Gold Spikes $1,334 on Jobs Report; Silver Outshines Gold; Red Metal Rocks $3.14

The Serenity of a Lone Mountain View
Eureka, Nevada

Friday, September 01, 2017 AM

Morning Miners,

There are few weeks that have been this brilliant for the metals we hold dear in Northern Nevada - gold and silver posted multi-month highs; copper reached multi-year highs. Even though this morning's monthly jobs report disappointed, it showed strong gains in mining support activities. Let's call it a summer and enjoy a well-deserved holiday weekend!

Here's the intraday high scorecard on the Comex futures exchange:

Gold $1,334.5 per ounce this AM - since September 2016

Silver $17.800 per ounce this AM - since June 2017

Copper $3.1355 per pound yesterday - since the fall of 2014

The Labor Department's nonfarm payroll report shows 156,000 additional jobs for August versus 180,00 expected. Unemployment rate bumped up slightly to 4.4% from 4.3% in July. Average hourly wages, an inflation indicator, moved up 0.1%. There were downward revisions for the June and July numbers; 21,000 and 20,000 respectively. The 3-month average remains a fairly robust 185,000 jobs.

Metal ore mining employment is holding fairly steady at 39,300 compared to 39,400 last month. Mining support activities, however, moved up 6,800 jobs. Some of this gain includes oil & gas extraction support.

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. More encouragingly, General Moly (GMO) shares remain at $0.46 this morning holding on to the gains from last week's upgrade 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 $1,340 per ounce. Target Silver price $17.9 per ounce.

After a disappointing jobs report for August, Comex gold surged to $1,334.5 per ounce, presently trading only a few dollars lower at $1,331.2. With the chance of a U.S. Federal Reserve rate hike in December further diminished on the morning numbers, there are few obstacles in gold's journey to higher prices. The trend of higher-lows since early-July is firmly in place. 

Gold's momentum is bolstered by strong weekly gains in value compared to equities, commodities and major currencies. Only silver has more shine than gold touching $17.8 per ounce as gold spiked on the labor report. It is likely that gold will move up to the $1,340 level next week; silver should nudge higher to $17.9.

Gold has a lot of moving parts: 

1. On the high-side, the sky may be the limit given the severity of a geopolitical shock. It would take only a few North Korean missile parts falling on Japanese soil to reach the $1,400-level.
2. Globally, there is enough background uncertainty and fear to keep gold above $1,200 for a long time coming. 
3. Important is the trend of higher-lows for gold priced in yen post-U.S. election - moving inexorably higher. When yen is in safe haven mode, gold wins the race. Gold in euro has been more erratic but has its mojo back scoring the 1,120 €/oz-level this morning. As gold peaks in dollars, it continues to move significantly higher in both currencies [see chart below]. 
4. Gold has again outpaced the broader Bloomberg commodity index (BCOM) this week by good margin and has caught up to ascendant copper. The gold-to-copper ratio is now below the "fire and fury" dip to 430 pounds per ounce. It is not likely that this can continue much longer (>400 is my threshold) - a bullish outcome for gold.
5. Gold is cheap versus over-valued equities. The yellow metal has continued to rise in value compared to the S&P 500 since early July [see "Chart to Watch" below]. 
6. Finally the chimera of rising rates and inflation expectations remains just that even though wage growth bumped 0.1% in August. 

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. This morning, the yuan is trading much stronger than last week at 6.5549 USD/CNY  scoring an earlier new low (i.e. a stronger level) for the year at 6.5490. This may be a sea change for the yuan with volatility picking up to major currency levels (1-month volatility* 0.66%).

Have a great weekend!

* by comparison the euro & yen 1-month volatilites are  0.70% & 0.62% respectively; Comex gold 1-month volatility is greater at 1.42%.

Weekly Summary  for September 01, 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) $2.61 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 with an established trend higher. 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 0.53734, maintaining a bullish breakout from the July low and also above the middle of its range bound meander for 2017.

Cheers,

Colonel Possum & Mariana

Photos by Mariana Titus if not otherwise noted.