Comex gold $1,158.3 per troy ounce
Comex silver $16.135 per troy ounce
Comex copper $2.5155 per pound
Happy New Year Miners,
After a tough post-election swoon, our favorite metal is finishing strong for the year. In the early hours, gold is just shy of $1,160 per ounce - up over 2% in U.S. dollars for the week and heading for a 9 % gain for the year. That's not bad, pardner, and very close to the vaunted U.S. stock market gains for 2016.
Yes, we have fallen quite a bit from the $1,375 mid-summer highs but gaining an annual 9% in a strong U.S. dollar environment is nothing to get discouraged about. Gold is set to score weekly gains against the S&P 500, key commodities copper and oil, and major currencies euro and yen - not a bad sprint to the finish.
A strong U.S. dollar and rising interest rates have been significant headwinds for gold since post-election. However, if inflation expectations rise with nominal rates in 2017 the impact to gold price is lessened and possibly reversed if real rates turn negative.
As we discussed last week, the question becomes whether 2017 will be a repeat of 2013 with gold losing value across a broad set of assets, which included stocks, commodities and currencies, or stabilize in a range above $1,100. There are continued signs that the latter case will prevail. I remain optimistic that gold will regain its mojo in the coming year falling in a range of $1,125 to $1,320 per ounce*. Average gold price for 2017 should register 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 last year and reversed to a bullish trend, peaking February 11. It bottomed again December 20 but has been trending higher since. Confirming a double-bottom in the coming months would be a significant positive for the lustrous metal.
Gold is gaining ground on the embattled euro and yen. Post-election, gold in euro and yen terms are converging and safely above 2013 lows [chart below]. Additionally, gold ratios relative to copper and oil are stabilizing near historically less extreme levels which is a healthy sign [Chart to Watch, below]. Geo-political events and/or a bump in inflation expectations could restore glitter to gold in 2017.
For January there may be more pain ahead. However, gold near my low-range of $1,125 per ounce-level is a tempting "buy."
*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
An exciting development for Eureka will be the re-opening of the Gold Bar Mine north of town. Some us old timers have fond memories of Gold Bar when it was operated by Atlas in the late-1980s and early-1990s (Johnny Horton and Atlas Mine Memories, Eureka Miner, Nov. 11, 2009).
McEwen Mining expects to have permitting done and an ROD by the third quarter of 2017. Mine construction will follow with first production expected by the end-of-2018. Their mine feasibility study assumes a reasonable $1,150 per ounce which nets a greater than 20% internal rate-of-return and payback in 3 years.
Here is a recent Kitco video with McEwen Mining CEO Rob McEwen discussing Gold Bar, other projects and his gold outlook for 2017:
McEwen Gives His Gold Outlook In This No-holds-barred Interview With Daniela Cambone (Kitco News, 12/28/2016)
Rob McEwen has been inducted in the the Mining Hall of Fame receiving the honors January 12. Congratulations and the best of luck to you and your team in 2017!
Winter 2016 Edition Mining Quarterly
Elko Daily Free Press Editor Marianne Kobak McKown has put together another dandy. The Winter Edition of the Mining Quarterly has great columns on Newmont Mining Corp.'s Twin Creeks Mine, Cripple Creek and Victor Mine (Colorado), Barrick Gold Corp.'s Cortez Hills, EP Minerals' unique product and the Kinross expansion of Bald Mountain.
Chart to Watch
Here's an importanat chart to watch. Click on the image for a larger size:
in the strong dollar era