Have a great weekend!
Gold nearly scored $1,300 per ounce this week. My input to the Weekly Kitco Gold Survey:
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]
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.
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
Here's a new chart to watch. Click on the image for a larger size:
Colonel Possum & Mariana