Gold Breaks $1,300; Cu Keeps Pace with Au Rally - What Next?

Rhyolite Faces in Forgotten Places
Eureka, Nevada

Friday, August 18, 2017 AM

Morning Miners,

Yet another strong week for gold. It broke the elusive $1,300-level this morning on a new set of concerns now that North Korea tensions have receded. Terror in Europe, disappointing corporate earning and post-Charlottesville fallout underpin this week's rally.

December Comex gold is presently trading at $1,304.6 per ounce after hitting $1,306.9 earlier in the day.

Although other commodities have been left in the dust this week, the red metal kept pace with the yellow leader on its way to challenge the key-$3 per pound-level. September Comex copper is now trading at $2.9370 per pound. Thursday copper came close to $3 by scoring an intraday $2.9825. Copper has been in an uptrend of higher-lows since early-May - slow but increasingly bullish.

"Synchronous global recovery" continues to push hopes for improving raw material demand buffeted by geopolitical tensions, terror and turmoil in Washington. 

Alas, LME Moly Oxide misses all the excitement still languishing at $7.26 per pound. This is disappointingly short of $8 after climbing to $7.94 for much of May. 

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.

Another lustrous week for gold as the yellow metal again posts broad gains in value compared to currencies, commodities and equities. Comex gold broke the key-$1,300 level to touch $1,306.9 per ounce this morning - prices not seen since last April. The drivers are the tragic terrorist attack in Barcelona, weaker-than-expected corporate earnings and controversy swirling around President Trump post-Charlottesville.

I believe momentum will carry into next week with Comex gold likely to breach $1,310 per ounce. Silver will shine at $17.2 per ounce.

Investors also poured into the Japanese yen for a safe haven play but gold gained 0.5% on the yen for the week. Gold rose above 1,100 €/oz, another key-level and 1.6% gain on the euro. It is bullish for gold when it performs this well against major currencies.

Most importantly, Gold is building its edge on falling U.S stocks. The S&P 500 is nearing its 100-day average after being above that mark since the U.S. election. Gold gained 1.5% on the S&P 500 with the gold-to-S&P 500 ratio sustaining an upward trend since early July. This is a very bullish performance against stocks that were recently posting all-time highs [see Chart to Watch, below].

Comex copper advanced with gold this week towards $3 per pound, nearly neck-and-neck. The yellow metal gained of 2% against the broader Bloomberg Commodity Index (BCOM).

For the moment, North Korea tensions have lowered but have the potential to rise again. The upcoming U.S. debt debate could also be another bullish driver for gold. 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 only slightly weaker than last week at 6.6665 USD/CNY (1-month volatility* 0.47%).

Have a great weekend!

* by comparison the euro & yen 1-month volatilites are  1.46% & 1.30%% respectively; Comex gold 1-month volatility is an elevated 2.12%.

Weekly Summary  for August 18, 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) $2.335 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) $0.3913 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 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 rally 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; 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 a strong 0.5378, sustaining a bullish breakout above the July low and now above the middle of its range bound meander for 2017.

Cheers,

Colonel Possum & Mariana

Photos by Mariana Titus if not otherwise noted.