"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, 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.

Friday, October 6, 2017

Gold $1,263 on Jobs Report - Ouch! McEwen Mining (MUX) Black Fox


Diamond Valley View from Devil's Gate
Eureka, Nevada


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

Friday, October 6, 2017 AM


Morning Miners,

A rough week for Nevada and the United States. This report's condolences to the families of those killed and injured in a senseless Las Vegas shooting.

Unfortunately, the ole Colonel switched from bull to bear on our favorite metal this week - at least for the time being. The Chinese have been celebrating Golden Week and hopefully will bring some luster back to their trading desks Monday. Regardless, there are some troubling trends in place for the yellow metal's 4-week downtrend.

I was "still not worried" last Friday; maybe I'm a little worried now.

The Labor Department's monthly jobs report this morning dipped Comex gold briefly to $1,262.8 per ounce although there has been a rebound to $1,272.2 (12:03 p.m. EDT). In this business, new lows matter. Chances are there will be a retest of the $1,263-level unless the returning Chinese see a bargain in the mix.

What happened? Most folks said they wouldn't read too much into the labor statistics for September due to hurricanes Harvey and Irma (Puerto Rico and the Virgin Islands are not included this report). Consensus expectation was a low 80,000 jobs added; the surprise - a whopping 33,000 jobs lost!

On first take, you may think that a negative number should be supportive of gold price. However, market participants focused on a separate survey that shows headline unemployment at a super low 4.2%. There was also a bump in hourly earnings and increase in the participation rate (63.1% versus 62.9% in August). Even the broader U6 unemployment measure (which includes that unemployed coach potato relative whose been saying for three years he'll look for work tomorrow) dropped to 8.3%. Taken together these factors indicate a tightening labor market and good excuse for the Federal Reserve to raise rates - a bearish headwind for gold.

Some more elaboration on the downdraft is given in my input to the Kitco News Weekly Gold Survey below.

A refresher on where we were last month - ouch!

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 the happier part of this week's story rallying back above the $3-level this morning, presently trading at $3.0250  per pound. Prices 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:


China's Golden Week is keeping copper traders away from their desk too. Metals maven Janet Mirasola of Sucden Futures, NY had this caution on copper going forward:

The Red One, which enjoyed 3% surge yesterday, triggered initially by news of an earthquake in Chile which turned out to have no impact on supply but gave traders the catalyst to unleash a technical rally taking out "stops" all the way and luring CTA's to add longs is consolidating this morning trading quietly either side of $6700 [$3.039 per pound] as it awaits fresh news.

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. Since moly oxide is primarily a byproduct of copper mining, the copper glut is not helping this situation." 

General Moly (GMO) recovered some from its recent drubbing, now trading at $0.36 per share.

McEwen Mining (MUX) Acquisition

McEwen Mining (MUX) completed a new acquistion: 


Rob McEwen, Chairman and Chief Owner, says:

We view this purchase as an important strategic step towards our goal of entering the S&P 500 Index; #1 It increases our forecast 2018 annual production by 20% to 185,000 gold equivalent ounces; #2 It allows us to accelerate development towards production of the Lexam VG properties we bought earlier this year; #3 It provides us with a base of operations, an experienced workforce, and multiple exploration targets in one of the world’s best gold mining districts, Timmins, Canada; #4 The purchase price was very attractive, given the significant investment made by the previous owner; and #5 The purchase includes large tax pools that will be used to shelter future income.  

The Record of Decision (ROD) for the Gold Bar Project north of Eureka is still pending, expected to be announced before the end of the year.

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 $1,250 per ounce. Target Silver price $16.3 per ounce.

A challenging week to make gold predictions given China Golden Week and Asia Moon Festival takes important gold market participants offline. Even though this morning's nonfarm payroll report is tainted by recent hurricanes, some bearish trends for gold price are emerging.

Headline unemployment dipping to 4.2%, average hourly earnings bumping up 0.5% (2.9% year-on-year) and an increased participation rate suggest the labor market is tightening - a prescription for a Federal Reserve rate hike in December. The 10-year Treasury spiked to nearly 2.4% a key level considered by some to be a tipping point for higher yields to come. The U.S dollar index strengthened on a falling euro and British pound sterling. With only moderate inflation these become very bearish indications for gold.

Steam from the geo-political cauldron and uncertainty about U.S. domestic and international policy direction are potentially bullish. However, the muted response of gold price to President Trump's flagging support for his Secretary of State and "calm before the storm" comment yesterday among his generals point to fragility of the yellow metal safe haven status. Even though weakening, the Japanese yen has lately shown more relative strength than gold. The yen is often an alternative safe haven for investors.

Most importantly, the gold-to-S&P 500 ratio dipped below its December low this morning emphasizing its diminished appeal relative to record breaking U.S. equities [see Chart to Watch below]. A key level for gold is $1,250. Falling below this is very bearish. Silver should follow gold lower next week to $16.3 per ounce. 

Gold is in trouble. Let's see what happens when Chinese traders return to their desks together with the outcome of the upcoming 5-yearly Congress.

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. Due to Golden Week, the yuan is unchanged at 6.653 USD/CNY, 3.4% 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 beyond the holiday break to update this number (1-month volatilities of euro and yen*).

Have a great weekend!

* the euro & yen 1-month volatilites are  0.84% & 1.26% respectively; Comex gold 1-month volatility is an elevated 2.86%.

Weekly Summary  for October 6, 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., 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. Unfortunately, it has now broken that trend line as shown in the chart.

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 418 pounds per ounce.

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, we almost got there this morning

My target price for next week is at the bottom of my range for 2017 gold - $1,250 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 132.57 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 yet again July 7, 2017 (0.4989).  Currently this AM the AUSP is 0.4963, a new low below the December benchmark (0.4973) - a potentially ominous move! 

Cheers,

Colonel Possum & Mariana

Photos by Mariana Titus if not otherwise noted.

Friday, September 29, 2017

Gold Tests $1,280 - Still Not Worried; Bad Week for General Moly (GMO)


Fall 2017Mining Quarterly


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

Friday, September 29, 2017 AM

Morning Miners,

Another bruiser for gold.

Comex gold dipped to $1,280.4 per ounce yesterday feeling the full weight of a buoyant U.S. dollar and rising Treasury yields, both lifted by renewed hopes for the Administration's new new Tax Reform Plan. February's "phenomenal" description of an earlier plan has been upgraded to "miraculous." 

There are solid elements that should spur economic growth such as lower corporate tax rates and repatriation of oversea's money at lower rates. The rejiggering of income tax rates, deduction makeover and elimination of the federal estate tax are far more contentious. The core issue is how to reform taxes without increasing the national deficit and, ultimately, the national debt. This promises to be another Washington lollapalooza. Stay tuned.

Some of the initial market optimism has faded this morning with Comex gold at $1,287.1 as the U.S. dollar index and 10-year Treasury yields off their Thursday peaks.

A look at where we were earlier this month puts metal prices in context:

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 

More on gold's price reaction is in my weekly input to Kitco News below.

Comex copper nearly made the $3-level this morning peaking to $2.9925 per pound, falling back some to trade at $2.9650 per pound currently. Prices seem to stabilizing after taking a beating on its recent "avalanche" of inventory. This London Metal Warehouse (LME) Chart indicates the inventory surge may be abating:



China's Golden Week begins next week so copper traders will be away from their desks. Put thoughts about copper in pause mode for now.

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. Since moly oxide is primarily a byproduct of copper mining, the copper glut is not helping this situation." 

Bad Week for General Moly (GMO)

General Moly (GMO) got walloped this week on a court decision and inexplicable 2-day delay in their press release. It finally came out this morning:


The court ruling first:

"...on September 27, 2017, the Nevada Supreme Court issued its Opinion affirming the Nevada District Court's March 2016 Order which vacated the water permits concerning the Mt. Hope Project. The Company and the Nevada State Engineer had challenged the District Court's Order last year."

On a more positive note the funding extension from AMER appears to be on track. Here is Bruce D. Hansen, General Moly's Chief Executive Officer, take on both events:

The Tranche 2 funding extension relates to unanticipated process delays. It has no impact on AMER's relationship with General Moly and its commitment to support eventual development of the Mt. Hope Project in Nevada. We also continue to work with AMER to evaluate other potential base metal business development opportunities.

And in regards to the Nevada Supreme Court Opinion:

...we are disappointed in the results, but are pleased that we can now move forward with the Nevada State Engineer on the new water applications for our majority-owned Mt. Hope Project. We anticipate that we can complete the process and obtain new permits along with receipt of a Record of Decision during 2018, which we anticipate may coincide with the continuing improvement in the molybdenum market for higher prices for a development decision of the Mt. Hope Project. We are confident in our ability to present evidence of the proper use of the water for the Mt. Hope Project and look forward to presenting evidence of our ability to mitigate any potential impacts to individual water right holders in the same basin. Now with a decision, our goal to achieve water permits and follow through with the eventual development and operation of the Mt. Hope Project can move forward.

Market participants saw the court ruling Wednesday and shares began a deep dive to $0.344 by yesterday, a nearly 33% fall from the September 14th high of $0.51 per share. A $0.46-level sustained for a time after an upgrade to "buy" earlier this month from Zack's Investment Research, Inc. General Moly price seems to be stabilizing this morning around $0.36 per share.

Ouch.

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 $1,300 per ounce. Target Silver price $16.9 per ounce.

Gold still below $1,300.

The lustrous metal repeats notable weekly losses against a broad array of assets: major currencies, domestic stocks, broader commodity index (Bloomberg BCOM) and Dr. Copper [see table below].

A quadruple whammy of rapidly rising treasury yields, U.S. dollar strength, low inflation print in Europe and a week without new North Korea threats weighs heavily on gold price. 

However, the dollar and yield boost from the new Administration Tax Reform Plan and a hot U.S. GDP number* is showing some signs of fading. The reality of passing this plan in its present form is uncertain and the impact of major hurricanes will no doubt hit GDP in the next update (albiet a potential boost to growth later on).

A key indicator is the 10-year Treasury yield - if it breaks 2.4% there could be more pain ahead for gold. I believe it more likely that rates will retreat some next week, the U.S. dollar rise will stall and some new steam will rise from the geo-political cauldron. All or some favor a gold return to the $1,300-level.

The near-term bottom is in for gold at $1,280. Any price below $1,285 is a cautious buy. Silver should move just below the $17-level at $16.9 per ounce.

Take heart. Gold is still in bull mode for the year!

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. This morning, the yuan is trading weaker than last week at 6.6516 USD/CNY, 3.4%  above a low (i.e. a stronger level) for the year of 6.4345. Yuan volatility is now in the ballpark of major currency levels (1-month volatility** 0.79%).

Have a great weekend!

* Q2 GDP revised upwards to an annual rate of 3.1%. The initial impact of hurricanes may shave 0.5% off GDP in the next report. Eventually, hurricane recovery and rebuilding is considered positive for the economy.

** by comparison the euro & yen 1-month volatilites are  0.64% & 1.36% respectively; Comex gold 1-month volatility is an elevated 2.59%.

Weekly Summary  for September 29, 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., 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. It is presently testing that trend line as shown in the chart.

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 are stabilizing near historically less extreme levels which proves a healthy sign. Gold valuations relative to copper are elevated and recovering from a recent descent lower.

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 $1,285 per ounce-level is a cautious "buy."

(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 132.91 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 yet again July 7, 2017 (0.4989). We must stay above the December low (0.4973)! Currently this AM the AUSP is 0.5128, falling back below the center of the range after a bullish breakout from the July low. Gold gains are now behind the S&P 500 gains for the year by a small margin (AUSP on December 30, 2016 was 0.5144).

Cheers,

Colonel Possum & Mariana

Photos by Mariana Titus if not otherwise noted.