Gold $1,362 on Irma, North Korea & Plunging U.S. Dollar; Copper Stalls

Hurricane Irma
International Space Station, NASA photo

Friday, September 08, 2017 AM

Morning Miners,

Gold and silver continue on a roll this week posting new multi-month highs this morning. Copper retreats from its Tuesday peak as the red metal rally stalls. 

Here's the intraday high scorecard on the Comex futures exchange (all December contracts):

Gold $1,362.4 per ounce this AM - since August 2016

Silver $18.29 per ounce this AM - since April 2017

Copper $3.1785 per pound Tuesday Sept. 5 - since the fall of 2014

With Hurricane Irma poised to strike Florida this weekend, fears grow that Irma and Harvey will cause headwinds for the economy. This makes a Federal reserve rate hike in December unlikely, a boost for gold. Although the "synchronous global recovery" is still intact, investor enthusiasm for copper stalled after Tuesday's high.

LME Moly Oxide remains on snooze alarm at $7.26 per pound. This is disappointingly short of $8 after climbing to $7.94 for much of May. However, General Moly (GMO) shares remain at $0.46 this morning holding on to the gains from an upgrade two weeks ago to "buy" from Zack's Investment Reasearch, Inc. 

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 $1,360 per ounce. Target Silver price $18.2 per ounce.

The drivers for gold this week are dramatic U.S. dollar weakness, uncertainty surrounding the impact of multiple super storms on the U.S economy and residual global uneasiness about the North Korean missile threat. Other factors favorable to the yellow metal are seasonality and strength relative to falling U.S. equities.

With all this momentum there is some deceleration as gold retreats from highs set earlier this week in terms of euro and Japanese yen. The reversal in rising copper prices also removes some buoyancy from the metals market. 

All in all, gold should have another run at the $1,360-level next week; silver should find comfort at $18.2 per ounce.

Although much is being made of the euro bounce this week from Draghi comments about possible QE tapering this fall, dollar weakness has been with us for sometime. The constancy and low volatility of the EURJPY cross rate is a clue that there is a common force moving major currencies for the last several months. Gold has thus far been the benefactor.

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 2017 and continues to strengthen. This morning, the yuan is trading much stronger than even last week at 6.4774 USD/CNY  scoring an earlier new low (i.e. a stronger level) for the year at 6.4345. This is a sea change for the yuan with volatility picking up above major currency levels (1-month volatility* 1.04%).

Have a great weekend!

* by comparison the euro & yen 1-month volatilites are  0.86% & 0.63% respectively; Comex gold 1-month volatility is greater at 1.81%.

Weekly Summary  for September 08, 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) $2.79 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) $0.4599 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)

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 a chance to see $1,400 given an adverse outcome for the President Trump's agenda, the financial impact of super storms Harvey and Irma 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 with an established trend higher. Gold in yen has mostly trended higher since the U.S. election. Gold in euro and yen are below their peaks set earlier in the week.

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 and recovering from a recent descent lower.

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 0.54817, maintaining a bullish breakout from the July low and near the top of its range bound meander for 2017.

Cheers,

Colonel Possum & Mariana

Photos by Mariana Titus if not otherwise noted.