By a separate survey, headline unemployment dropped to 4.1% with a shrinking work force. How should you read this?

The first thing to remember is the impact of major hurricanes - the Bureau of Labor statisticians have never sharpened their pencils on the impact of two debilitating hurricanes (Puerto Rico is not in the survey, otherwise it would be three). Last month jobs were down 33,000 but that was revised to up 18,000 with this morning's report (still low but now positive).

Consensus called for a big positive correction of 300,000 or more, some even forecasting 400,000. That is why the reported number was deemed low with talking heads saying things like "weak number" and "lower than anyone expected."

Here's how the ole Colonel sees it. No one really knows how to figure in storm impacts of this magnitude so it is best to look at averages to see the big picture. The 3-month average is 162,000. 261,000 is a lot higher than the average so we're in pretty good shape. Another positive is a decrease in the broader U6 unemployment which includes everyone with a heartbeat that has even vaguely thought about getting off the couch to find work. The U6 number is now 7.9% - pretty darn low remembering it was running above 17% during the bad times.

Participation rate unfortunately ticked down 0.4% to 62.7% which is a measure of folks that are earnestly looking for work. Another disappointment is that hourly wages remained flat - we want this to go up! Again, there may be some stormy stuff in these calculations.

Bottom line? I think the U.S. Federal Reserve is more upbeat about the economy then earlier this year and is on course to bump rates in December. Janet Yellen will be replaced by Jerome Powell next year but most expect a continuity of monetary policy. The U.S. is tightening while most major central banks are still in loosey-goosey mode as I discuss in my input to Kitco News (see below). This divergence in policies supports gold price with a floor now around $1,250 per ounce. As long as someone out there continues to print money, gold is in good shape.

The high side is driven by political and geopolitical uncertainties and shocks. Although hard to predict, an upset or two could very well set gold on a course above $1,300 and perhaps touch $1,400 next year. Lacking such drama, the yellow metal will behave as a currency driven by global monetary policy. It had a good week gaining on both the euro and Japanese yen (discussion and charts below).

For more about gold, please read my input below to the Kitco News Weekly Gold Survey.

Here's our scorecard on where we stand for the last-half of the year:

Intraday highs on the Comex futures exchange (all December contracts):

Gold $1,362.4 per ounce September 8, 2017
Silver $18.290 per ounce September 8, 2017
Copper $3.2595 per pound ($7,186 per tonne) October 16, 2017 

Comex copper is presently trading at a $3.1430 per pound, below October's high but up 1.3% for the week. Improving global growth has kept the red metal climbing but now it faces U.S. dollar strength (it bears repeating that the OECD now predicts 45 economies will grow this year and the IMF has stepped up global 2018 GDP from 3.6% to 3.8%). All eyes are on China to see how growth prospects shape up now that their upbeat 5-yearly Congress has concluded. Copper prices are less sensitive to supply side excess as LME inventories continue to decline:


It is instructive to keep our eyes on the Comex inventories which, albiet lower in total, have leveled off:


And, again the chorus of our very tiresome molybdenum song,  "LME Moly Oxide remains on snooze alarm at $7.26 per pound. This is disappointingly short of $8 after climbing to $7.94 for much of May." 

General Moly (GMO) has fallen to the $0.28-level per share. The company received their AMER Tranche #2 funding on Monday, October 16. 

My Input to Kitco News 

Here's how I saw the weekly price action as told to the Kitco News Weekly Gold Survey:

My vote is up. Target gold price $1,285 per ounce. Target Silver price $17.2 per ounce.

A weaker-than-expected U.S. jobs report has backed the 10-year Treasury further away from 2.4% and the U.S. dollar index (.DXY) from 95. Both of these levels were identified as key to maintaining an uptrend in interest rates and stronger U.S. dollar; retreat from these levels is bullish gold, at least for the time being.

Gold price was steady around $1,278 per ounce following the labor report and its price floor supported by recent announcements from Central Banks. With the selection of Jerome Powell as the new Fed Chair, the U.S. is expected to continue tightening albeit at a gradual pace. The Bank of Japan will continue its policy of accommodation while Europe takes a "lower for longer" approach to quantitative easing. The Bank of England broke ranks by its first rate rise in 10 years but the net effect is a general divergence of U.S. monetary policy from most other major central banks. This establishes a solid floor for gold which, I believe, is $1,250 per ounce.

President Trump's travel to Asia could, at least initially, stir the geopolitical pot and provide gold another run at the $1,285-level next week - perhaps higher (e.g., provocative action by North Korea).

Although gold lost ground to key commodities and the broader Bloomberg commodity index (BCOM), it showed strength compared to the euro and Japanese yen. Gold has re-established uptrends in both currencies - another bullish indication [see Weekly Summary Table & currency chart below].

Silver should follow gold higher next week to $17.2 per ounce.

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. The yuan has stabilized below 7 USD/CNY for 2017 and generally grown stronger. The yuan is stronger than last week at 6.6240 USD/CNY and now 2.9% above its low (i.e. a stronger level) for the year of 6.4345. A 1-month yuan volatility of 0.36% is in the ballpark of major currency levels - a healthy sign for the Chinese currency (1-month volatilities of euro, yen and gold*).

Have a great weekend!

* the euro & yen 1-month volatilites are  0.67% & 0.69% respectively; Comex gold 1-month volatility is 0.81%.

Weekly Summary  for November 3, 2017 AM 


(click on table for larger size)

My latest column in Mining Quarterly (as reprinted in the Elko Daily Free Press):

A Tectonic Shift in Markets (Elko Daily Free Press, September 12,2017)

My latest column in Kitco News, Montreal:


McEwen Mining (MUX) $1.93 per share


General Moly (GMO) $0.28 per share; Moly oxide (LME) $7.26 per pound



Marcum Microcap Conference  (Press Release, 6/16/2017)




Gold Price Outlook: Fourth Quarter 2017 (Revised)

Gold started the year nicely and should remain in my latest revised range of $1,250 to $1,400 per ounce*. Average gold price for 2017 is expected to print above $1,250 per ounce with a chance to see $1,400 given an adverse outcome for President Trump's tax reform plan or geopolitical shocks (e.g., North Korea, Iran, 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). It was worrisome that gold in euro terms broke below uptrend support March 9 and then again after French elections (i.e. defeat of Le Pen), and headed lower on the prospects of the ECB taking a more hawkish stance on monetary policy. It  had a nice rally following President Trump's "fire and fury" comments with an established a trend higher since early-July. The ECB's "lower for longer" approach to quantitative easing has returned some mojo to the gold-in-euro uptrend.

Gold in yen has mostly trended higher since the U.S. election. The Bank of Japan announcement that their accommodative monetary policy is unchanged supports this uptrend.

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 at historically less extreme levels which proves a healthy sign. However, gold valuations relative to copper are again in decline posting a new low for the year of 401 pounds per ounce on October 18th and again on the 25th. Falling below 400 is bearish for gold.

Political and geopolitical events together with concerns about the timing and efficacy of the new administration's policies have restored glitter to gold in 2017. A fall below $1,260 is bearish; below $1,230, very bearish. A rise above $1,300 is bullish; above $1,362, very bullish.

(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 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 with good margin above 2013 lows

Note for currency buffs: Value parity in the above chart occurs when the EUR/JPY cross rate is 139.24; something to watch for - presently 132.69 yen per euro. 

Chart to Watch

Here's a chart to watch for 2017. Click on the image for a larger size:


Gold-to-S&P 500 Ratio

An important gold ratio 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 July 7, 2017 (0.4989) and October 20, 2017 (0.4972). Currently this AM the AUSP is 0.4957...a modestly positive move from last week's low.

Cheers,

Colonel Possum & Mariana

Photos by Mariana Titus if not otherwise noted.

Friday, October 27, 2017

Gold Resilient at $1,263; Copper Retreats, U.S. Dollar Soars


Eureka Rodeo 2012
Eureka, Nevada


Checkout Mining Quarterly by new editor Suzanne Featherston - it's a dandy!

Friday, October 27, 2017 AM

Morning Miners,

The European Central Bank (ECB) threw a lifeline to gold this week.

ECB President Mario Draghi announced that their quantitative easing program, the printing of euros to buy bonds, would be pared back but last longer. Interest rates would remain unchanged. In the U.S. better-than-expected GDP and other positive economic data increased expectations for more aggressive tightening of our monetary policy while Europe continues on the path of expansion. The divergence of policies is gold's friend creating a floor for prices which I believe is somewhere above $1,250 per ounce. 

Comex gold price dropped 1% this week dipping briefly to $1,263.8 per ounce but rose 0.8% against the embattled euro. As long as someone continues to print money, gold has a life jacket. The next test will be on Halloween when the Bank of Japan is expected to announce their monetary policy. The consensus is continued accommodation similar to Europe and opposite from the United States - more support for our favorite metal.

Now that spells support not necessarily rally, pardner. Gold in this environment behaves as another currency unless something scary happens in the geopolitical arena. Divergence in central bank thinking kicked the U.S. Dollar Index (.DXY) to 3-month highs as the euro slumped to 3-month lows. Strong dollar is a headwind for gold and the metal complex. For more about gold, please read my input below to the Kitco News Weekly Gold Survey.

Here's our scorecard on where we stand for the last-half of the year:

Intraday highs on the Comex futures exchange (all December contracts):

Gold $1,362.4 per ounce September 8, 2017
Silver $18.290 per ounce September 8, 2017
Copper $3.2595 per pound ($7,186 per tonne) October 16, 2017 

Comex copper is presently trading at a $3.0820 per pound, now sharply below this month's high. Improving global growth has kept the red metal climbing but now it faces a stiff U.S. dollar headwind (it bears repeating that the OECD now predicts 45 economies will grow this year and the IMF has stepped up global 2018 GDP from 3.6% to 3.8%). All eyes are on China to see how growth prospects shape up now that their upbeat 5-yearly Congress has concluded. Copper prices are less sensitive to supply side excess as LME inventories continue to decline:


It is instructive to keep our eyes on the Comex inventories which, albiet lower in total, appear to be leveling off:


And, again the chorus of our very tiresome molybdenum song,  "LME Moly Oxide remains on snooze alarm at $7.26 per pound. This is disappointingly short of $8 after climbing to $7.94 for much of May." 

General Moly (GMO) has fallen to the $0.31-level per share. The company received their AMER Tranche #2 funding on Monday, October 16. 

Here is an interesting interview with CEO Bruce Hansen which appeared in Metals News:


And General Moly's latest MolyBits on the many uses of molybdenum:

MOLYBITS (10/19/2017)

My Input to Kitco News 

Here's how I saw the weekly price action as told to the Kitco News Weekly Gold Survey:

My vote is down. Target gold price $1,260 per ounce. Target Silver price $16.5 per ounce.

Gold's price resilience is noteworthy in the face of a daunting U.S. dollar rally, better-than expected U.S. GDP and other economic data that almost ensures that the U.S. Federal Reserve will continue a trajectory of higher rates.

Although gold in U.S dollar terms is down 1% for the week around the $1,268-level, it is up 0.8% in euro terms after ECB's Mario Drahgi announced a lower-for-longer QE policy with no raise in interest rates. Gold is also outpacing copper for the week by nearly 2% weathering the dollar storm much better than its metallic companions.

Gold relative to the record-setting S&P 500 is at a new low this morning as market participants abandon safe havens for equities against a backdrop of global optimism and strong U.S. earnings reports. However, expansionary monetary policy in Europe and Japan as the U.S tightens should set a floor for gold in U.S. dollars, especially with stubborn geopolitical concerns still hiding in the shadows synchronous global recovery.

I believe it likely that the yellow metal will test $1,260 per ounce next week but remain above $1,250 for 2017. Silver should find some relief at $16.5 per ounce.

A key test is watch how much higher the 10-yr Treasury yield goes now that it is above 2.4%, a tipping point identified by bond traders for higher yields to come. If yields stall, gold remains on solid ground. If geopolitics flare up, gold could easily head north to $1,300 territory again.

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. The yuan has stabilized below 7 USD/CNY for 2017 and generally grown stronger. The yuan is notably weaker than last week at 6.6534 USD/CNY and now 3.4% above its low (i.e. a stronger level) for the year of 6.4345. A 1-month yuan volatility of 0.42% is in the ballpark of major currency levels - a healthy sign for the Chinese currency (1-month volatilities of euro, yen and gold*).

Have a great weekend!

* the euro & yen 1-month volatilites are  0.50% & 0.63% respectively; Comex gold 1-month volatility is 0.79% [Note: gold volatility was reported earlier to be elevated which it is not]

Weekly Summary  for October 27, 2017 AM 


(click on table for larger size)

My latest column in Mining Quarterly (as reprinted in the Elko Daily Free Press):

A Tectonic Shift in Markets (Elko Daily Free Press, September 12,2017)

My latest column in Kitco News, Montreal:


McEwen Mining (MUX) $1.9299 per share


General Moly (GMO) $0.3123 per share; Moly oxide (LME) $7.26 per pound



Marcum Microcap Conference  (Press Release, 6/16/2017)




Gold Price Outlook: Fourth Quarter 2017 (Revised)

Gold started the year nicely and should remain in my latest revised range of $1,200 to $1,400 per ounce*. Average gold price for 2017 is now expected to print above $1,250 per ounce with a chance to see $1,400 given an adverse outcome for President Trump's tax reform plan or geopolitical shocks (e.g., Iran, 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). It was worrisome that gold in euro terms broke below uptrend support March 9 and then again after French elections (i.e. defeat of Le Pen), and headed lower on the prospects of the ECB taking a more hawkish stance on monetary policy. It  had a nice rally following President Trump's "fire and fury" comments with an established trend higher since early-July. The ECB's more dovish tone this week has returned some mojo to the gold-in-euro uptrend

Gold in yen has mostly trended higher since the U.S. election.

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 at historically less extreme levels which proves a healthy sign. However, gold valuations relative to copper are again in decline posting a new low for the year of 401 pounds per ounce on October 18th and again on the 25th. Falling below 400 is bearish for gold.

Political and geopolitical events together with concerns about the timing and efficacy of the new administration's policies have restored glitter to gold in 2017. A fall below $1,260 is bearish; below $1,230, very bearish. A rise above $1,300 is bullish; above $1,362, very bullish.

My target price for next week is at the border of scary at $1,260 per ounce.

(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 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 with good margin above 2013 lows

Note for currency buffs: Value parity in the above chart occurs when the EUR/JPY cross rate is 139.24; something to watch for - presently 133.76 yen per euro and above where it was last week.

Chart to Watch

Here's a chart to watch for 2017. Click on the image for a larger size:


Gold-to-S&P 500 Ratio

An important gold ratio 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 July 7, 2017 (0.4989) and October 20, 2017 (0.4972). Currently this AM the AUSP is 0.4935...very scary. 

Cheers,

Colonel Possum & Mariana

Photos by Mariana Titus if not otherwise noted.

Friday, October 20, 2017

Gold $1,280-level on Tax Reform; McEwen Gold Bar Very Close to ROD


Why I Love Nevada
Eureka, Nevada


Checkout Mining Quarterly by new editor Suzanne Featherston - it's a dandy!

Friday, October 20, 2017 AM

Morning Miners,

Expectation for a Record of Decision (ROD) on the Gold Bar Project in early November is exciting news for Eureka (see below for details). The best to the McEwen Mining team!

Unfortunately, an up-down week for gold. Hiking up the $1,300 mountain again, Comex gold got to $1,292.9 per ounce Thursday but then fell all the way down to $1,277.6 this morning. Recovering some, the Lustrous One currently stands at $1,283.2...but the trail back up is on shaky ground.

Geopolitics support gold with uncertainty around the future of the Iran nuclear deal, simmering tensions in Korea, a Brexit negotiation in trouble and Spain back on tenterhooks... 

...but global economies continue to whir along with increasingly optimistic outlooks. In the U.S., the Senate passing a budget is the first step towards tax reform with the expectation for a better business environment. This has strengthened the U.S. dollar and caused Treasury yields to head northbound, not a great outcome for gold especially in a low to moderate inflation environment.

Gold may find some buoyancy from metals depending on the outcome of  China's 19th Congress which concludes this week. An upbeat forecast from their leaders will no doubt spur the metals higher. Taken altogether, gold is trying to find a base to build from. 

For more detail, checkout my input to the Kitco News Weekly Gold Survey below.

A scorecard on where we were last month.

Intraday highs on the Comex futures exchange (all December contracts):

Gold $1,362.4 per ounce September 8, 2017
Silver $18.290 per ounce September 8, 2017
Copper $3.1785 per pound ($7,007 per tonne) September 5, 2017 

Comex copper is presently trading at a robust $3.1855 per pound, now ABOVE September's high. More evidence of improving global growth keeps the red metal climbing. The OECD now predicts 45 economies will grow this year and the IMF has stepped up global 2018 GDP from 3.6% to 3.8%. Copper prices are recovering from the red metal's recent "avalanche" of inventory. This London Metal Warehouse (LME) Chart indicates steady progress from that peak:


It is instructive to keep our eyes on the Comex inventories which, albiet lower in total, are starting to level off:


And, again the chorus of our very tiresome molybdenum song,  "LME Moly Oxide remains on snooze alarm at $7.26 per pound. This is disappointingly short of $8 after climbing to $7.94 for much of May." 

General Moly (GMO) has stabilized around $0.34 per share after receiving their AMER Tranche #2 funding on Monday, October 16. 

Here is an interesting interview with CEO Bruce Hansen which appeared in Metals News:


And General Moly's latest MolyBits on the many uses of molybdenum:

MOLYBITS (10/19/2017)

My Input to Kitco News 

Here's how I saw the weekly price action as told to the Kitco News Weekly Gold Survey:

My vote is down. Target gold price $1,260 per ounce. Target Silver price $16.9 per ounce.

An up-and-down week for gold. Morning trading around the $1,280-level shows weekly losses against a broad array of assets: U.S. equities, key commodities and major currencies.

The turn downward for gold occurred as the U.S. Senate passed a budget making way for tax code reform. The passage strengthened the U.S. dollar and boosted Treasury yields - both headwinds for gold going forward. The 10-yr Treasury is very near 2.4%, a tipping point identified by bond traders for higher yields to come.

Perhaps most importantly, the yellow metal's resilience in the face of record setting stock markets is under extreme pressure. This morning the gold-to-S&P 500 is dangerously close to its December low as market participants shift to a "risk-on" posture. 

Gold has also been weak relative to copper, the latter rising on synchronous global growth and expectations for an upbeat outcome from China's 19th Congress. A key-level to watch is a gold-to-copper ratio of 400 pounds per ounce. Movement below this number would be bearish for the lustrous metal; bullish for the red.

If geopolitics flare up, gold could head north to $1,300 territory again. Lacking that stimulus, it is likely prices will test the $1,260-level next week. Silver should follow gold lower to $16.9 per ounce.

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. The yuan has stabilized below 7 USD/CNY for 2017 and generally grown stronger. The yuan is slightly weaker than last week at 6.6200 USD/CNY and 2.9% above its low (i.e. a stronger level) for the year of 6.4345. A 1-month yuan volatility of 0.44% is in the ballpark of major currency levels - a healthy sign for the Chinese currency (1-month volatilities of euro, yen and gold*).

Have a great weekend!

* the euro & yen 1-month volatilites are  0.42% & 36% respectively; Comex gold 1-month volatility is elevated again at 2.68%.

McEwen Gold Bar Close to ROD

McEwen Ming just released their Q3 2017 results and a Record of Decision (ROD) on the Gold Bar Project is expected in early November - great news for Eureka!

McEwen Mining Reports Q3 2017 Production Results (Press Release 10/18/2017)

According to the report:

The Gold Bar Project has achieved a major milestone in the permitting process with the publication by the Environmental Protection Agency (EPA) of the Notice of Availability of the Final Environmental Impact Statement (EIS) in the Federal Register. Following a regulated review period, a signed Record of Decision will be published, signifying the completion of the National Environmental Policy Act (NEPA) process. The Record of Decision is expected in early November this year and development of Gold Bar is planned to begin upon receipt, in line with our earlier estimates. Gold Bar is expected to contribute an average of 65,000 ounces to our annual gold production beginning in 2019.

McEwen Mining (MUX) is presently trading at $2.045 per share.

Weekly Summary  for October 20, 2017 AM 


(click on table for larger size)

My latest column in Mining Quarterly (as reprinted in the Elko Daily Free Press):

A Tectonic Shift in Markets (Elko Daily Free Press, September 12,2017)

My latest column in Kitco News, Montreal:


McEwen Mining (MUX) $2.45 per share


General Moly (GMO) $0.461 per share; Moly oxide (LME) $7.26 per pound



Marcum Microcap Conference  (Press Release, 6/16/2017)




Gold Price Outlook: Fourth Quarter 2017 (Revised)

Gold started the year nicely and should remain in my latest revised range of $1,200 to $1,400 per ounce*. Average gold price for 2017 is now expected to print above $1,250 per ounce with a chance to see $1,400 given an adverse outcome for President Trump's Tax Reform Plan, the initial financial impact of super storms Harvey, Irma and Maria, or geopolitical shocks (e.g., Iran, 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). It was worrisome that gold in euro terms broke below uptrend support March 9 and then again after French elections (i.e. defeat of Le Pen), and headed lower on the prospects of the ECB taking a more hawkish stance on monetary policy. It  had a nice rally following President Trump's "fire and fury" comments with an established trend higher since early-July.

Gold in yen has mostly trended higher since the U.S. election.

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 at historically less extreme levels which proves a healthy sign. However, gold valuations relative to copper are again in decline posting a new low for the year of 401 pounds per ounce on October 18. Falling below 400 is bearish for gold.

Political and geo-political events together with concerns about the timing and efficacy of the new administration's policies have restored glitter to gold in 2017. A fall below $1,260 is bearish; below $1,230, very bearish. A rise above $1,300 is bullish; above $1,362, very bullish.

My target price for next week is the border of scary at $1,260 per ounce.

(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 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 with good margin above 2013 lows

Note for currency buffs: Value parity in the above chart occurs when the EUR/JPY cross rate is 139.24; something to watch for - presently 133.76 yen per euro and above where it was last week.

Chart to Watch

Here's a chart to watch for 2017. Click on the image for a larger size:


Gold-to-S&P 500 Ratio

An important gold ratio 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 yet again July 7, 2017 (0.4989). Currently this AM the AUSP is 0.4993...very scary. We must stay above the December low benchmark (0.4973)! 

Cheers,

Colonel Possum & Mariana

Photos by Mariana Titus if not otherwise noted.

Friday, October 13, 2017

Gold Above $1,300 Again; Global Growth Keeps Metal Bulls Running


Eureka Rodeo 2012
Eureka, Nevada


Checkout the latest Mining Quarterly by new editor Suzanne Featherston - it's a dandy!

Friday, October 13, 2017 AM

Morning Miners,

Wow - what a difference a week or even a few hours can make in markets. Gold was on life support last Friday morning and I was confident it would need to test the $1,250-level to regain a pulse. Love being wrong when the yellow metal surprises to the upside!

A week ago, a low headline number for unemployment and rising 10-year Treasury yields sent gold down the shaft to the $1,260-level. The ole Colonel felt there was another ride lower in a 4-week downtrend. It was the old bugaboo again - fear of rising rates in a low inflation environment. Last Friday's labor report suggested to many that a Fed rate hike in December was a sure thing and the 10-year would soon make the 2.4% tipping point.

What's changed? 

There probably will be another rate hike before Christmas, but gold buyers seem less concerned. The 10-year fell back to lower yields, presently at 2.28%. Minutes from the September meeting of the Federal Open Market Committee (FOMC) showed that policymakers may not be as hawkish as previously thought. A weaker-than-expected CPI number, a gauge of inflation, spiked gold above $1,300 per ounce this morning after a fairly robust recovery all week. The logic is that the Fed will continue to raise rates but slowly until inflation picks up. 

Even last Friday showed signs of life as Comex gold scored a $1,274.9 close. I threw a red flag when the gold-to-S&P 500 ratio made a new low in the morning; by Friday afternoon gold was regaining value compared to equities (see last chart below).

Geopolitics is also supporting gold's rally with uncertainty around the future of the Iran nuclear deal, simmering tensions in Korea and a Brexit negotiation in trouble. At least Chinese traders are back from Golden Week and the world awaits the outcome of China's 19th Congress which convenes next week. An upbeat forecast from their leaders will no doubt spur the metals higher. Taken altogether, gold appears to be back in bull gear. For more detail, checkout my input to the Kitco News Gold Survey below.

A scorecard on where we were last month.

Intraday highs on the Comex futures exchange (all December contracts):

Gold $1,362.4 per ounce September 8, 2017
Silver $18.290 per ounce September 8, 2017
Copper $3.1785 per pound ($7,007 per tonne) September 5, 2017 

Comex copper is presently trading at a strong $3.1285 per pound, not far from September's high. More evidence of improving global growth keeps the red metal climbing. The OECD now predicts 45 economies will grow this year. Copper rices are recovering after taking a beating on the red metal's recent "avalanche" of inventory. This London Metal Warehouse (LME) Chart indicates the inventory surge is abating:


It is instructive, however, to keep our eyes on the Comex inventories which, albiet lower in total, are climbing higher:


And, again the chorus of our very tiresome molybdenum song,  "LME Moly Oxide remains on snooze alarm at $7.26 per pound. This is disappointingly short of $8 after climbing to $7.94 for much of May." 

General Moly (GMO) has stabilized around $0.36 per share. Their AMER Tranche #2 funding is set to close Monday, October 16.

My Input to Kitco News 

Here's how I saw the weekly price action as told to the Kitco News Weekly Gold Survey:

My vote is up. Target gold price $1,310 per ounce. Target Silver price $17.4 per ounce.

Gold Revival.

The yellow metal looked pretty grim last Friday morning falling to a new low when compared to rising stock markets and challenged by a strong dollar. Even before Friday's close, gold regained ground and now posts a solid 2.2% gain for the week [see Weekly Summary below]. Enjoying headroom above the $1,300-level, gold scores a weekly 2% gain on the S&P 500 as equities continue to post all-time highs [see Chart to Watch below]Very bullish.

Although lagging copper and oil rallies boosted by global growth optimism, gold viewed as a currency has done quite well for the week. It has reaffirmed a value gain in terms of yen, an uptrend in place since the U.S. election. It has also performed well against the euro, an uptrend holding now since early-July [see currency chart below]. Gold price volatility has also fallen to more currency-like levels on the order of yen and euro. This suggests emerging gold price stability. Bullish.

I believe geopolitics surrounding the Iran deal and North Korea together with buoyancy from rising commodities will lift gold to $1,310 per ounce next week - possibly higher. Silver should follow gold higher next week to $17.4 per ounce.

Let's see what happens when China's 19th Congress convenes next week. An upbeat China growth forecast could keep the metal bulls running.

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. The yuan has stabilized below 7 USD/CNY for 2017 and has strengthened recently. With Golden Week over, the yuan is trading at 6.5753 USD/CNY, 2.2% above a low (i.e. a stronger level) for the year of 6.4345. Yuan volatility has been in the ballpark of major currency levels but we need to get some distance from the holiday break to update this number (1-month volatilities of euro, yen and gold*).

Have a great weekend!

* the euro & yen 1-month volatilites are  0.70% & 47% respectively; Comex gold 1-month volatility has fallen to 1.17%.

Weekly Summary  for October 13, 2017 AM 


(click on table for larger size)

My latest column in Mining Quarterly (as reprinted in the Elko Daily Free Press):

A Tectonic Shift in Markets (Elko Daily Free Press, September 12,2017)

My latest column in Kitco News, Montreal:


McEwen Mining (MUX) $2.45 per share


General Moly (GMO) $0.461 per share; Moly oxide (LME) $7.26 per pound



Marcum Microcap Conference  (Press Release, 6/16/2017)




Gold Price Outlook: Fourth Quarter 2017 (Revised)

Gold started the year nicely and should remain in my latest revised range of $1,200 to $1,400 per ounce*. Average gold price for 2017 is now expected to print above $1,250 per ounce with a chance to see $1,400 given an adverse outcome for President Trump's Tax Reform Plan, the initial financial impact of super storms Harvey, Irma and Maria, or geopolitical shocks (e.g., Iran, 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). It was worrisome that gold in euro terms broke below uptrend support March 9 and then again after French elections (i.e. defeat of Le Pen), and headed lower on the prospects of the ECB taking a more hawkish stance on monetary policy. It  had a nice rally following President Trump's "fire and fury" comments with an established trend higher since early-July.

Gold in yen has mostly trended higher since the U.S. election.

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 at historically less extreme levels which proves a healthy sign. However, gold valuations relative to copper are again in decline posting a new low for the year of 414 pounds per ounce on October 12.

Political and geo-political events together with concerns about the timing and efficacy of the new administration's policies have restored glitter to gold in 2017. A fall below $1,230 is very bearish; above $1,300, bullish; above $1,362, very bullish.

Gold below $1,260 per ounce-level sets some red flags, so far so good.

My target price for next week is $1,310 per ounce.

(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 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 with good margin above 2013 lows

Note for currency buffs: Value parity in the above chart occurs when the EUR/JPY cross rate is 139.24; something to watch for - presently 132.58 yen per euro, abut where it was last week.

Chart to Watch

Here's a chart to watch for 2017. Click on the image for a larger size:


Gold-to-S&P 500 Ratio

An important gold ratio 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 yet again July 7, 2017 (0.4989). Currently this AM the AUSP is 0.5103 recovering from last Friday's scary 0.5001. We must stay above the December low benchmark (0.4973)! 

Cheers,

Colonel Possum & Mariana

Photos by Mariana Titus if not otherwise noted.