Comex gold $1,167.5 per troy ounce
Comex silver $17.115 per troy ounce
Comex copper $2.6520 per pound
Bird's-eye view on gold price (update Monday, December 12, 2016 AM)
It is easy to become discouraged about the direction of gold price. The yellow metal has been trending down for five months and touched a new 10-month low this morning. Prices accelerated to the downside post-election with rapidly rising interest rates but this could stall and even reverse if inflation picks up in 2017. My view is there will be some scary moments ahead, even a sub-$1,100 plunge before year's end, if the U.S. Federal Reserve decides to raise the Fed fund rate this week. Some experts say the greatly anticipated hike is already priced in but there will likely still be a dramatic market reaction - we only have to think back to last December when gold dropped to the $1,050-level with the last increase.
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 some encouraging signs that the latter case will prevail (as mentioned below). 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.
[Note: 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]
A rough week for gold as it neared 10-month lows. My input to this morning's Weekly Kitco Gold Survey:
Gold faces more challenges next week as consensus is high that the FOMC will bump interest rates against a backdrop of this week's trim-but-extend net dovish policy direction from the ECB. This likely sustains a divergence trend between the Federal Reserve and other major central banks producing tailwinds for the already strong USD and headwinds for gold price.
Gold continues a bearish descent as it faces rising interest rates that, so far, outpace inflation expectations. However, signs of increasing inflation and stronger physical demand for the yellow metal in China are encouraging. Key will be the interplay between interest rates in the U.S. and increasing inflation expectations from anticipated fiscal stimulation and improved economic growth.
A key 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. This morning the ratio is at a new 2016 low, falling nearly 25% from that high with stocks making new highs and gold in bearish retreat.
Most importantly, a trend of higher-lows broke down in late September and now the AUSP is only 3% above last December's low. We could see gold lose all its 2016 US dollar gains before year's end.
However, gold is holding ground with the embattled euro and yen [chart below]. Post-election, gold in euro and yen terms are converging and still safely above 2013 lows. Additionally, gold ratios relative to copper and oil are falling to historically less extreme levels which is a healthy sign [see Chart to Watch, below]. Missteps in the early days of a Trump presidency and/or a bump in inflation expectations could restore some glitter to gold in 2017.
My vote is down. Gold target for next week is $1,160 per ounce; Silver, $17.00 per ounce
Chart to Watch
Here's an importanat chart to watch. Click on the image for a larger size:
in the strong dollar era