I'm preparing to go on the road so this will be a short one, pardner. Had to stop packing to watch gold and silver soar; even copper is above $5,000 per tonne this morning on a falling U.S. dollar.
8:59 AM Eureka time:
Comex gold [6/16] $1,298.4 per ounce (today's high $1,295.5)
Comex silver [7/16] $17.935 per ounce (today's high $18.005)
Comex copper [7/16] $2.2760 per pound (today's high $2.2825 or $5,032 per tonne)
This is how I described market conditions in my input to the Weekly Kitco News Gold Survey:
Never has so much come from nothing. The U.S. Federal Reserve and Bank of Japan announced no change in policy this week sending shock waves through global markets.
The Japanese yen continues to be the currency to watch; from dollar strength earlier this month to an even stronger dip below JPY 107 today. Here's the good news: even with the yen surge, the USD gold rally is gaining strength on the yen. Gold in yen terms is up 1.8% from yesterday, rather impressive.
My big picture remains that gold prices will continue in a trading range, trapped between a floor of negative interest rates (Europe, Japan) and a cap determined by the U.S. interest rate trajectory. This week's monetary inaction has moved the cap higher, perhaps $1,310 per ounce.
The 3-month correlations with oil and copper remain noticeably positive (>+0.5) with shorter term correlations in the green too. This week gold gained a bit on copper but lost ground to rising oil and soaring silver. Importantly, last week the gold-to-silver ratio broke a multi-year trend of higher-lows [chart below].
Silver is having a bullish run for 2016 indeed. I believe it likely that gold will pause to catch its breath next week finding some comfort on the $1,280 per ounce veranda.
My vote is down. Target for next week $1,280 per ounce.
Kitco News Editor Neils Christensen responded, "Wow you are a Debbie downer but no lone wolf."
I replied, "Ha! New bull horns and nose ring but I still have my bear pants on!"
Christensen got the last laugh, "Ha ha ha. Sort of like a messed up Minotaur."
Here's the gold-silver chart that got things rolling (click for larger image):
Gold & Oil: A Historical Ratio Turns Bad
Editor Marianne Kobak McKown has down another excellent job with the Spring Edition. Important updates on Newmont, Jerritt Canyon, Pershing Gold at Relief Canyon and much, much more!
Please read my update on gold prices in the latest Mining Quarterly - gold is showing glitter, pardner.
The online version:
Oldies but Goodies
Here's an oldie from April 11, 2011:
Those were the days!
A good friend of mine collects silver coins. I wrote him on the 29th of December, "I think silver is starting to look a bit interesting. I added to a position yesterday when prices fell near 5-1/2 year lows."
It turned out to be a good call.
Gold has certainly had a run this year, but so has silver. As of yesterday's closing prices, both metals are up 18% while equity markets struggle to make single digits for 2016. Back in the day (which wasn't that long ago, see today's "Oldies but Goodies"), silver typically raced ahead of gold when both rallied. Daily gains of 1.5 to 2.0 times gold's advance were not uncommon for the white metal. Traders call this "beta" where a beta exceeding 1.0 implies greater percentage moves compared to its reference - in this case gold price. For quite some time, silver performance has lagged gold scoring a lowly 3-month beta of only 0.75.
All that may be changing in silver's favor, pardner. Here are my most recent thoughts on both gold and silver for today's Weekly Kitco Gold Survey:
Comex gold charged like a lion Tuesday breaking into $1,260 territory but appears to be exiting the week as a lamb trading this morning at $1,228.4 per ounce. The yellow metal is also weaker against key commodities oil and copper as well as major currencies euro and yen. The FX markets appear to be stabilizing with the yen falling back from recent notable strength (4/12, JPY 107.64) and the euro recovering from its March weakness (3/16, EUR 1.0869). The dollar index (.DXY), down 5% from its late January high, will probably trend somewhat higher. With these cross-currents, gold will likely find some middle ground from its recent high and late-March low. My target for next week is $1,235 per ounce.
Yesterday, Comex silver made its 2016 high at an impressive $16.27 per ounce as gold-to-silver ratio (GSR) transitions from dull to exciting. A trend of higher ratio lows began in late-November 2012 and is key to watch in the coming weeks. Today, the GSR is a strong 76.1 oz/oz; if it breaks below 75, the 3-1/2 year trend of gold gaining value over silver will be broken. Something to watch for silver bulls.
My vote is up. Target gold price $1,235 per ounce.
Let's see if the GSR breaks 75 and the 3-month beta moves back above 1.0 in the coming weeks. Please do your own research, silver can be a widow maker as well as hero my friend!
Gold price margins from 2013 lows (euro, yen)
A disturbing aspect of gold's 2015 decline in USD was the concurrent collapse in euro and yen terms.
The yellow metal has stayed above its 2013 lows in terms of both currencies. The percent margin above those bottoms peaked in late January 2015 and then trended down with the divergence of US monetary policy from Europe and Japan, and the associated rise of the US dollar. (click on chart for larger image, an earlier version of this chart appears in Spring 2016 Mining Quarterly ):
Declining value of gold relative to a devalued currency is a red flag. January witnessed a key reversal in this downtrend for both euro and yen and then it was up and away - a bullish turn for gold. We are now witnessing a bearish reversal in this recovery that continues from mid-March.
879.64 euros per ounce on 12/20/2013
122,443 yen per ounce on 6/28/2013
Friday AM (04/15/2016):
1,087 euros per ounce (+23.6% margin)
133,639 yen per ounce (+9.4%% margin < 10%, worrisome)
Here's the scorecard on the stock market, S&P 500 is at 2,079 (Friday AM):
S&P 500 high: 2,134.72, 5/20/2015
Then from the late December high, the February downdraft:
S&P 500 high: 2,081.56, 12/29/2015
S&P 500 low: 1,810.10, on 2/11/2016 down 13.0% & 15.2% from 5/20/2015 high
S&P 500 bear market begins below 20% at 1,707.78
We're now above the Dec-Feb fib box and the December high (2,081.56) was breached several times this week. A sustained rally above this level would be bullish.