"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, April 21, 2017

Update: Gold $1,228; Mining Jobs on a Roll


Gold is on the road again!
Eureka, Nevada

Update: Friday, May 5, 2017 AM

The good news is that today's Labor Department numbers show that mining nationally continues to be on an uptrend reporting 186,200 jobs in April compared to 185,100 in March (this is ex-oil & gas folks). 

Otherwise, gold had a rough week along with commodities. This morning's Comex price is $1,228.2 per ounce; copper $2.5045 per pound - ouch!  My input to the Kitco News Weekly Gold Report:

My vote is down. Target gold price $1,200 per ounce. Target Silver price $15.9 per ounce.

A dramatic commodity retreat on renewed fears of a China economic slowdown followed by a better-than-expected U.S. jobs report* this morning places an odd dynamic on the yellow metal. Although dropping 3% for the week, gold has fared better in value than plummeting copper and oil. It has, however, been outpaced by the yen and lost considerable ground to the euro (nearly 4% decline in euro-terms). 

U.S. unemployment at pre-crisis levels allows the Fed to stay on a trajectory of interest rate hikes which is a bearish headwind for gold. There appears to be enough residual fear in marketplace to keep gold above the key $1,200-level. With the euro at 6-month highs, the greatest upside potential is a surprise Le Pen win in the final weekend elections. That outcome would no doubt plummet the euro and return gold to $1,250+ territory. China fears may also be a bit overdone with the yuan remaining very stable below 7 USD/CNY. A rebound in the metal complex would be bullish for gold.

On the downside, a Macron victory in France would likely test the $1,200-level for gold with further loses to the euro currency. I therefore believe it more likely to find gold at $1,200 next Friday than $1,250+. .

* 211,000 jobs added (190,000 expected); 4.4% unemployment (4.6% expected)

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. A less vigorous defense is now ongoing and its recent low volatility suggests the yuan remains a currency yawn.  This morning, the yuan has strengthened slightly trading at 6.8994 USD/CNY (1-month volatility* is 0.09%).


Have a great weekend!

* by comparison the euro & yen 1-month volatilites are  1.31% & 1.25% respectively.

Weekly Summary updated for May 5, 2017 AM Update (something new!)


(click on table for larger size)

My latest column in Kitco News, Montreal:


My commentary in the the Spring 2017 Mining Quarterly:


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

McEwen Mining (MUX) $2.70 per share (AM)


General Moly (GMO) $0.32 per share (AM); Moly oxide (LME) $6.92 per pound

An unofficial source told me today that a much anticipated Nevada Supreme Court decision regarding water rights has been moved from April 4th to May 1st.


Update: Friday, April 28, 2017 AM

Gold has been on a see-saw this week but we could see a surprise to the upside. This morning's Comex price is $1,267.3 per ounce. My input to the Kitco News Weekly Gold Report:

My vote is up. Target gold price $1,280 per ounce. Target Silver price $17.4 per ounce.

The push-pull on gold price continued this week keeping the yellow metal in a range of $1,260 to $1,280 per ounce. Gold positives continue to be escalating tensions in North Korea although fears of a FN victory in France have abated some as markets await the May 7 final round of voting. 

An unexpectedly high inflation number in Europe* reported this morning provides additional lift. Although today's disappointing GDP number** plumbs the slowest rate in 3-years at 0.7%, equity markets seem little disturbed in a season of mostly positive earnings reports and the promise of a business friendly tax reform plan. Rising stocks continue to be a headwind for gold in 2017.

For the week, gold crushed companion silver [gold-to-silver ratio is above 73, levels not seen since November] but lost considerable ground to the euro, copper, oil and the broader Bloomberg commodity index (BCOM). In currencies, gold slipped substantially in euro terms but eked out a gain relative to the weakening yen. The yellow metal and yen compete for safe haven status which has been on the back foot most of this week [see updated weekly summary below].

A miscalculation in North Korea or negative outcome in French elections could easily boost gold above $1,300 per ounce. More benign geopolitical outcomes and rallying stocks next week could push gold below Wednesday's low at $1,260.7 but not lower than a solid floor at $1,250. I believe it more likely to find gold at $1,280 next Friday.

* Europe inflation 1.9%; 1.2% core
** U.S. first quarter 2017 GDP 0.7% versus 1.2% expected . Fourth quarter 2016 GDP was 2.1%

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. A less vigorous defense is now ongoing and its recent low volatility suggests the yuan has become a currency yawn.  This morning, the yuan has strengthened slightly trading at 6.8899 USD/CNY (1-month volatility* is 0.10%).

Have a great weekend!

* by comparison the euro & yen 1-month volatilites are  1.1% & 1.0% respectively.

Weekly Summary updated for 4/28/17 AM Update (something new!)


(click on table for larger size)

My latest column in Kitco News, Montreal:


My commentary in the the Spring 2017 Mining Quarterly:


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

McEwen Mining (MUX) $2.99 per share (AM)


General Moly (GMO) $0.37 per share (AM); Moly oxide (LME) $6.92 per pound

Oral arguments were heard by the Nevada Supreme Court decision regarding water rights on Monday, May 1st.


Friday, April 21, 2017 AM

Gold Nearly Scores $1,300

Morning Miners!

Gold nearly scored $1,300 per ounce this week. My input to the Weekly Kitco Gold Survey:

My vote is up. Target gold price $1,290 per ounce . Target Silver price $18.0 per ounce.

A dipole of positive and negative forces has suspended gold price in a tight range around the $1,280-level this week. On the positive, strong earnings reports from GE and Honeywell this morning and a hint from the Treasury that delayed tax reform may now come sooner than later are bullish equities but place downward pressure on gold price. On the negative, geopolitical tensions with North Korea and Russia, a terror attack in Paris and French presidential elections this Sunday put a solid price floor under the yellow metal.

A strong [Marine Le Pen, National Front] FN showing in first round of French voting or miscalculation in North Korea could easily boost gold above $1,300 per ounce - on Monday, Comex prices nearly touched this key level peaking at $1,297.4. More benign geopolitical outcomes and rallying stocks on strong earnings next week could push gold below Wednesday's low at $1,275.4 but not lower than a solid floor at $1,250. I believe it more likely to find gold at $1,290 next Friday.

For the week, gold raced ahead of declining oil and copper prices as well as the broader Bloomberg commodity index (BCOM). Gold also showed strength in terms of yen but loss some ground to the euro. Gold in euro terms will be highly sensitive to Sunday's election, already within striking distance of its July high last year. [see summary table above and charts below]

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. A less vigorous defense is now ongoing and its recent low volatility suggests the yuan has become a currency yawn.  This morning, the yuan has weakened slightly trading at 6.8844 USD/CNY (1-month volatility* is 0.13%).

Have a great weekend!

* by comparison the euro & yen 1-month volatilites are roughly 0.8% & 1.0% respectively.

Gold Bar Country
Eureka, Nevada

McEwen Mining Gold Bar Progress!

Tuesday, McEwen Mining (MUX) released an upbeat quarterly report with an update on Eureka's Gold Bar project:

McEwen Mining Reports Q1 2017 Production Results (Press release, 4/18/2017)

"Gold Bar Project, Nevada – Advancing Towards Construction:  Permitting for the Gold Bar Project is advancing and remains on schedule to receive a Record of Decision in the third quarter of 2017. The Bureau of Land Management published the Draft Environmental Impact Statement (DEIS) in the Federal Register on March 3rd, 2017 and the 45-day public comment period is now closed for the DEIS. Comments received during the public comment period will be addressed and incorporated in the final Environmental Impact Statement."

The BLM held a meeting for public comment on the Gold Bar Project March 22 at the Opera House.

Best of luck to the McEwen team. Go Gold Bar!

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 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) and both are above pre-election levels. It was somewhat worrisome that gold in euro terms broke below uptrend support March 9, but it has since recovered marching steadily to the highs if 2016.

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 concerns about the timing and efficacy of the new administration's policies have restored 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 a strong 0.5452.

Cheers,

Colonel Possum & Mariana

Photos by Mariana Titus if not otherwise noted

Friday, April 7, 2017

Missiles Boost Gold above $1,270; Lousy Jobs Report But Miners Shine

Long Road
Eureka, Nevada

Weekly Summary updated for 4/07/17 AM (something new!)


(click on table for larger size)

My commentary in the the 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) $3.22 per share (AM)


General Moly (GMO) $0.4321 per share (AM); Moly oxide (LME) $6.92 per pound

An unofficial source told me today that a much anticipated Nevada Supreme Court decision regarding water rights has been moved from April 4th to May 1st.


Friday, April 7, 2017 AM

[Note: Since I wrote this column in the wee hours, Comex gold has fallen to $1,254.1 per ounce, 11:20 a.m. Eureka time. My target price for next week remains unchanged: $1,260 per ounce]

Morning Miners!

Gold spikes above $1,271 this week as missiles fly in Syria. Comex gold is presently trading at $1,269.1 per ounce. My input to the Weekly Kitco Gold Survey:

My vote is down. Target gold price $1,260 per ounce . Target Silver price $18.3 per ounce.

Missiles over Syria boost gold above $1,271 per ounce. Today's Nonfarm Payroll Report hints inflation but slower growth with disappointing total jobs added and downward revisions for previous months [more discussion below]. Except for oil, gold gained value for the week compared to key commodities and major currencies euro, yen - all bullish indications as the yellow metal touches 5-month highs. Comex gold is currently trading at $1,269.1 per ounce.

However, the jobs report may tell a different story. Although average hourly earnings are up they have slowed from the previous month. The weakest sector was retail but there were strong gains in mining (which includes oil & gas) [see below for breakdown] and other sectors with a robust ADP private sector report for the week. The outlook may be brighter than the last 24-hour new cycle suggests. If the Syria missile strike proves to be a "one-off" punitive warning and the President Trump meetings with China's Xi Jinping go well, there could be some selling pressure on gold next week. A muted U.S. stock market reaction today supports this thesis.

Escalating U.S. involvement in Syria, 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. A less vigorous defense is ongoing. It will be interesting to see what effect the Trump/Xi meetings will have on the currency, if any. This morning, the yuan has weakened slightly and volatility is still quite low trading at 6.8897 USD/CNY (1-month volatility* is 0.20%).

Have a great weekend!

* by comparison the euro & yen 1-month volatilites are roughly 0.7% & 1.4% respectively.

Washroom
Eureka, Nevada

Lousy Jobs Report but Miners Shine

The monthly jobs report released by The Labor Department this morning (Employment Situation Summary) showed a surprisingly low addition of new jobs in March compared to expectations - 98,000 versus 178,000. There were also downward revisions to January and February numbers.

By a separate survey, the headline employment rate declined to 4.5% in March. Most encouragingly, the broader U6 unemployment measure (which includes everyone with a heartbeat that still hasn't left the couch to actively seek work) has fallen to 8.9% (this was up around 17% during the recession).

One of the worst sectors is Retail trade which may reflect more of the "Amazon effect" than an economy heading for trouble - more folks shopping online than going to the mall.

For example, compare Retail to Mining (which includes oil & gas exploration & production)*:

Retail trade lost 30,000 jobs in March. Employment in general merchandise stores declined by 35,000 in March and has declined by 89,000 since a recent high in October 2016 

...and,

Mining added 11,000 jobs in March, with most of the gain occurring in support activities for mining (+9,000). Mining employment has risen by 35,000 since reaching a recent low in October 2016.

In fairness, many of these jobs are related to the oil and gas industry. The Bureau of Labor Statistics also provides data that strips out those activities providing a clearer picture for the mining of mineral solids.*


(click on chart for larger image)

The above chart shows that low occurred September 2016 at 178,700 total employees with the March 2017 number at a healthier 184,200. For comparison, mining employment peaked at 223,700 December 2011.

Major industries and Manufacturing were little changed with gains in professional and business services. So-so but the Mining Sector uptick is a real positive. CNBC reported an encouraging ADP report on the private sector earlier this week:


[Wednesday, 5 Apr 2017 | 8:15 AM ET | 02:15] The year's fast start for job creation showed no signs of letting up in March as private payrolls saw another big boost, according to a report Wednesday. Companies added 263,000 jobs for the month, ADP and Moody's Analytics said. That was well above the 185,000 expected from economists surveyed by Reuters and also better than the 245,000 reported for February.

*Further Note on Mining:

The Bureau of Labor Statistics (BLS) defines mining this way:

The Mining sector comprises establishments that extract naturally occurring mineral solids, such as coal and ores; liquid minerals, such as crude petroleum; and gases, such as natural gas. The term mining is used in the broad sense to include quarrying, well operations, beneficiating (e.g., crushing, screening, washing, and flotation), and other preparation customarily performed at the mine site, or as a part of mining activity.

A big family going back to work...

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 shocks (e.g., Syria, North Korea).

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 a strong 0.5368.

Cheers,

Colonel Possum & Mariana

Photos by Mariana Titus if not otherwise noted