Gold $1,301 But Volatile; Copper, Copper...$3.04! GMO Upgrade

Hurricane Harvey
A natural terror...

Friday, August 25, 2017 AM

Morning Miners,

Our hearts and prayers to those in the path of Hurricane Harvey - a brewing monster. My wife, Mariana, should be safe but heavy rain, high winds and flooding will be Harvey's calling card in Southwest Louisiana. This pales in comparison to what awaits the folks in Texas.

There has been a storm surge in base metals with the red metal weighing in at $3.04 per pound this morning. Metals Maven Janet Mirasola of Sucden Futures NY identifies $6,647 per tonne ($3.06 per pound) as the next key-level. Optimistic bets on China and the chimera of "global synchronous recovery" boost prices higher - let's hope this proves true. Copper-bearing minerals are important for Northern Nevada - you bet!

And copper continues to gain on gold breaking a 6+year trend line of comparative value. This is potentially bearish for gold but there is enough scary stuff coming up politically in September that I remain bullish on both metals. Let's hope we get through the U.S. debt-ceiling brouhaha without too much damage to markets.

LME Moly Oxide is still on snooze alarm at $7.26 per pound. This is disappointingly short of $8 after climbing to $7.94 for much of May. Talk about a dead market! More encouragingly, General Moly (GMO) shares bumped up this week to $0.46 - maybe there is something in the ether for molybdenum recovery after all. Check this out:

Zacks Investment Research, Inc.  — 7:15 AM ET 08/25/2017 On August 25, 2017 Zacks Investment Research, Inc. upgraded GENERAL MOLY INC (GMO) from HOLD to BUY.

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 $17.2 per ounce.

A burst of volatility in gold trading before stocks opened this Friday with Comex prices bouncing up to $1,301, down to $1,281 and then stabilizing around the $1,290-level - curious. It may be explained by anticipation of speeches today at the Jackson Hole Symposium of central bankers with the Janet Yellen speech now underway (10:18 a.m. EDT).

More importantly, in my view, is the base metal rally that continued into this week with all eyes on copper. With Comex copper at $3.04 the closely watched gold-to-copper ratio plunged to 424 pounds per ounce breaking a long-term trend of higher lows established since February 2011. This suggests that the red metal may continue to gain value on the yellow metal - a potentially bearish trend for gold.

However, with the upcoming debt ceiling quagmire and simmering geopolitical tensions gold should remain in bull mode with a shot at $1,310 per ounce next week. Silver should regain $17.2 territory boosted in part by the metals rally.

The Lustrous One had a lackluster week against major currencies struggling to stay abreast of the yen and losing shine to the euro. Gold fell below 1,100 €/oz, currently trading at 1,085 €/oz. It is bearish for gold when it performs poorly against major currencies.

Gold is also losing its edge on U.S stocks. On a weekly basis the S&P 500 gained 1.4% in value compared to the yellow metal.

Gold also lost 0.4% against the broader Bloomberg Commodity Index (BCOM).

Have a relaxing weekend!

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 6.6544 USD/CNY (1-month volatility* 0.42%).

Have a great weekend!

* by comparison the euro & yen 1-month volatilites are  1.45% & 1.42% respectively; Comex gold 1-month volatility is an elevated 2.22%.

Weekly Summary  for August 25, 2017 AM  (something new!)

(click on table for larger size)

My latest column in Kitco News, Montreal:

The Gundlach Indicator R.I.P. - Gold, Copper & Interest Rates (Kitco News, August 23, 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) $2.35 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) $0.46 per share; Moly oxide (LME) $7.26 per pound

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

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, President Trump's agenda 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 was 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  had a nice rally following President Trump's "fire and fury" comments but has recently stalled. 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 falling.

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; above $1,300, very 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 0.5253, stalling from a bullish breakout above the July low but still near the middle of its range bound meander for 2017.

Cheers,

Colonel Possum & Mariana

Photos by Mariana Titus if not otherwise noted.