Gold Visits $1,265; Weak Dollar Boosts Metals

Exploring the Ordovician

View from Lone Mountain, Eureka, Nevada

Friday, May 19, 2017 AM

Morning Miners,

Gold ends the week off yesterday's high of $1,265 per ounce trading at $1,254.7. The yellow metal may see some downward pressure next week. Comex copper is getting a nice bounce from Thursday's sell-off; presently at $2.5655 per pound. Moly oxide remains at $7.94 per pound after its big jump last week.

My input to the Kitco News Weekly Gold Report:

My vote is down. Target gold price $1,240 per ounce. Target Silver price $16.6 per ounce.

One has to be impressed by the rally in commodities this morning and their relation to gold.

After a week of political turmoil in the White House that brought Comex gold to $1,265 per ounce, there is a sense that the appointment of a Special Counsel for the Russia investigation and the President's trip abroad will bring market [near-term] stability and diminish enthusiasm for the safe haven trade.

Commodities are now responding to positive economic news for the U.S. and Europe and a beaten U.S. dollar returned to pre-election levels*. 

[Metals are recovering well too. Comex copper is up 3.2% this morning from yesterday's low trading at $2.5655 per pound or $5,656 per tonne. Staying above the $5,500-level is key]

Even though broader Bloomberg Commodity Index is at late-April levels today, gold maintains gains for the week compared to rising copper, recovering U.S. stock markets and the Japanese yen. Gold has lost some ground to Nymex oil, now above $50 per barrel, and a strengthening euro [see above chart]. Given this backdrop, it is likely that the yellow metal will return to the $1,240 per ounce level next week.

* On U.S. election day, the U.S. Dollar Index (DXY) had a low of 97.55 and then it peaked above 103 in early January. This morning's DXY is a lower still 97.24.

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 is steady trading at 6.8870 USD/CNY (1-month volatility** is 0.10%).

Have a great weekend!

** by comparison the euro & yen 1-month volatilites are  1.00% & 1.18% respectively.

Weekly Summary updated for May 19, 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) $2.895 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) $0.2895 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)

Fossils from 470 million years ago...or so

Lone Mountain, Eureka, Nevada

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, 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..

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. 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.

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 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 0.5283, a welcome uptick on recent stock market weakness.

Cheers,

Colonel Possum & Mariana

Photos by Mariana Titus if not otherwise noted