The Eureka Miner: May 2018

Friday, May 25, 2018

Gold $1,307, Safe Haven over Strong Dollar; McEwen $50M Notes for Gold Bar

Springtime in Gold Country
Eureka, Nevada

Friday, May 25, 2018 AM

Latest Mining Quarterly! (Checkout story on McEwen Mining's Gold Bar Project)

McEwen Mining Proposed Issue of Notes (Press release, 5/25/2018)

General Moly Reports First Quarter Results (Press Release May 08,2018)

Next Week: Target gold price $1,310 per ounce. Target Silver price $16.7 per ounce.

Morning Miners!

Last week was bad for gold, this week was good.

A frightening fall to $1,281.2 on the Comex Exchange didn't start things well Monday but then bullish forces came to the rescue. The Federal Reserve decided not to raise interest rates until probably June and is feeling more comfortable that inflation is in check (see chart below). "Risk-off" sentiment then stepped into the marketplace with the cancellation of the U.S./North Korea summit, confusion over U.S. trade tactics and political problems in Europe. As a safe haven play, only the Japanese yen outpaced gold - and only by a nudge.

For the week, gold stayed ahead of key commodities oil and copper, the euro and S&P500 reclaiming $1,300 territory with a Comex high this morning of $1,307.2 per ounce. [see my full input to the Kitco News Weekly Gold Survey below and the Weekly Summary Chart].

Even though gold has been in a 6-week downtrend, the ole Colonel remains bullish. Hey, gold did this well even with the U.S. Dollar Index (DXY)* scoring a 6-month high this morning!

Also,checkout the latest McEwen Mining press release below - mo' money, mo'money for the Gold Bar Project!

Have a fun Memorial Day Weekend! See you at the Car Show Drag Races.

* U.S. Dollar Index (.DXY) high 94.18

McEwen $50M Notes for Gold Bar Construction

TORONTO, May 25, 2018 (GLOBE NEWSWIRE) -- McEwen Mining Inc. (NYSE:MUX) (TSX:MUX) (“McEwen Mining” or the “Company”) today announced that it intends to issue up to US$50 million in Senior Secured Notes (“Notes”) to complete construction the Gold Bar Mine in Nevada. Negotiations are underway with an independent third-party lender, whereby they would purchase 50% of the Notes issued and Rob McEwen would purchase the remaining 50%. The Notes contemplated will have a term of 3 years and bear interest at a rate of 9.75% per annum. No fees, other than appropriate legal expenses, will be paid in connection with the Notes; and no warrants, shares, royalties, or streams will be granted. The proposed transaction remains subject to final agreement of terms and satisfactory completion of due diligence.

Full press release:

McEwen Mining Proposed Issue of Notes (Press release, 5/25/2018)

Inflation Watch

Inflation expectations made a new 2018 high April 23rd above a new trend line of higher lows (dark blue dotted line, click on chart for larger size). However, it appears inflation expectations are leveling off for now.

10-year Inflation Expectations

Note: In the above chart inflation expectations peaked at 2.14% February 2 but were surpassed April 23 at 2.18%. Wednesday was lower returning to 2.14% (note old trend line, faded dashed blue). Latest number is right on the new higher-low trend line (dashed blue).

Interest rates and inflation numbers going forward are greatly influenced by central bank policy worldwide. My latest Kitco commentary discusses what some of the moving parts are as well as useful indicators - watch the U.S. Dollar Index (DXY) and euro/yen cross rate:

The Gartman Gold Trade Revisited (Kitco News, 2/14/2018)

Several of the charts in this column are updated below.

Have a fun weekend!

Old Glory
Eureka, Nevada

Scorecard

Here's a scorecard on where we stand with some of our favorite metals.

Intraday highs on the Comex futures exchange:

Gold $1,370.5 per ounce January 25, 2018 (April 2018 contract)

Silver $18.160 per ounce September 8, 2017 (Continuous chart))

Copper $3.3335 per pound ($7,349 per tonne) December 28, 2017 (May 2018 contract)

Comex copper is presently trading at $3.0895 per pound ($6,811 per tonne), still lack luster at 7.3% below December's high. Improving global growth has kept the red metal above the key $3 per pound. Trade war fears dipped the red metal below this mark but copper is now back above $3. Recent weakness must be watched!

Copper futures remain down year-to-date on the Shanghai Futures Exchange (SHFE).

China growth resulted in a GDP 6.9% for 2017 compared to 6.7% for 2016. The GDP projection for 2018 is 6.5%, down but still fairly robust. Encouragingly, the Q1 result is a better-than-expected 6.8% although industrial production fell to 6.0%. Watch this one too, pardner.

Recent U.S. import tariff threats on steel, aluminum and other Chinese exports cloud the outlook for metals. Sanctions on Russian aluminum producer Rusal have spiked aluminum prices to 7-year highs (whose output represents 6% of global supply) but have fallen since with softening of U.S. position.

First round U.S./China trade talks have concluded with no major issues resolved new talks are scheduled to be held in Washington.

Total copper stored in LME and Nymex warehouses is slightly higher than last week at 0.543 million tonnes.

LME inventories are stabilizing:

It is instructive to keep our eyes on the Nymex inventories which are behind the LME and falling (LME 298,000 versus Nymex 245,440 tonnes):

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 $1,310 per ounce. Target silver price $16.7 per ounce.

Gold price has experienced lift from rising geopolitical tensions and drag from a U.S. Dollar Index (DXY) that hit a new 6-month high this morning*. For the week, there has been more lift than drag with Comex gold trading just a few dollars under its morning high of $1,307.2 per ounce. Gold has also regained ground lost last week to a broad set of assets.

The collapse of the U.S./North Korean summit and confusion about U.S. trade tactics has put new wind under the lustrous metal that had been basing below the $1,300-level since mid-May. However, political concerns about Italy and its soaring bond rates have plummeted the euro driving the value of the greenback higher. Gold investors in Europe have benefited most with the yellow metal breaking the key 1,120€ per ounce-level.

I remain bullish in a bearish 6-week downtrend and believe gold will secure $1,310 per ounce or higher next week with silver following to $16.7 per ounce. The Comex May 21st low of $1,281.2 will remain the near-term bottom.

By the numbers, gold is up 1.0% for the week outpacing the the S&P 500 (+0.8%), key commodities copper and oil (+0.2% & +4.8%) and the euro (+2.1%). As an alternate safe haven, the Japanese yen is a nose ahead of gold (-0.4%). [see Weekly Summary and charts below]

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. There has been talk from China that currency devaluation may be used as a tool in a U.S./China trade war, just talk for now. Something to watch: the yuan has been weakening since mid-April.

The yuan stabilized below 7 USD/CNY for 2017 and had been trending steadily stronger in the new year. The yuan is weaker than last week at 6.3894 USD/CNY, and putting more daylight above the March 26th low (i.e. stronger level) of 6.2342. A low 1-month yuan volatility of 0.29% is lower than major currency levels - something else to watch (1-month volatilities of euro, yen and gold*).

* the euro & yen 1-month volatilites are 1.09% & 0.62% respectively; Comex gold 1-month volatility is 0.95%

Weekly Summary for May 25, 2018 AM

(click on table for larger size)

Yearly Summary for 2017

(click on table for larger size)

Comex gold gained nearly 14% for the year but was outpaced by Comex copper that enjoyed a 32% uptick in price. Comex silver lagged both for a respectable 7.2% gain. Overall, gold gained 12% on the broader Bloomberg Commodity Index (BCOMTR:IND) which includes everything from crude oil to things that oink. In terms of major currencies, gold in terms of yen advanced almost 10% but slipped 0.4% relative to the strengthening euro.

Although gold slipped 5% in value relative to the S&P 500 it was not a bad year at all for the yellow metal!

Gold Price Revised Outlook for 2018:

My gold range for 2017 was $1,250 to $1,400. We closed 2017 comfortably above $1,300 at $1,309.3 (February contract).

Let's assume 2018, like 2017, is a mix of buoyant market expectations and rising rates with occasional geopolitical, political and economic shocks. Gold will feel the headwinds of the former and enjoy price spikes in times of market stress. My revised forecast is a floor price of $1,285 with highs challenging but not exceeding $1,380 per ounce [5/21/2018 Comex gold tested $1,281.2 on an intraday basis]

2018 will prove a less bullish period for gold than last year with higher interest rates in the U.S. Inflation will be another key factor to monitor, it has been on the rise (see chart above in discussion).

The difference between interest rates and inflation expectations drive gold price; if the former leads the latter, there could be stiff headwinds for the lustrous metal. A trade war that results in slower growth and higher inflation could be potentially very bullish for gold.

Here's the beer bet for 2018: Gold will fall below $1,220 before rising above $1,380. We ended 2017 in the middle of that range with prices just above $1,300 - a fair starting point.

Which side of this bet you take depends on whether you have a half-empty or half-full view on interest rate direction and economic prospects, both global and domestic. Now that I've risen the floor to $1,285, it looks like the half-full folks may have something to celebrate in 2018.

Important charts to watch remain the gold-to-S&P500 or AUSP (see "Chart to Watch" below) and gold in terms of major currencies euro and Japanese yen (directly below). An explanation of the charts below is given in my latest Kitco column:

The Gartman Gold Trade Revisited (Kitco News, 2/14/2018)

Note the resumed divergence of the euro-yen spread in the second chart.

Click on the image for a larger size:

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

Note upside trend of higher lows for gold in U.S. dollars for 2018 (dotted blue line).

Gold euro/yen spread widens again in 2018

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 127.17 yen per euro as the gold euro/yen spread increases (above chart).

Chart to Watch

Here's a chart to watch for 2018. 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 (0.4973) trended higher but then bearishly bottomed again in July, 2017 and more recently December, 12, 2017 (0.4661). Currently this AM the AUSP is 0.4797 bearishly below the key 0.5-level but bullishly trending higher. There is now a weak trend of higher-lows from December 2017.

Cheers,

Colonel Possum & Mariana

Photos by Mariana Titus if not otherwise noted.

Friday, May 18, 2018

Gold Tests $1,284 - Something Shiny on the Other Side of the Mountain?

Sun basking on 350 million year old shale
Lone Mountain, Eureka, Nevada

Friday, May 18, 2018 AM

Latest Mining Quarterly! (Checkout story on McEwen Mining's Gold Bar Project)

General Moly Reports First Quarter Results (Press Release May 08,2018)

McEwen Mining Reports Q1 2018 Production Results (Press release, 4/16/2018)

Next Week: Target gold price $1,300 per ounce. Target Silver price $16.6 per ounce.

Morning Miners!

We haven't seen a week this bad for gold in some time - that's what the market bears will tell you.

Real interest rates, the kryptonite for our metallic hero, are hitting 7-year highs. Price collapsed below $1,300 per ounce to plumb $1,284 yesterday on a strong U.S. dollar which made a new high for the year this morning*. Comex gold is presently trading at $1,288.0 trying its hardest to put some daylight above yesterday's low.

Don't despair pardner! The ole Colonel remains in bull pasture. Kitco News included my thoughts in Allen Sykora's Weekly Gold Survey:

Richard Baker, editor of the Eureka Miner Report, sees gold reclaiming $1,300. “Although there has been a terrific acceleration in interest rates and U.S. dollar value lately, that will slow,” Baker said. “Inflation should start to close the gap with interest rates, and rising deficits will eventually erode dollar -- both bullish indications for gold. There is also enough lingering political/geopolitical uncertainty to keep gold afloat above its trend line.”

More analysis for the week is included in my input to the survey below.

If you believe the bears can't see what's on the other side of the mountain, you may want to throw a little glitter in the buckboard at these prices.

If I'm wrong, it's a long way down the mine shaft.

Please do your own research. As this report always remind the reader - markets can turn on you faster than a feral cat!

* U.S. Dollar Index (.DXY) high 93.81, 10-year TIPS auction real yield 0.934%; both on Thursday 5/17/2018

Inflation Watch

10-year Inflation Expectations

Note: In the above chart inflation expectations peaked at 2.14% February 2 but were surpassed April 23 at 2.18%. Wednesday was slightly lower at 2.17% (note old trend line, faded blue).

The Gartman Gold Trade Revisited (Kitco News, 2/14/2018)

Several of the charts in this column are updated below.

Have a fun weekend!

Remembering fallen Peace Officers
Eureka, Nevada

Scorecard

Here's a scorecard on where we stand with some of our favorite metals.

Intraday highs on the Comex futures exchange:

Gold $1,370.5 per ounce January 25, 2018 (April 2018 contract)

Silver $18.160 per ounce September 8, 2017 (Continuous chart))

Copper $3.3335 per pound ($7,349 per tonne) December 28, 2017 (May 2018 contract)

Comex copper is presently trading at $3.0770 per pound ($6,784 per tonne), lack luster at 7.7% below December's high. Improving global growth has kept the red metal above the key $3 per pound. Trade war fears dipped the red metal below this mark but copper is now back above $3. Recent weakness must be watched!

Copper futures remain down year-to-date on the Shanghai Futures Exchange (SHFE).

First round U.S./China trade talks have concluded with no major issues resolved new talks are scheduled to be held in Washington.

Total copper stored in LME and Nymex warehouses is now lower at 0.539 million tonnes.

LME inventories continue to fall:

It is instructive to keep our eyes on the Nymex inventories which are behind the LME (LME 290,825 versus Nymex 248,259 tonnes):

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 $16.6 per ounce.

Yesterday's TIPs auction brought real yields for that security to a 7-year high (0.934%) - a bearish indication for the Shiny One if interest rates continue to outpace inflation. Positive inflation adjusted returns are a serious headwind for gold that pays no interest for holding it.

Gold is also is hanging by a thread with respect to its trend of higher-lows established from Dec. 2016 as it plumbed $1,284 yesterday. As the U.S. Dollar Index (.DXY) makes a new high for the year*, the yellow metal has lost value for the week across a broad set of assets including equities, key commodities and currencies.

BUT the gold bears are not seeing the other side of the mountain. Although there has been a terrific acceleration in interest rates and U.S. dollar value lately, that will slow. Inflation should start to close the gap with interest rates and rising deficits will eventually erode dollar - both bullish indications for gold.

There is also enough lingering political/geopolitical uncertainty to keep gold afloat above its trend line. I remain bullish and think it likely the lustrous metal will regain $1,300 territory next week with silver getting a boost back to the $16.6-level.

By the numbers, gold is down 2.5% for the week falling behind the S&P 500 (-2.1%), key commodities copper and oil (-1.4% & -3.6%) and major currencies euro (-1.0%) and Japanese yen (-1.1%).

Time for the other side of the mountain![see Weekly Summary and charts below]

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. There has been talk from China that currency devaluation may be used as a tool in a U.S./China trade war, just talk for now. Something to watch: the yuan has been weakening since mid-April.

The yuan stabilized below 7 USD/CNY for 2017 and had been trending steadily stronger in the new year. The yuan is weaker than last week at 6.3769 USD/CNY, and putting daylight above the March 26th low (i.e. stronger level) of 6.2342. A low 1-month yuan volatility of 0.37% is lower now than major currency levels - something else to watch (1-month volatilities of euro, yen and gold*).

* the euro & yen 1-month volatilites are 1.29% & 0.65% respectively; Comex gold 1-month volatility is 1.04%.

Weekly Summary for May 18, 2018 AM

(click on table for larger size)

Yearly Summary for 2017

(click on table for larger size)

Although gold slipped 5% in value relative to the S&P 500 it was not a bad year at all for the yellow metal!

Gold Price Revised Outlook for 2018:

My gold range for 2017 was $1,250 to $1,400. We closed 2017 comfortably above $1,300 at $1,309.3 (February contract).

2018 will prove a less bullish period for gold than last year unless interest rates return to 2017 levels and copper prices fall - a less likely scenario given the recent rise of the 10-year Treasury together with U.S. growth and synchronous global growth expectations. Inflation will be another key factor to monitor, it has been on the rise (see chart above in discussion). Geo-political tensions in the Middle-East have also re-surfaced.

Here's the beer bet for 2018: Gold will fall below $1,220 before rising above $1,380. We ended 2017 n the middle of that range with prices just above $1,300 - a fair starting point.

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

Note upside trend of higher lows for gold in U.S. dollars for 2018 (dotted blue line).

Gold euro/yen spread widens again in 2018

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 130.44 yen per euro as the gold euro/yen spread reverses lower (above chart).

Chart to Watch

Here's a chart to watch for 2018. Click on the image for a larger size:

Gold-to-S&P 500 Ratio

Cheers,

Colonel Possum & Mariana

Photos by Mariana Titus if not otherwise noted.

Friday, May 11, 2018

Gold $1,324 Gets Some Giddy-Up on Falling Dollar; Mt. Hope Mineral Treasures

Old Glory, May Weather
Eureka, Nevada

Friday, May 11, 2018 AM

Latest Mining Quarterly! (Checkout story on McEwen Mining's Gold Bar Project)

General Moly Reports First Quarter Results (Press Release May 08,2018)

McEwen Mining Reports Q1 2018 Production Results (Press release, 4/16/2018)

Next Week: Target gold price $1,340 per ounce. Target Silver price $17.1 per ounce.

Morning Miners!

Snow/rain mix and thunder or blue skies and time to water everything - turbulent spring weather in the Great Basin. This is not unlike global markets this week - unsettled forecasts. Of course, gold loves uncertainty and appears to have recovered from two recent dives at the $1,300-level, trading this morning at $1,324.8 per ounce on the Comex exchange. The ole Colonel has headed for the bull pasture, I think we'll see a nice rally in the coming weeks (see my recently revised 2018 forecast below).

For starters, the rising dollar peaked this week posting a 4.5 month high for the U.S. Dollar Index (.DXY) at 93.42. Presently the "Dixie" is a lower 92.48. To give this some perspective, the index has languished around the 90-level for much of this year. A weakening dollar boosts gold, copper and other dollarized commodities.

As for cloudy skies, continue to watch oil for clues especially now that the U.S. has pulled out of the nuclear agreement with Iran. West Texas crude (WTI) is now above $70 per barrel and its global benchmark buddy is nearly $77. Some analysts predict a return to $100 per barrel - I'm not there on that one yet! It is notable that the gold-to-WTI ratio made a new low yesterday of 18.5 barrels per ounce. February 2016 an ounce of gold could buy nearly 50 barrels!

The possibility of trade wars also remains on the horizon. Some early hail is falling from U.S. sanctions on China's tech giant ZTE which sells smartphones and other telecommunications equipment. ZTE claimed last month that it expected its business to be "severely impacted" by U.S. sanctions and its stock halted trading on the Hong Kong exchange April 16. Of course this is tit-for-tat given that company's dubious record of trade violations in dealing with North Korea and Iran.

[UPDATE 5/13/2018: Trump Extends Lifeline to Sanctioned Tech Company ZTE (Wall Street Journal, 5/13/2018)

Sanctions on Russia's aluminum behemoth Rusal are still rippling the metal markets although softened some form the initial imposition. Commodity Maven Janet Mirasola of Sucden Futures, Inc. reported this morning, "Rusal said its long term prospects remain uncertain as the top aluminum producer declined to give forecasts in a quarterly earnings report that predates U.S. sanctions. 'Any forecast or outlook made or previously made should be deemed unreliable and may become irrelevant due to ongoing developments on the market' – leading us to wonder not just for Rusal but in relation to all the tariffs and sanctions – what else could possibly go wrong??"

In fairness, there may be sunnier days ahead given a positive outcome from the upcoming U.S.-North Korea summit now scheduled for June 12 in Singapore. For now, global markets are in a wait-and-see mode. For more analysis please see my input to the Kitco News Weekly Gold Survey (below).

Inflation Watch

10-year Inflation Expectations

Note: In the above chart inflation expectations peaked at 2.14% February 2 but were surpassed April 23 at 2.18%. That was matched again Wednesday at 2.18% (note old trend line, faded blue).

The Gartman Gold Trade Revisited (Kitco News, 2/14/2018)

Several of the charts in this column are updated below.

Have a fun weekend!

Mt. Hope Mineral Treasures

General Moly (GMO) released its first quarter results Tuesday:

General Moly Reports First Quarter Results (Press Release May 08,2018)

There are several positives in this report not the least of which is a marked improvement in the price of moly oxide, now comfortably above $12 per pound. This is 40% above the average price for the last quarter of 2017 ($12.23 per pound versus $8.76).

General Moly's recent survey reminds us of the mineral treasures of nearby Mt. Hope. As well as having one of the world's largest deposits of molybdenum, there are also high grade copper and silver deposits alongside zinc mineralization.

Bruce D. Hansen, Chief Executive Officer, says, “We are continuing our exploration efforts with support of Dr. Mark Osterberg, Principal Consulting Geologist, and his team at Mine Mappers, LLC, in the evaluation of the Cu-Ag Target within a 17-acre zinc mineralized area covering historical underground mining of primarily zinc at the Mt. Hope Project. We continue to be excited about the exploration potential of this skarn area of interest, immediately adjacent to the moly deposit at Mt. Hope and expect to provide an update announcement later this quarter regarding our initial exploration plan. In regards to the moly price, we saw a brief downturn where the price retraced to $11.83/lb in mid-April before increasing to the current price of $12.40/lb, trailing the same general pattern as the oil price, which is now at the $70/barrel mark. As long as there is a sustainable oil industry with robust oil drilling activity and oil and gas infrastructure investment globally, there is strong demand for specialty steels using moly.”

Stay tuned.

Spring Blossoms
Eureka, Nevada

Scorecard

Here's a scorecard on where we stand with some of our favorite metals.

Intraday highs on the Comex futures exchange:

Gold $1,370.5 per ounce January 25, 2018 (April 2018 contract)

Silver $18.160 per ounce September 8, 2017 (Continuous chart))

Copper $3.3335 per pound ($7,349 per tonne) December 28, 2017 (May 2018 contract)

Comex copper is presently trading at $3.1100 per pound ($6,856 per tonne), moving up but 6.7% below December's high. Improving global growth has kept the red metal above the key $3 per pound. Trade war fears dipped the red metal below this mark but copper is now back above $3. Recent weakness must be watched!

Copper futures remain down year-to-date on the Shanghai Futures Exchange (SHFE).

First round U.S./China trade talks have concluded with no major issues resolved.

Total copper stored in LME and Nymex warehouses is now lower at 0.544 million tonnes.

LME inventories continue to fall:

It is instructive to keep our eyes on the Nymex inventories which are behind the LME but moving up (LME 293,025 versus Nymex 251,643 tonnes):

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 $1,340 per ounce. Target silver price $17.1 per ounce.

Comex gold passed the test this week, at least for now. Taking a second run at the $1,300-level*, the yellow metal rebounded nicely from a low Wednesday of $1,304.2 per ounce. With a U.S. dollar falling from a 4.5 month high, gold should move higher in the next several weeks on a turbulent spring mix of political/geopolitical weather.

My target for next week is $1,340 per ounce with silver following gold higher to $17.1 per ounce.

There is plenty uncertainty in the market jet stream with sanctions on China's tech giant and Russia's aluminum producer Rusal keeping trade war fears alive. The fallout of the U.S leaving the Iran nuclear pact continues to drive oil prices, sluggish inflation gives the U.S. Federal Reserve more room to maneuver but impact of adverse trade outcomes may stall economic growth. Finally, a positive outcome of the upcoming U.S./North Korea talks may bring a little sunshine to otherwise cloudy skies.

The lustrous one should prosper as market participants try to decide whether its umbrellas or sunscreen ahead. [see Weekly Summary and charts below]

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. There has been talk from China that currency devaluation may be used as a tool in a U.S./China trade war, just talk for now. Something to watch: the yuan has been weakening since mid-April.

The yuan stabilized below 7 USD/CNY for 2017 and had been trending steadily stronger in the new year. Although the yuan is stronger than last week at 6.3467 USD/CNY, it is still putting daylight above the March 26th low (i.e. even stronger level) of 6.2342. A low 1-month yuan volatility of 0.53% is lower now than major currency levels - something else to watch (1-month volatilities of euro, yen and gold*).

* the euro & yen 1-month volatilites are an elevated 1.48% & 0.86% respectively; Comex gold 1-month volatility is 1.16%.

Weekly Summary for May 11, 2018 AM

(click on table for larger size)

Yearly Summary for 2017

(click on table for larger size)

Although gold slipped 5% in value relative to the S&P 500 it was not a bad year at all for the yellow metal!

Gold Price Revised Outlook for 2018:

My gold range for 2017 was $1,250 to $1,400. We closed 2017 comfortably above $1,300 at $1,309.3 (February contract).

Let's assume 2018, like 2017, is a mix of buoyant market expectations and rising rates with occasional geopolitical, political and economic shocks. Gold will feel the headwinds of the former and enjoy price spikes in times of market stress.My revised forecast is a floor price of $1,290 with highs challenging but not exceeding $1,380 per ounce. Recent data suggests the floor may be rising to the $1,300-level.

Here's the beer bet for 2018: Gold will fall below $1,220 before rising above $1,380. We ended 2017 n the middle of that range with prices just above $1,300 - a fair starting point.

Which side of this bet you take depends on whether you have a half-empty or half-full view on interest rate direction and economic prospects, both global and domestic. Now that I've risen the floor to $1,290, it looks like the half-full folks may have something to celebrate in 2018.

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

Note upside trend of higher lows for gold in U.S. dollars for 2018 (dotted blue line).

Gold euro/yen spread widens again in 2018

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 130.60 yen per euro as the gold euro/yen spread reverses lower (above chart).

Chart to Watch

Here's a chart to watch for 2018. Click on the image for a larger size: