"The history of Eureka lies in its future." - Lambert Molinelli, 1878


The author/editor of the Eureka Miner owns common shares of local mining stocks, General Moly (GMO) 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, March 31, 2017

Gold Posts a Good First Quarter, What's Ahead for 2017?

Paleozoic Beach Front Property
Devil's Gate, Eureka

Weekly Summary updated for 3/31/17 AM (something new!)

(click on table for larger size)

My commentary in the just released Spring 2017 Mining Quarterly:

Online Edition (pages 44-46): Spring 2017 Mining Quarterly

There is also a terrific column by Adella Harding (pages 5-8) about the 20 year history of Mining Quarterly

McEwen Mining (MUX) $3.10 per share (AM)

General Moly (GMO) $0.5185 per share (AM); Moly oxide (LME) $6.92 per pound

Friday, March 31, 2017 AM 

Morning Miners!

Gold hangs tough near the key $1,250-level this week while markets are on track for a good first quarter. Comex gold year-to-date is up 8.3%. My input to the Weekly Kitco Gold Survey:

My vote is up. Target gold price $1,250 per ounce . Target Silver price $18.3 per ounce.

As the first quarter closes the S&P 500 is on track to have its highest quarterly gain since 2015. Global and domestic stock markets have reacted positively to an improving world economy and the promise of U.S. tax reform, deregulation and infrastructure spending. China manufacturing recorded its best manufacturing expansion in more than 5 years. All of this positive data has a supported a rebound in metal prices and the broader commodity indexes.

However, there is a darker side to 2017 that has supported gold price above the $1,200-level, depressed U.S. Treasury rates and stalled inflation expectations. This includes a perception of delays in executing U.S. economic reforms and fiscal stimulus which has dampened the "risk-off" attitude earlier in the year. In Europe, Brexit implementation and upcoming elections in France and Germany continue to cast a shadow on rosier economic expectations.

Comex gold is near flat for the week at $1,247.8 per ounce in early morning trading (June contract, gold intraday high for the week was Monday at $1,261). The yellow metal lost value compared to oil, copper and the Bloomberg Commodity Index. However, gold made gains in terms of euro and Japanese yen, bullishly staying above positive trend support for the quarter (see chart below). A surprise FN victory in France or miscalculation in dealing with hot spots such as North Korea could drive the yellow metal considerably higher in the coming months.

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. Aggressive liquidity tightening by the People's Bank of China (PBOC) has eased, stabilizing the yuan below 7 USD/CNY. However, defending their currency brought China foreign reserves to a 6-year low earlier this year. Premier Li Leqiang's lowering of the China GDP target to 6.5% and the Fed rate hike suggest a relaxation of this vigorous defense is ongoing. This morning, the yuan has strengthened slightly and volatility is still quite low trading at 6.8830 USD/CNY (1-month volatility* is 0.21%).

Have a great weekend!

* by comparison the euro & yen 1-month volatilites are roughly 0.9% & 1.4% respectively.

Alaskite columnar formations
Devil's Gate, Eureka

Gold Price Outlook 2017

Gold started the year nicely and should remain in my revised range of $1,180 to $1,320 per ounce*. Average gold price for 2017 is expected to print above $1,200 per ounce with an outside chance to see $1,400 given an adverse outcome for European elections, evolving U.S. trade policies or geo-political shock.

Gold has gained ground on the embattled euro and yen. Post-election, gold in euro and yen terms are up and safely above 2013 lows (chart below) and are both above pre-election levels. It was somewhat worrisome that gold in euro terms broke below uptrend support March 9, but it has since recovered.

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 is a healthy sign. Geo-political events and/or a bump in inflation expectations could restore glitter to gold in 2017.

Gold near my low-range of $1,180 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

My commentary in the just released 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 trending higher

Chart to Watch

Here's a new chart to watch. Click on the image for a larger size:

Gold-to-S&P 500 Ratio

An important gold ratio to watch 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 again March 15, 2017. We must stay above the December bottom (0.4973)! A second uptrend is in place, currently this AM the AUSP is 0.5279.


Colonel Possum & Mariana

Photos by Mariana Titus if not otherwise noted

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