"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 9, 2017

Gold Misses $1,300 Then Stumbles; General Moly (GMO) Surprise


Diamond Range
Lone Mountain, Eureka, Nevada

Friday, June 9, 2017 AM

Morning Miners,

Rough week for the yellow metal; good one for the red. After nearly breaking $1,300 Tuesday, gold is in danger of losing its latest momentum while copper gets some giddy-up go. Share price of General Moly (GMO) took an unexpected 90% leap from its May low to a high of $0.52 yesterday although it has since pulled back to $0.39 (story below). Moly Oxide remains unchanged on the LME at $7.94 per pound ($17,550 per tonne).

Comex copper is currently trading at $2.6365 per pound, up nearly 2.5% for the week. Here's how I see the gold story as provided to the Kitco News Weekly Gold Report:

My vote is down. Target gold price $1,260 per ounce. Target Silver price $17.1 per ounce.

The week ends with a much stronger U.S. dollar on a U.K. election result with no clear majority. Yesterday's ECB hold on rates and the Comey testimony had less impact on [metal] markets. Dollar strength has pulled gold from a near miss of the key $1,300-level Tuesday* to trade this morning below $1,270 per ounce.

I believe a likely bump in interest rates from the FOMC next week will bring the yellow metal to $1,260 or lower threatening an uptrend of higher-lows established since May 9th.

The red metal fared much better, gaining nearly 2.5% for the week even with a stronger greenback. This was broadly true for other key commodities with the exception of falling oil. Gold lost nearly 1% of value compared to the Bloomberg Commodity Index but gained 3% against oil.

Gold's losses also extended to the Japanese yen but held steady relative to the euro. Holder's of gold in terms of pound sterling were among the few happy campers in the gold world.

Not a great short-term outlook for the yellow metal in commodities or currencies. Ongoing political and geopolitical uncertainty should, however, maintain strong support at $1,250 per ounce.

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 at 6.7970 USD/CNY (1-month volatility** up from last week at 0.59%).

Have a great weekend!

* Tuesday's intraday high was $1,298.8 per ounce; May 9th low is $1,217.8

** by comparison the euro & yen 1-month volatilites are  1.7% & 1.9% respectively.

Weekly Summary  for June 9, 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) $2.56 per share (Close)


General Moly (GMO) $0.3000 per share (Close); Moly oxide (LME) $7.94 per pound



Old Tree, Old Mountain
Lone Mountain, Eureka, Nevada

General Moly Surprise

The surge in General Moly (GMO) share price yesterday remains surprising to me given that Moly oxide price hasn't moved in nearly a month from $7.94 per pound. The jump was nonetheless noteworthy with over one million shares trading at nearly six times the average 90-day volume. The high for yesterday was $0.4394 per share with a close at $0.4350. Today, prices shot up to $0.5270 but quickly collapsed to trade at $0.38 - let's see where GMO closes today, anything above $0.37 would be encouraging from my view [Update: GMO closed at $0.38, game on].

Why the jump? There was an Annual Meeting this week but I didn't see any big surprises in their press release. Perhaps more importantly, General Moly will tell why they are optimistic about the future next Thursday (June 15):

General Moly Presents at Marcum Microcap Conference in New York (Press Release, 6/5/2017)

The press release provides this teaser:

In his presentation, Mr. Hansen [General Moly CEO] will provide an overview of the Company and its major assets in Nevada, the Mt. Hope Project, one of the largest and highest grade primary molybdenum deposits in the world, and the previously mined Liberty Project. He will also discuss the unsustainability of current low molybdenum prices amidst improving long-term fundamentals in the molybdenum market, including rising steel consumption from a stabilized oil industry, growing liquid natural gas market and China's unprecedented infrastructure expansion.

Maybe a stronger Chinese yuan (see above) and GMO jump in share price are seeing something I'm not. It would be great to be surprised again by more momentum next week.

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. There is solid support at the $1,250-level.

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 0.5200, still surprisingly resilient given that S&P 500 is again setting new all-time highs this morning.

Cheers,

Colonel Possum & Mariana

Photos by Mariana Titus if not otherwise noted

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