"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 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

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