Gold Bump on U.S. Retail Sales; Moly Oxide Surges Higher 15%

Headframe, Lone Mountain

Eureka, Nevada

Friday, May 12, 2017 AM

Morning Miners,

Gold ends the week higher but may see some downward pressure next week. This morning's Comex price is $1,230.9 per ounce; copper $2.5135 per pound. Hey, check out the moly oxide jump to $7.94 per pound (see below).

My input to the Kitco News Weekly Gold Report:

My vote is down. Target gold price $1,220 per ounce. Target Silver price $16.3 per ounce.

Although gold got a bump this morning on weaker-than-expected retail sales* in the U.S., next week is likely to bring downward pressure on gold returning it to the $1,220 per ounce level.

Some of the drivers that have brought the yellow metal higher are moderating: political uncertainty in Europe has eased with the defeat of Le Pen in France, commodity markets have stabilized after last week's selloff and the S&P 500 Volatility Index (VIX) has recently dipped to single-digit lows.

Although Chinese equity markets have retreated on leverage tightening, the yuan has become the yawn with exceptionally low volatility. The latter suggests stability coupled with a better-than expected GDP for Q1 (6.9% vs. 6.5% target) - an environment not supportive of the safe haven trade there.**

For the week, gold outpaced the euro, yen and copper but lost ground to dramatically rebounding oil prices [see Weekly Summary Chart].

* Retail sales 0.4% reported versus 0.6% expected; core sales 0.3%,expected 0.5%

**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. Recent low volatility suggests the yuan remains a currency yawn.  This morning, the yuan has strengthened slightly trading at 6.8775 USD/CNY (1-month volatility* is 0.11%).

Have a great weekend!

* by comparison the euro & yen 1-month volatilites are  0,99% & 1.67% respectively.

Weekly Summary updated for May 12, 2017 AM  (something new!)

(click on table for larger size)

My latest column in Kitco News, Montreal:

Validating Gundlach's 10-yr Treasury relation to the Copper:Gold Ratio (Kitco News, April 18,2017)

My commentary in the the Spring 2017 Mining Quarterly:

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

Online Edition (pages 44-46): Spring 2017 Mining Quarterly

McEwen Mining (MUX) $2.70 per share (AM)

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) $0.32 per share (AM); Moly oxide (LME) $7.94 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.

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

Down Below, Lone Mountain

Eureka, Nevada

Moly Oxide Surges Higher 15%

Moly Oxide prices finally got some giddy-up go after being at $6.92 per pound since last fall. For the week, molybdenum is up 15% at $7.94 per pound - need to get above $10 per pound but this move is encouraging.

General Moly (GMO) $0.32 per share (AM)

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 evolving U.S. trade policies 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).

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 concerns about the timing and efficacy of the new administration's policies have restored 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:

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 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)! Currently this AM the AUSP is 0.5150 a very mild uptick of higher lows for 2017.

Cheers,

Colonel Possum & Mariana

Photos by Mariana Titus if not otherwise noted