Gold Bounce to $1,260; Red Metal Revival at $2.65; Moly Oxide Drops to $7.26 - Ouch!

Summer 2017 Mining Quarterly - It Rocks!

Friday, June 23, 2017 AM

Morning Miners,

What a dipsy-doodle this week for commodity prices. After some scary lows Wednesday, gold and copper look to finish Friday fit as a fiddle. If you want some rest form this drama check out the latest Mining Quarterly featured at the Annual Elko Mining Expo earlier this month - it rocks! (see below).

Troubling for General Moly (GMO) is the LME drop in moly oxide from $7.94 to $7.26 per pound. They need to have sustained prices above $8 per pound to be eligible for a new round of AMER funding. Ouch - going the wrong way!

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 $1,250 per ounce. Target Silver price $16.6 per ounce.

After an early morning dash to the $1,260-level, gold is now trading at $1,258.4 per ounce to eek out a small weekly gain. This is welcome relief following the dramatic pullback Wednesday when many commodities followed oil lower to make multi-week or multi-month lows. Although Nymex crude is trying to stabilize around the $43-level it plumbed a 10-month low Wednesday losing 4.5% of its value for the week. In stark contrast, copper bounced to $2.6515 per pound in trade earlier today, now up over 2% for the week*.

This commodity roller coaster is symptomatic of global oversupply of key commodities and uncertainty about real demand going forward. The good new is that the yellow metal has mostly gained value against commodities (up more than 2% against the broader Bloomberg Commodity Index) except for the red metal revival to early-June prices. Gold also rose in terms of major currencies euro and Japanese yen.

Although dramatic, this week's price action reveals no major fundamental changes to the global picture and I would expect gold to return to $1,250 next week. It is critically important to stay above $1,230 per ounce. The yellow metal needs to make $1,265-$1,270 next week to break the bearish decline that started earlier this month. However, ongoing political and geopolitical uncertainty should reinstate strong support at the $1,250-level.

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 had a surprising stretch of strengthening earlier this month. Volatility has also picked up from recent calm.  This morning, the yuan is trading slightly weaker than last week at 6.8343 USD/CNY (1-month volatility** 0.33%).

Have a great weekend!

* Wednesday lows were: Nymex crude $42.05; Comex gold $1,241.7; Comex silver $16.315; Comex copper $$2.539

This month's intraday Comex gold high was $1,298.8 per ounce; the May 9th low is $1,217.8

** by comparison the euro & yen 1-month volatilites are  0.42% & 0.68% respectively.

Weekly Summary  for June 23, 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)

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

My latest column in Kitco News, Montreal:

The Gundlach Conundrum: $1,000 Gold by Year's End? (Kitco News, June 21,2017)

McEwen Mining (MUX) $2.70 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) $0.34 per share; Moly oxide (LME) $7.94 per pound

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)

Mining Employment Steady to Up from Here!

Summer 2017 Edition Mining Quarterly

Marianne Kobak McKown has done an excellent job again bringing a new Mining Quaterly in time for summer. It has a new size format with glossy pages that really make images pop! There are great stories and updates on Goldstrike/Cortez, Florida Canyon, RheoMinerals, Newmont and McEwen Mining's Gold Bar Project north of Eureka. 

Veteran Adella Harding has several columns on the rise in Nevada gold production and mining claims as well as new exploration. My column on commodity prices also discusses good news on mining employment nationally and updates from Barrick and Newmont locally:

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

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

Hats off to Marianne, Adella and crew!

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).

There is a sobering possibility of a serious gold correction later this year if you believe some of the observations and interest rate projections of bond guru Jeffrey Gundlach of DoubleLine Capital. Here's my analysis on why this may be the case:

The Gundlach Conundrum: $1,000 Gold by Year's End? (Kitco News, June 21,2017)

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 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 were stabilizing near historically less extreme levels which proved a healthy sign. 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 although that is being tested lately. There is solid support at the $1,250-level; a fall below $1,230 is very bearish.

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 March 15, 2017. We must stay above the December low (0.4973)! Currently this AM the AUSP is 0.5174, remaining in the middle of a range bound meander for 2017.

Cheers,

Colonel Possum & Mariana

Photos by Mariana Titus if not otherwise noted