Gold Tests $1,280 - Still Not Worried; Bad Week for General Moly (GMO)

Fall 2017Mining Quarterly

Checkout the latest Mining Quarterly by new editor Suzanne Featherston - it's a dandy!

Friday, September 29, 2017 AM

Morning Miners,

Another bruiser for gold.

Comex gold dipped to $1,280.4 per ounce yesterday feeling the full weight of a buoyant U.S. dollar and rising Treasury yields, both lifted by renewed hopes for the Administration's new new Tax Reform Plan. February's "phenomenal" description of an earlier plan has been upgraded to "miraculous." 

There are solid elements that should spur economic growth such as lower corporate tax rates and repatriation of oversea's money at lower rates. The rejiggering of income tax rates, deduction makeover and elimination of the federal estate tax are far more contentious. The core issue is how to reform taxes without increasing the national deficit and, ultimately, the national debt. This promises to be another Washington lollapalooza. Stay tuned.

Some of the initial market optimism has faded this morning with Comex gold at $1,287.1 as the U.S. dollar index and 10-year Treasury yields off their Thursday peaks.

A look at where we were earlier this month puts metal prices in context:

Intraday highs on the Comex futures exchange (all December contracts):

Gold $1,362.4 per ounce September 8, 2017

Silver $18.290 per ounce September 8, 2017

Copper $3.1785 per pound ($7,007 per tonne) September 5, 2017 

More on gold's price reaction is in my weekly input to Kitco News below.

Comex copper nearly made the $3-level this morning peaking to $2.9925 per pound, falling back some to trade at $2.9650 per pound currently. Prices seem to stabilizing after taking a beating on its recent "avalanche" of inventory. This London Metal Warehouse (LME) Chart indicates the inventory surge may be abating:

China's Golden Week begins next week so copper traders will be away from their desks. Put thoughts about copper in pause mode for now.

And, again the chorus of our very tiresome molybdenum song,  "LME Moly Oxide remains on snooze alarm at $7.26 per pound. This is disappointingly short of $8 after climbing to $7.94 for much of May. Since moly oxide is primarily a byproduct of copper mining, the copper glut is not helping this situation." 

Bad Week for General Moly (GMO)

General Moly (GMO) got walloped this week on a court decision and inexplicable 2-day delay in their press release. It finally came out this morning:

General Moly and its Largest Shareholder, AMER, Agree to Two-week Extension to Close $6 Million Tranche 2 Private Placement and General Moly Reports on Ruling from Nevada Supreme Court (Press release, 9/29/2017)

The court ruling first:

"...on September 27, 2017, the Nevada Supreme Court issued its Opinion affirming the Nevada District Court's March 2016 Order which vacated the water permits concerning the Mt. Hope Project. The Company and the Nevada State Engineer had challenged the District Court's Order last year."

On a more positive note the funding extension from AMER appears to be on track. Here is Bruce D. Hansen, General Moly's Chief Executive Officer, take on both events:

The Tranche 2 funding extension relates to unanticipated process delays. It has no impact on AMER's relationship with General Moly and its commitment to support eventual development of the Mt. Hope Project in Nevada. We also continue to work with AMER to evaluate other potential base metal business development opportunities.

And in regards to the Nevada Supreme Court Opinion:

...we are disappointed in the results, but are pleased that we can now move forward with the Nevada State Engineer on the new water applications for our majority-owned Mt. Hope Project. We anticipate that we can complete the process and obtain new permits along with receipt of a Record of Decision during 2018, which we anticipate may coincide with the continuing improvement in the molybdenum market for higher prices for a development decision of the Mt. Hope Project. We are confident in our ability to present evidence of the proper use of the water for the Mt. Hope Project and look forward to presenting evidence of our ability to mitigate any potential impacts to individual water right holders in the same basin. Now with a decision, our goal to achieve water permits and follow through with the eventual development and operation of the Mt. Hope Project can move forward.

Market participants saw the court ruling Wednesday and shares began a deep dive to $0.344 by yesterday, a nearly 33% fall from the September 14th high of $0.51 per share. A $0.46-level sustained for a time after an upgrade to "buy" earlier this month from Zack's Investment Research, Inc. General Moly price seems to be stabilizing this morning around $0.36 per share.

Ouch.

My Input to Kitco News 

Here's how I saw the weekly price action as told to the Kitco News Weekly Gold Survey:

My vote is up. Target gold price $1,300 per ounce. Target Silver price $16.9 per ounce.

Gold still below $1,300.

The lustrous metal repeats notable weekly losses against a broad array of assets: major currencies, domestic stocks, broader commodity index (Bloomberg BCOM) and Dr. Copper [see table below].

A quadruple whammy of rapidly rising treasury yields, U.S. dollar strength, low inflation print in Europe and a week without new North Korea threats weighs heavily on gold price. 

However, the dollar and yield boost from the new Administration Tax Reform Plan and a hot U.S. GDP number* is showing some signs of fading. The reality of passing this plan in its present form is uncertain and the impact of major hurricanes will no doubt hit GDP in the next update (albiet a potential boost to growth later on).

A key indicator is the 10-year Treasury yield - if it breaks 2.4% there could be more pain ahead for gold. I believe it more likely that rates will retreat some next week, the U.S. dollar rise will stall and some new steam will rise from the geo-political cauldron. All or some favor a gold return to the $1,300-level.

The near-term bottom is in for gold at $1,280. Any price below $1,285 is a cautious buy. Silver should move just below the $17-level at $16.9 per ounce.

Take heart. Gold is still in bull mode for the year!

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 2017 and has strengthened recently. This morning, the yuan is trading weaker than last week at 6.6516 USD/CNY, 3.4%  above a low (i.e. a stronger level) for the year of 6.4345. Yuan volatility is now in the ballpark of major currency levels (1-month volatility** 0.79%).

Have a great weekend!

* Q2 GDP revised upwards to an annual rate of 3.1%. The initial impact of hurricanes may shave 0.5% off GDP in the next report. Eventually, hurricane recovery and rebuilding is considered positive for the economy.

** by comparison the euro & yen 1-month volatilites are  0.64% & 1.36% respectively; Comex gold 1-month volatility is an elevated 2.59%.

Weekly Summary  for September 29, 2017 AM 

(click on table for larger size)

My latest column in Mining Quarterly (as reprinted in the Elko Daily Free Press):

A Tectonic Shift in Markets (Elko Daily Free Press, September 12,2017)

My latest column in Kitco News, Montreal:

The Gundlach Indicator R.I.P. - Gold, Copper & Interest Rates (Kitco News, August 23, 2017)

McEwen Mining (MUX) $2.45 per share

Gold Bar Project on Track, McEwen Rocks; Gold Bounce Next Week? (Eureka Miner, 03/03/2017)

McEwen Mining & Gold Bar Thumbs Up for 2017! (Eureka Miner, 12/30/16) 

General Moly (GMO) $0.461 per share; Moly oxide (LME) $7.26 per pound

General Moly and its Largest Shareholder, AMER, Strengthen Strategic Partnership (Press Release, August 8, 2017)

Mt. Hope Project's Supplemental EIS Published in Federal Register, Moving Project Towards ROD (Press Release, July 20, 2017)

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

What's Up with General Moly (GMO)? EM Talks to CEO Bruce Hansen (Eureka Miner, 1/27/17)

Gold Price Outlook: Fourth Quarter 2017 (Revised)

Gold started the year nicely and should remain in my latest revised range of $1,200 to $1,400 per ounce*. Average gold price for 2017 is now expected to print above $1,250 per ounce with a chance to see $1,400 given an adverse outcome for President Trump's Tax Reform Plan, the initial financial impact of super storms Harvey, Irma and Maria, or geopolitical 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 worrisome that gold in euro terms broke below uptrend support March 9 and then again after French elections (i.e. defeat of Le Pen), and headed lower on the prospects of the ECB taking a more hawkish stance on monetary policy. It  had a nice rally following President Trump's "fire and fury" comments with an established trend higher. It is presently testing that trend line as shown in the chart.

Gold in yen has mostly trended higher since the U.S. election.

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 proves a healthy sign. Gold valuations relative to copper are elevated and recovering from a recent descent lower.

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. A fall below $1,230 is very bearish; above $1,300, bullish; above $1,362, very bullish.

Gold below $1,285 per ounce-level is a cautious "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:

Commentary: Gold ain't just whistling Dixie; The U.S. dollar has peaked and commodities have bottomed – a bullish case for gold in 2017

Click on the image for a larger size:

Gold in euro & yen terms with good margin above 2013 lows

Note for currency buffs: Value parity in the above chart occurs when the EUR/JPY cross rate is 139.24; something to watch for - presently 132.91 yen per euro.

Chart to Watch

Here's a chart to watch for 2017. Click on the image for a larger size:

Gold-to-S&P 500 Ratio

An important gold ratio 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 July 7, 2017 (0.4989). We must stay above the December low (0.4973)! Currently this AM the AUSP is 0.5128, falling back below the center of the range after a bullish breakout from the July low. Gold gains are now behind the S&P 500 gains for the year by a small margin (AUSP on December 30, 2016 was 0.5144).

Cheers,

Colonel Possum & Mariana

Photos by Mariana Titus if not otherwise noted.

Gold Below $1,300 - Why I'm Not Worried; Inventory Weighs on Copper

March 1, 1954 Hydrogen Bomb Test
Bikini Atoll

Friday, September 22, 2017 AM

Morning Miners,

What a week.

My thoughts yesterday: Mightier than a North Korean ICBM, mightier than a super-storm, the Fed proves once again it can stir up the markets...at least the gold market. Comex gold dips to $1,291.2 per ounce on hawkish comments from Fed Chair Yellen on interest rates and unwinding of its $4.2 trillion balance sheet.

My thoughts this morning: North Korea's threat to explode an H-bomb over the Pacific trumps Yellen. Comex gold heads back to the key $1,300-level, trading presently at $1,298.8 per ounce.

A quick look in the rear view mirror as summer turns to fall:

Intraday highs on the Comex futures exchange (all December contracts):

Gold $1,362.4 per ounce September 8, 2017

Silver $18.290 per ounce September 8, 2017

Copper $3.1785 per pound ($7,007 per tonne) September 5, 2017 

I think gold can regain its September high before fall turns to winter, perhaps higher if North Korean tensions increase. An argument for why gold's dramatic pullback this week was an overreaction to Fed is given below in my weekly input to Kitco News.

Here's an interesting fact: even with gold's drop below $1,300 this week, the yellow metal gains this year still exceed those of the record breaking S&P 500 by nearly 1%. Something to think about before you turn bearish on gold.

The new H-bomb threat was heard around the world blunting the U.S. dollar advance and tumbling base metal prices -  especially copper, nickel and lead. Taken together the retreat was 3%.

Copper continues to take a beating on its recent "avalanche" of inventory and renewed fears that China demand is slowing yet again. Comex copper this morning is trading at $2.9415 per pound. This London Metal Warehouse (LME) Chart tells the story:

Zinc and lead also suffer from recent build in inventory.

Allow me to repeat what I said last week, "Comex copper should return above $3 per pound if 'synchronous' global recovery remains intact. China's currency remains very strong, Europe and India are humming, and rebuilding Houston and Florida [and now Puerto Rico] should give an eventual lift to our own GDP. Inventories will adjust with time. We may have to wait until next year to see a second sustained rally in the red stuff." Barring a nuclear explosion in the Pacific, I still believe this to be true.

And, like the chorus of a tiresome song,  "LME Moly Oxide remains on snooze alarm at $7.26 per pound. This is disappointingly short of $8 after climbing to $7.94 for much of May. Since moly oxide is primarily a byproduct of copper mining, the copper glut is not helping this situation." 

General Moly (GMO) shares have pulled back to $0.43 per share from the $0.46-level established after an upgrade to "buy" earlier this month from Zack's Investment Research, Inc. 

Here's how I saw the weekly price action as told to the Kitco News Weekly Gold Survey:

My vote is up. Target gold price $1,310 per ounce. Target Silver price $17.2 per ounce.

Gold below $1,300.

The lustrous metal is on track to take notable weekly losses against a broad array of assets: major currencies euro & yen, domestic stocks, broader commodity index (Bloomberg BCOM) and Dr. Copper. However, I believe much of this is an overreaction to the Federal Reserve's comments this week that kicked off the great unwind of their 4.2 trillion balance sheet and considerably increased the chances for a rate hike in December.

The exchange of threats between the U.S. and North Korea peaking on a threat for the latter to explode a massive H-bomb over the Pacific have brought new shine to gold this morning. This coupled with global banking policies that remain expansionary and the uncertain economic impact that hurricane devastation will have near term on the U.S. economy, mitigate some of the reaction to Fed Chair Yellen's comments.

I believe, a move up to at least the $1,310-level is in the cards for next week, maybe even higher. It is notable that even with recent pullbacks:1) gold is out pacing the record-setting S&P 500 by nearly 1% this year, 2) it's gains against the yen continue a trend higher since the U.S. election and, 3) with inventories crushing copper prices, gold value compared to the red metal is again elevated.

Silver should move above the $17 per ounce-level to $17.2.

Take heart. Gold is still in bull mode for the year! 

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 2017 and has strengthened recently. This morning, the yuan is trading weaker than last week at 6.5895 USD/CNY, 2.4%  above a low (i.e. a stronger level) for the year of 6.4345. Yuan volatility is now in the ballpark of major currency levels (1-month volatility* 0.72%).

Have a great weekend!

* by comparison the euro & yen 1-month volatilites are  0.44% & 1.15% respectively; Comex gold 1-month volatility is 1.37%.

Weekly Summary  for September 22, 2017 AM  (something new!)

(click on table for larger size)

My latest column in Kitco News, Montreal:

The Gundlach Indicator R.I.P. - Gold, Copper & Interest Rates (Kitco News, August 23, 2017)

McEwen Mining (MUX) $2.45 per share

Gold Bar Project on Track, McEwen Rocks; Gold Bounce Next Week? (Eureka Miner, 03/03/2017)

McEwen Mining & Gold Bar Thumbs Up for 2017! (Eureka Miner, 12/30/16) 

General Moly (GMO) $0.461 per share; Moly oxide (LME) $7.26 per pound

General Moly and its Largest Shareholder, AMER, Strengthen Strategic Partnership (Press Release, August 8, 2017)

Mt. Hope Project's Supplemental EIS Published in Federal Register, Moving Project Towards ROD (Press Release, July 20, 2017)

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

What's Up with General Moly (GMO)? EM Talks to CEO Bruce Hansen (Eureka Miner, 1/27/17)

Gold Price Outlook: Second-Half 2017 (Revised)

Gold started the year nicely and should remain in my latest revised range of $1,200 to $1,400 per ounce*. Average gold price for 2017 is now expected to print above $1,300 per ounce with a chance to see $1,400 given an adverse outcome for President Trump's agenda, the initial financial impact of super storms Harvey, Irma and Maria, or geopolitical 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 worrisome that gold in euro terms broke below uptrend support March 9 and then again after French elections (i.e. defeat of Le Pen), and headed lower on the prospects of the ECB taking a more hawkish stance on monetary policy. It  had a nice rally following President Trump's "fire and fury" comments with an established trend higher. It is presently testing that trend line as shown in the chart.

Gold in yen has mostly trended higher since the U.S. election.

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 proves a healthy sign. Gold valuations relative to copper are elevated and recovering from a recent descent lower.

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. A fall below $1,230 is very bearish; above $1,300, bullish; above $1.362, very bullish.

Gold below $1,285 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:

Commentary: Gold ain't just whistling Dixie; The U.S. dollar has peaked and commodities have bottomed – a bullish case for gold in 2017

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 chart to watch for 2017. Click on the image for a larger size:

Gold-to-S&P 500 Ratio

An important gold ratio 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 July 7, 2017 (0.4989). We must stay above the December low (0.4973)! Currently this AM the AUSP is 0.5193, falling back to the center of the range after a bullish breakout from the July low. Gold gains still, however, lead the S&P 500 gains for the year by a small margin.

Cheers,

Colonel Possum & Mariana

Photos by Mariana Titus if not otherwise noted.

Gold Fails to Hold $1,338; Copper Clobbered - What's Up?

Remote Command Post
North Ranch, Eureka, Nevada

Friday, September 15, 2017 AM

Morning Miners,

Nothing lasts forever - the summer gold and copper rally is over. Nuts.

But take heart, we've seen this movie more times than a few of us would like to remember. In the next episode yellow and red metals will hear the bugles of the global cavalry and prices shall rise again. Maybe soon. Maybe later...

Let's first review the summer scorecard. Even though Fall Equinox is still a week away, I don't think we'll beat these stalwart numbers. 

Intraday highs on the Comex futures exchange (all December contracts):

Gold $1,362.4 per ounce September 8, 2017

Silver $18.290 per ounce September 8, 2017

Copper $3.1785 per pound ($7,007 per tonne) September 5, 2017 

Copper has taken a beating with a recent "avalanche" of inventory and renewed fears that China demand is slowing yet again. Metals maven Janet Mirasola of Sucden Futures NY reports that an additional 100,000 tonnes of the red metal were added to warehouses just this week. Comex copper is once again below $3 per pound trading at $2.9505 - more than 7% below its September high.

Gold, for the reasons noted in my Kitco report below, is trading at $1,328.9 per ounce - encouragingly only several percent off its high.

Gold, although weaker this week against domestic stock markets making new all-time highs, has a foundation of global uneasiness about North Korean missiles, terror and U.S policy direction. This should keep prices elevated for the time being. Inflation may become a concern if it causes central banks to become more hawkish (gold does poorly if interest rates rise faster than inflation expectations).

Comex copper should return above $3 per pound if "synchronous" global recovery remains intact. China's currency remains very strong, Europe and India are humming, and rebuilding Houston and Florida should give an eventual lift to our own GDP. Inventories will adjust with time. We may have to wait until next year to see a second sustained rally in the red stuff.

LME Moly Oxide remains on snooze alarm at $7.26 per pound. This is disappointingly short of $8 after climbing to $7.94 for much of May. Since moly oxide is primarily a byproduct of copper mining, the copper glut is not helping this situation. However, General Moly (GMO) shares still remain around $0.46 holding on to the gains from an upgrade to "buy" earlier this month from Zack's Investment Research, Inc. 

Here's how I saw the weekly price action as told to the Kitco News Weekly Gold Survey:

My vote is down. Target gold price $1,320 per ounce. Target Silver price $17.6 per ounce.

Gold is in a slump; inflation is in the air. 

Closing the week with a North Korean missile launch over Japan, poor U.S. industrial production and retail data, and a terrorist attack in London have not restored much shine to the yellow metal. Trading at $1,328.9 per ounce this morning on all this news is a notable fall from Thursday's $1,338.2 high. 

Gold has lost buoyancy from its fellow metals with copper down more than 7% for the week on an "avalanche" of inventory and fears that China is slowing again. There is a suspicion of continued hawkishness among central bankers with the euro zone scoring a healthy 2% wage growth, the U.S. CPI ticking up in August and the Bank of England raising rates. 

This suggests gold has further to fall with a likely drop to the $1,320- level next week. Silver should find comfort at $17.6 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 2017 and continues to strengthen. This morning, the yuan is trading a bit weaker than last week at 6.5426 USD/CNY, 1.7%  above a low (i.e. a stronger level) for the year of 6.4345. Yuan volatility is picking up above major currency levels (1-month volatility* 0.91%).

Have a great weekend!

* by comparison the euro & yen 1-month volatilites are  0.72% & 0.70% respectively; Comex gold 1-month volatility is greater at 3.14%.

Weekly Summary  for September 15, 2017 AM  (something new!)

(click on table for larger size)

My latest column in Kitco News, Montreal:

The Gundlach Indicator R.I.P. - Gold, Copper & Interest Rates (Kitco News, August 23, 2017)

McEwen Mining (MUX) $2.45 per share

Gold Bar Project on Track, McEwen Rocks; Gold Bounce Next Week? (Eureka Miner, 03/03/2017)

McEwen Mining & Gold Bar Thumbs Up for 2017! (Eureka Miner, 12/30/16) 

General Moly (GMO) $0.461 per share; Moly oxide (LME) $7.26 per pound

General Moly and its Largest Shareholder, AMER, Strengthen Strategic Partnership (Press Release, August 8, 2017)

Mt. Hope Project's Supplemental EIS Published in Federal Register, Moving Project Towards ROD (Press Release, July 20, 2017)

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

What's Up with General Moly (GMO)? EM Talks to CEO Bruce Hansen (Eureka Miner, 1/27/17)

Gold Price Outlook: Second-Half 2017

Gold started the year nicely and should remain in my latest revised range of $1,200 to $1,400 per ounce*. Average gold price for 2017 is expected to print above $1,200 per ounce with a chance to see $1,400 given an adverse outcome for the President Trump's agenda, the initial financial impact of super storms Harvey and Irma or geopolitical 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 worrisome that gold in euro terms broke below uptrend support March 9 and then again after French elections (i.e. defeat of Le Pen), and headed lower on the prospects of the ECB taking a more hawkish stance on monetary policy. It  had a nice rally following President Trump's "fire and fury" comments with an established trend higher. Gold in yen has mostly trended higher since the U.S. election. Gold in euro, however, has retreated from its recent peaks.

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 proves a healthy sign. Gold valuations relative to copper are elevated and recovering from a recent descent lower.

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. A fall below $1,230 is very bearish; prices above $1,260, bullish; above $1,300, very bullish.

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:

Commentary: Gold ain't just whistling Dixie; The U.S. dollar has peaked and commodities have bottomed – a bullish case for gold in 2017

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 chart to watch for 2017. Click on the image for a larger size:

Gold-to-S&P 500 Ratio

An important gold ratio 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 July 7, 2017 (0.4989). We must stay above the December low (0.4973)! Currently this AM the AUSP is 0.5329, maintaining a bullish breakout from the July low but now stalling just below the top of its range bound meander for 2017.

Cheers,

Colonel Possum & Mariana

Photos by Mariana Titus if not otherwise noted.

Gold $1,362 on Irma, North Korea & Plunging U.S. Dollar; Copper Stalls

Hurricane Irma
International Space Station, NASA photo

Friday, September 08, 2017 AM

Morning Miners,

Gold and silver continue on a roll this week posting new multi-month highs this morning. Copper retreats from its Tuesday peak as the red metal rally stalls. 

Here's the intraday high scorecard on the Comex futures exchange (all December contracts):

Gold $1,362.4 per ounce this AM - since August 2016

Silver $18.29 per ounce this AM - since April 2017

Copper $3.1785 per pound Tuesday Sept. 5 - since the fall of 2014

With Hurricane Irma poised to strike Florida this weekend, fears grow that Irma and Harvey will cause headwinds for the economy. This makes a Federal reserve rate hike in December unlikely, a boost for gold. Although the "synchronous global recovery" is still intact, investor enthusiasm for copper stalled after Tuesday's high.

LME Moly Oxide remains on snooze alarm at $7.26 per pound. This is disappointingly short of $8 after climbing to $7.94 for much of May. However, General Moly (GMO) shares remain at $0.46 this morning holding on to the gains from an upgrade two weeks ago to "buy" from Zack's Investment Reasearch, Inc. 

Here's how I saw the weekly price action as told to the Kitco News Weekly Gold Survey:

My vote is up. Target gold price $1,360 per ounce. Target Silver price $18.2 per ounce.

The drivers for gold this week are dramatic U.S. dollar weakness, uncertainty surrounding the impact of multiple super storms on the U.S economy and residual global uneasiness about the North Korean missile threat. Other factors favorable to the yellow metal are seasonality and strength relative to falling U.S. equities.

With all this momentum there is some deceleration as gold retreats from highs set earlier this week in terms of euro and Japanese yen. The reversal in rising copper prices also removes some buoyancy from the metals market. 

All in all, gold should have another run at the $1,360-level next week; silver should find comfort at $18.2 per ounce.

Although much is being made of the euro bounce this week from Draghi comments about possible QE tapering this fall, dollar weakness has been with us for sometime. The constancy and low volatility of the EURJPY cross rate is a clue that there is a common force moving major currencies for the last several months. Gold has thus far been the benefactor.

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 2017 and continues to strengthen. This morning, the yuan is trading much stronger than even last week at 6.4774 USD/CNY  scoring an earlier new low (i.e. a stronger level) for the year at 6.4345. This is a sea change for the yuan with volatility picking up above major currency levels (1-month volatility* 1.04%).

Have a great weekend!

* by comparison the euro & yen 1-month volatilites are  0.86% & 0.63% respectively; Comex gold 1-month volatility is greater at 1.81%.

Weekly Summary  for September 08, 2017 AM  (something new!)

(click on table for larger size)

My latest column in Kitco News, Montreal:

The Gundlach Indicator R.I.P. - Gold, Copper & Interest Rates (Kitco News, August 23, 2017)

My commentary in the Summer 2017 Mining Quarterly:

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

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

McEwen Mining (MUX) $2.79 per share

Gold Bar Project on Track, McEwen Rocks; Gold Bounce Next Week? (Eureka Miner, 03/03/2017)

McEwen Mining & Gold Bar Thumbs Up for 2017! (Eureka Miner, 12/30/16) 

General Moly (GMO) $0.4599 per share; Moly oxide (LME) $7.26 per pound

General Moly and its Largest Shareholder, AMER, Strengthen Strategic Partnership (Press Release, August 8, 2017)

Mt. Hope Project's Supplemental EIS Published in Federal Register, Moving Project Towards ROD (Press Release, July 20, 2017)

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

What's Up with General Moly (GMO)? EM Talks to CEO Bruce Hansen (Eureka Miner, 1/27/17)

Gold Price Outlook: Second-Half 2017

Gold started the year nicely and should remain in my latest revised range of $1,200 to $1,400 per ounce*. Average gold price for 2017 is expected to print above $1,200 per ounce with a chance to see $1,400 given an adverse outcome for the President Trump's agenda, the financial impact of super storms Harvey and Irma or geopolitical 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 worrisome that gold in euro terms broke below uptrend support March 9 and then again after French elections (i.e. defeat of Le Pen), and headed lower on the prospects of the ECB taking a more hawkish stance on monetary policy. It  had a nice rally following President Trump's "fire and fury" comments with an established trend higher. Gold in yen has mostly trended higher since the U.S. election. Gold in euro and yen are below their peaks set earlier in the week.

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 proves a healthy sign. Gold valuations relative to copper are elevated and recovering from a recent descent lower.

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. A fall below $1,230 is very bearish; prices above $1,260, bullish; above $1,300, very bullish.

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:

Commentary: Gold ain't just whistling Dixie; The U.S. dollar has peaked and commodities have bottomed – a bullish case for gold in 2017

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 chart to watch for 2017. Click on the image for a larger size:

Gold-to-S&P 500 Ratio

An important gold ratio 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 July 7, 2017 (0.4989). We must stay above the December low (0.4973)! Currently this AM the AUSP is 0.54817, maintaining a bullish breakout from the July low and near the top of its range bound meander for 2017.

Cheers,

Colonel Possum & Mariana

Photos by Mariana Titus if not otherwise noted.