"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, June 16, 2017

Gold Loses Glitter, Heads for $1,250; General Moly (GMO) Plan


Looking for fossil traces
Lone Mountain, Eureka, Nevada

Friday, June 16, 2017 AM

Morning Miners,

Another rough week for gold and its metallic cousins . After nearly breaking $1,300 last week, gold is trading just barely above the key $1,250 support level at $1,256.8.  Comex copper fell more than 3% on the week to presently $2.5640 per pound. Comex silver has fallen about as much saying good-bye to $17, currently pricing $16.67 per ounce. Moly Oxide remains unchanged on the LME at $7.94 per pound ($17,550 per tonne).

General Moly (GMO) presented a plan for Mt. Hope at the Marcum Microcap Conference (see below).

Here's how I see the damage this week as provided to the Kitco News Weekly Gold Report:

My vote is down. Target gold price $1,250 per ounce. Target Silver price $16.6 per ounce.

A more hawkish sounding Fed and falling inflation expectations proved a tough combination for gold that came dangerously close to key support of $1,250 per ounce after nearly touching $1,300 last week*. A President under FBI scrutiny and domestic terror on a baseball field failed to provide enough safe haven lift to spare the yellow metal a 1% loss for the week as it trades near $1,256 this morning. 

Ominously, the 1-month uptrend of higher lows was broken into the close last Friday setting the stage for more bearish sentiment going forward. It is likely gold will retest $1,250 next week; a fall below $1,230 would be very bearish. Ongoing political and geopolitical uncertainty should, however, maintain strong support at the $1,250-level.

Gold fared much better compared to falling commodities copper, oil and the broader Bloomberg Commodity Index but lost ground to both euro and Japanese yen. One bright spot was a surprise PBOC [People's bank of China] injection of liquidity into China's financial system - China loosening monetary policy establishes a potentially positive dynamic for the yellow metal.

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. The yuan has stabilized below 7 USD/CNY for most of 2017 and has had a surprising stretch of strengthening lately. Volatility has also picked up from recent calm.  This morning, the yuan is trading slightly weaker than last week at 6.8104 USD/CNY (1-month volatility** 0.56%).

Have a great weekend!

* The Federal Reserve boosted short-term rates by 0.25% and laid out a plan for reducing its $4.2T balance sheet; Consumer Price Index for May, a key measure of inflation, rose 0.1% versus 0.2% expected; Last week's intraday Comex gold high was $1,298.8 per ounce; May 9th low is $1,217.8

** by comparison the euro & yen 1-month volatilites are  0.39% & 0.66% respectively.

Weekly Summary  for June 16, 2017 AM  (something new!)


(click on table for larger size)

My commentary in the just released Summer 2017 Mining Quarterly:

Bottoms Up! (6/8/2017. Elko Daily Free Press)

My latest column in Kitco News, Montreal:


Online Edition (pages 77-80): Summer 2017 Mining Quarterly

McEwen Mining (MUX) $2.59 per share (Close)


General Moly (GMO) $0.3276 per share (Close); Moly oxide (LME) $7.94 per pound

Marcum Microcap Conference  (Press Release, 6/16/2017)



Fossils from the Ordovician
Lone Mountain, Eureka, Nevada

General Moly Plan

The surge in General Moly (GMO) share price last week, briefly scoring $0.53 per share, quickly faded the following day and this morning trades at $0.3476, a 34% drop. Ouch, nice while it lasted. GMO needs to stay above the $0.30-level from my view.

General Moly CEO Bruce Hansen presented their future plans at the Marcum Microcap Conference yesterday which included a very detailed power point presentation:

Marcum Microcap Conference  (Press Release, 6/16/2017)

These are their priorities for next year:

  1. Leverage internal skills working with AMER to identify value-accretive opportunities with a focus on base metal prospects in North America
  2. Effect reinstatement of the ROD, and re-issuance of permits for water rights at the Mt. Hope Project which would lead to the Tranche 2 investment of $6.0 million by AMER, contingent on a molybdenum price trading at or above $8 per pound for 30 consecutive calendar days, and the restoration of our water permits by the State Engineer 
  3. Maintain existing state permits for the Mt. Hope Project 
  4. Prudently manage financial liquidity and flexibility to sustain the Company over the medium term and to fund current business activities into 2Q 2018, excluding potential additional AMER investments
There are also good projections for the molybdenum market predicting moly oxide prices in the $9.40 to $10.40 range for 2018-2019. Although LME moly (which this report tracks) is slightly below the key $8-level (item 2), spot prices have been a tad above.

A good read and best of luck to the General Moly team!


Gold Price Outlook: Second-Half 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 evolving U.S. trade policies, political 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). It was somewhat worrisome that gold in euro terms broke below uptrend support March 9 and then again after French elections (i.e. defeat of Le Pen) but has since stabilized. Gold in yen has consistently trended higher.

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 were stabilizing near historically less extreme levels which proved a healthy sign. However, the gold-to-oil ratio is once again headed north above a comfortable range of variation. Gold valuations relative to copper are elevated but not alarming.

Political and geo-political events together with concerns about the timing and efficacy of the new administration's policies have restored glitter to gold in 2017 although that is being tested lately. There is solid support at the $1,250-level; a fall below $1,230 is very bearish.

Gold below $1,200 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 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 with good margin above 2013 lows

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 yet again March 15, 2017. We must stay above the December low (0.4973)! Currently this AM the AUSP is 0.177, roughly in the middle of a range bound meander for 2017.

Cheers,

Colonel Possum & Mariana

Photos by Mariana Titus if not otherwise noted

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