The Eureka Miner: News from China, Europe Lifts Gold, U.S. Dollar & Mining Stocks

Friday, November 21, 2014

News from China, Europe Lifts Gold, U.S. Dollar & Mining Stocks

That time of year again, Eureka, Nevada

My latest Kitco News commentary:

Is Gold Still on a Slippery Slope? (Nov. 24, 2014)

Morning miners!

A terrific market Friday before Thanksgiving week. Central banks come to the rescue again with news of monetary stimulus coming from China and Europe (see discussion below and Kitco News Weekly Gold Survey). Asset classes that often work in opposition are all marching in step today - the DOW and S&P 500 are setting new highs, the U.S. dollar is up and gold rallied above the key $1,200 per ounce-level.

Beleaguered mining stocks are also doing well. Although there appears to be some profit taking on the big gold miners Newmont (NEM) and Barrick Gold (ABX), both have recovered considerably from their recent bottoms - up 8.6% and 16.3% respectively. Midway (MDW) is whistling $0.79 up 1.28% in morning trade. Benchmark Moly miner Thompson Creek (TC) and General Moly (GMO) are both in the green too.

Mining Stocks, Yahoo Finance

Let's enjoy this while it lasts pardner.

Look for my column on gold outlook for 2015 in the upcoming Winter Edition of the Mining Quarterly.

Here is my input to the Kitco News Weekly Gold Survey :

My vote:

Up. Next week's target price $1,220 per ounce.

Discussion:

What a remarkable morning for markets.

On the news that China will cut interest rates and inject liquidity into their banking system and ECB's Mario Draghi is ready to apply "all means necessary" to meet inflation targets, all boats rise. The S&P 500 scores yet another record intraday high, the U.S. dollar is up, Gold is up and the base metal complex is reacting constructively.

Notably, Comex gold has recovered all its losses for the year in morning trading ($1,202.4 versus 12/31/13 close at $1,202.3). Most importantly the yellow metal is positioned very strongly relative to silver and industrial commodities copper and oil. As shown below gold value is up 18% compared to Comex silver, 11% versus Comex copper and 28% versus Nymex oil (click on chart for larger image).

This new found momentum may bring gold to the upper boundary of the "value wedge" as illustrated in this second chart: $1,220 per ounce, my target for next week. Without additional catalyst, this may be to the top of the present rally. If commodities can rally higher gold may too, breaking the curse of the declining wedge. If not, gold could fall to a range between $990 to $1,170 per ounce in the first quarter of next year.