Comex gold $1,189.1 per troy ounce
Comex silver $16.660 per troy ounce
Comex copper $2.6635 per pound
Gold and copper peaked Thursday to new post-election highs. My input to the Weekly Kitco Gold Survey:
Gold continued its bull run for 2017, peaking to a six-week high on Thursday at $1,207.7 per ounce. Although $1,200 is a key level, the yellow metal failed to close above this benchmark ($1,199.8) and prices are in retreat for Friday the 13th. Gold is presently trading at $1,189.1 per ounce.
A mixed week for gold indicates a near term top may be in. For currencies, gold scores solid gains from last Friday against the U.S.dollar and euro but lags the Japanese yen [see Chart to Watch]. Gold eked out a gain relative to basket of commodities (Au:BCOM) but has lost more than 3% in value to copper while advancing 3.5% compared to oil [chart below].
On a positive note, gold continues to trend higher relative to the S&P 500. Major stock indexes have lost post-election momentum given uncertainty about the specifics President-elect Trump's tax and economic plans. It is important to note that gold posted its new high after the Trump press conference as domestic equities faded.
Treasury yields are slightly up for the week [10-YR 2.396%] after a downtrend that began mid-December. Since post-election, a strong U.S dollar and rising interest rates have proved significant headwinds for the yellow metal. 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 [see link directly below discussion*].
The fate of the Chinese yuan remains a key tell for gold. Aggressive liquidity tightening by the People's Bank of China (PBOC) has eased, stabilizing the yuan below 7 USD/CNY. However, defending their currency has brought China foreign reserves to a 6-year low. We may have to wait until after lunar New Year to see if this vigorous defense is sustainable. After Chinese traders return from holiday, it is possible that gold will get a boost; and copper, a correction given worsening conditions for the yuan.
In the meantime, there will probably be some consolidation given gold's solid advance this week.
Have a good weekend!
My vote is down. Target gold price next week is $1,180 per ounce; silver, $16.5 per ounce.
*Note on real rates going forward:
Real Rates’ Show Real Concerns Over Trump Economic Rebound (Min Zeng, WSJ, 01/15/2017)
Red Metal Rally
(Bloomberg, 01-12-2017) -- Indonesia will allow mining companies to export concentrates after Jan. 11, in a move that will help Freeport-McMoRan Inc. continue its operations at the world’s second-largest copper mine.
That welcome news initially caused an early Thursday dip in copper's recent advances as reported by Janet Mirasola, Managing Director Sucden Futures Inc., New York (click on graph for larger image).
Mirasola had earlier identified $5,800 per metric ton as a key level for copper going forward. However, the red metal retreat quickly reversed to rally later in the day touching $2.6935 per pound ($5,938/t) Friday morning. The red metal may indeed be in rally mode but Chinese trading after the lunar New Year may pose a real challenge.
At 11:13 AM Eureka time:
Comex copper (3/17) = $2.6885/lb ($5,927/t > $5,800/t); [close: $2.6900/lb, after hours Friday, $2.716/lb]
Freeport McMoRan (FCX) = $15.19/share (up 15.2% YTD, $13.19/share 12/30/16); [close $15.19/share]
Gold Price Outlook 2017
The question becomes whether 2017 will be a repeat of 2013 with gold losing value across a broad set of assets, which includes stocks, commodities and currencies, or stabilize in a range above $1,100. There are increasing signs that the latter case will prevail. I believe gold is starting the year nicely and should remain 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.
Gold near my low-range of $1,125 per ounce-level is a tempting "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
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 (updated 1/13/17)
Colonel Possum & Mariana