Comex gold $1,175.9 per troy ounce
Comex silver $16.510 per troy ounce
Comex copper $2.5235 per pound
Gold has giddy-up go for 2017. My input to the Weekly Kitco Gold Survey:
Gold continued its strong finish for 2016 into the first week of the new year. Peaking to a four-week high Thursday at $1,185.9 per ounce, the yellow metal has pulled back slightly on a U.S. dollar positive nonfarm payroll report [NFP, see below for further detail], trading presently at $1,175.9.
Even with a recovering dollar, early dealings show gold with solid weekly gains against the U.S.dollar, euro and yen as well as key commodities copper and oil. Gold has even increased value compared to the S&P 500 which has hovered just below all-time highs for much of the week. All very bullish indications going forward.
Since post-election, The U.S dollar and rising interest rates have been significant headwinds for the yellow metal. Fortunately, interest rates have pulled back this week together with some wage inflation suggested by the NFP [see below for further detail]. If inflation expectations rise with nominal rates in 2017, the impact to gold price is lessened and possibly reversed if real rates turn negative.
The fate of the Chinese yuan in the near term is a key tell for gold. The yuan soared against the dollar this week with very aggressive liquidity tightening by the People's Bank of China (PBOC). Arguably, this began erosion of dollar strength against other currencies. Even though this trend reversed after today's reasonably solid U.S. labor report, similar PBOC actions caused much market turmoil last January and sparked the 2016 gold rally. A key metric to watch is the overnight rate for unsecured borrowing in Hong Kong (CNH HIBOR). It spiked above 38% this week, the second highest on record [Update: CNH HIBOR is now a startling 61.3%, nearly last January's peak!].
We may have to wait until after the lunar New Year to see how the yuan story plays out. In the meantime, there will probably be some consolidation given gold's solid advance this week. My vote is down.
Target gold price next week is $1,160 per ounce; silver, $16.6 per ounce.
Tim Arnold, who many Eurekans remeber for his tenure with General Moly, has a new job:
Pershing Gold Hires Timothy D. Arnold as Vice President of Operations(Press release, Jan. 4,2017)
The best of luck Tim!
Overview: Pershing Gold is an emerging gold producer whose primary asset is the Relief Canyon Mine in Pershing County, Nevada. Relief Canyon includes three open-pit mines, expanding adjacent open-pit-able gold deposits, and a state-of-the-art, fully permitted and constructed heap-leach processing facility. Pershing Gold is currently permitted to resume mining at Relief Canyon under the existing Plan of Operations.
Pershing Gold's landholdings cover approximately 25,000 acres that include the Relief Canyon Mine asset and lands surrounding the mine in all directions. This land package provides Pershing Gold with the opportunity to expand the Relief Canyon Mine deposit and to explore and make new discoveries on nearby lands.
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."
*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
The Labor Department's nonfarm employment report released this morning, showed an increase of 156,00 jobs for December versus 185,000 expected. The unemployment rate ticked up slightly to 4.7% from the prior month's 4.6%. Nonetheless it was a solid report indicating, in the words of one CNBC Business News commentators, "a reasonably good economy." Chief U.S. Economist for Deutsche Bank Securities went so far as to say the report was "boring."
The good news for gold is that 2016 witnessed a 2.9% increase in the average hourly wage - the strongest gain since 2009. The December number was $26 per hour up an encouraging 0.4% from the prior month. This suggests inflationary pressures may be building - a bullish indication for the yellow metal. Stay tuned.
McEwen Mining & Gold Bar Thumbs Up for 2017!
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
Colonel Possum & Mariana