Gold $1,298 on North Korea & Low Inflation Data; Good News for General Moly (GMO)

180,000 tons of mining history
Eureka Consolidated Slag, Eureka, Nevada

Friday, August 11, 2017 AM

Morning Miners,

It's hard to imagine a better week for gold in recent months. It came close to the $1,300-level on North Korean tensions and this mornings' weaker-than-expected inflation data*. The latter may seem confusing since the yellow metal is often thought to be an inflation hedge. The present market logic is that lowered inflation expectations may delay the U.S. Federal Reserve's next interest rate hike - a pause considered bullish for gold.

Comex gold is presently trading at $1,292.2 per ounce after hitting $1,298.1 earlier in the day.

Gold was off to the races after President's "fire and fury" remarks on Tuesday, August 8th. Interestingly, the base metal complex continued to rally that same day. Copper posted prices not seen since late-2014. Other metals joined the surge with zinc scoring a new high for the year and aluminum scaling a two-and-a-half-year peak. The ratio of copper-to-gold prices rose to mid-2015 levels shortly after the President’s remarks. The yellow metal’s move was sound but outpaced by its red metal companion that day. Very curious.

Comex copper is trading down a bit from its highs this week at $2.9080 per pound.

"Synchronous global recovery" continues to push hopes for improving raw material demand.  

Unfortunately, LME Moly Oxide missed the metal rally again still languishing at $7.26 per pound disappointingly short of $8 after climbing to $7.94 for much of May.

However, General Moly (GMO) negotiated a reprieve with their AMER partner from the $8 per pound constraint for securing Tranche 2 funding for Mt. Hope. The new scoop:

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

Bruce D. Hansen, Chief Executive Officer, said,

We appreciate our mutually beneficial partnership with AMER in building long-term value for General Moly and all of our shareholders. The renewed commitment AMER has made to General Moly and the Mt. Hope Project reinforces General Moly's competitive position and leverage in a rising molybdenum price environment. AMER's agreement to purchase additional General Moly common stock through the Amended Investment Agreement by accelerating the Tranche 2 and Tranche 3 purchases provides additional funding to the Company. The purchases, together with our current cash, are projected to fund our current business activities and working capital for more than two years at the current cash burn of $1.5 million per quarter for corporate and the Liberty Project expenses.

Phew, a lot happened Tuesday, August 8th!

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 $17.1 per ounce.

A lustrous week for gold as the yellow metal posts broad gains in value compared to currencies, commodities and equities. Up more than 2% for the week, Comex gold nearly touched $1,300 this morning spurred on by weaker-than-expected inflation data and a continued ratcheting of tensions over North Korea.

Investors also poured into the Japanese yen for a safe haven play but gold gained nearly 1.0% on the yen. Recently struggling in euro terms, gold bounced to 1,095 €/oz. It is very bullish for gold when it performs this well against major currencies.

Almost puzzling, base metals had a good week too with strong gains for copper, zinc and aluminum. But even as copper advances towards $3 per pound, gold has outpaced the red metal and posts a respectable weekly gain of 2% against the broader Bloomberg Commodity Index (BCOM).

I believe gold's good fortunes will extend into next week closing above $1,300 per ounce. Silver will also gain some shine at $17.1 per ounce. Let's hope this North Korea situation sorts out.

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 continues to strengthen. Volatility is lower than other major currencies.  This morning, the yuan is trading stronger than last week at 6.6605 USD/CNY (1-month volatility** 0.50%).

Have a great weekend!

*   CPI in July was up 0.1% versus 0.2% expected. Annualized inflation is now 1.7%.

** by comparison the euro & yen 1-month volatilites are  1.17% & 0.97% respectively.

Weekly Summary  for August 11, 2017 AM  (something new!)

(click on table for larger size)

My latest column in Kitco News, Montreal:

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

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) $2.57 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) $0.45 per share; Moly oxide (LME) $7.26 per pound

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)

Summer 2017 Mining Quarterly - It Rocks!

Summer 2017 Mining Quarterly

[SPECIAL NOTE: Marianne Kobak McKown will no longer be with the Elko Daily Free Press. She was hired as the executive director of the Committee Against Domestic Violence starting July 1. She will be missed by this report and the mining community, the best of luck on her new journey!

Suzanne Featherston is the new editor of the Mining Quarterly - the best to Suzanne!]

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 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 an outside chance to see $1,400 given an adverse outcome for the upcoming debt limit debate 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 is 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 has had a nice pop following President Trump's "fire and fury" comments. 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 but stable..

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.

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 0.5289, a bullish breakout above the July low and now at the middle of its range bound meander for 2017.

Cheers,

Colonel Possum & Mariana

Photos by Mariana Titus if not otherwise noted.