Eureka, Nevada
Friday, May 25, 2018 AM
Latest Mining Quarterly! (Checkout story on McEwen Mining's Gold Bar Project)
McEwen Mining Proposed Issue of Notes (Press release, 5/25/2018)
General Moly Reports First Quarter Results (Press Release May 08,2018)
General Moly Reports First Quarter Results (Press Release May 08,2018)
Next Week: Target gold price $1,310 per ounce. Target Silver price $16.7 per ounce.
Morning Miners!
Last week was bad for gold, this week was good.
A frightening fall to $1,281.2 on the Comex Exchange didn't start things well Monday but then bullish forces came to the rescue. The Federal Reserve decided not to raise interest rates until probably June and is feeling more comfortable that inflation is in check (see chart below). "Risk-off" sentiment then stepped into the marketplace with the cancellation of the U.S./North Korea summit, confusion over U.S. trade tactics and political problems in Europe. As a safe haven play, only the Japanese yen outpaced gold - and only by a nudge.
For the week, gold stayed ahead of key commodities oil and copper, the euro and S&P500 reclaiming $1,300 territory with a Comex high this morning of $1,307.2 per ounce. [see my full input to the Kitco News Weekly Gold Survey below and the Weekly Summary Chart].
Even though gold has been in a 6-week downtrend, the ole Colonel remains bullish. Hey, gold did this well even with the U.S. Dollar Index (DXY)* scoring a 6-month high this morning!
Also,checkout the latest McEwen Mining press release below - mo' money, mo'money for the Gold Bar Project!
Have a fun Memorial Day Weekend! See you at the Car Show Drag Races.
* U.S. Dollar Index (.DXY) high 94.18
McEwen $50M Notes for Gold Bar Construction
TORONTO, May 25, 2018 (GLOBE NEWSWIRE) -- McEwen Mining Inc. (NYSE:MUX) (TSX:MUX) (“McEwen Mining” or the “Company”) today announced that it intends to issue up to US$50 million in Senior Secured Notes (“Notes”) to complete construction the Gold Bar Mine in Nevada. Negotiations are underway with an independent third-party lender, whereby they would purchase 50% of the Notes issued and Rob McEwen would purchase the remaining 50%. The Notes contemplated will have a term of 3 years and bear interest at a rate of 9.75% per annum. No fees, other than appropriate legal expenses, will be paid in connection with the Notes; and no warrants, shares, royalties, or streams will be granted. The proposed transaction remains subject to final agreement of terms and satisfactory completion of due diligence.
Full press release:
McEwen Mining Proposed Issue of Notes (Press release, 5/25/2018)
Inflation Watch
Inflation expectations made a new 2018 high April 23rd above a new trend line of higher lows (dark blue dotted line, click on chart for larger size). However, it appears inflation expectations are leveling off for now.
10-year Inflation Expectations
Note: In the above chart inflation expectations peaked at 2.14% February 2 but were surpassed April 23 at 2.18%. Wednesday was lower returning to 2.14% (note old trend line, faded dashed blue). Latest number is right on the new higher-low trend line (dashed blue).
Interest rates and inflation numbers going forward are greatly influenced by central bank policy worldwide. My latest Kitco commentary discusses what some of the moving parts are as well as useful indicators - watch the U.S. Dollar Index (DXY) and euro/yen cross rate:
The Gartman Gold Trade Revisited (Kitco News, 2/14/2018)
Several of the charts in this column are updated below.
Have a fun weekend!
Eureka, Nevada
Scorecard
Here's a scorecard on where we stand with some of our favorite metals.
Intraday highs on the Comex futures exchange:
Gold $1,370.5 per ounce January 25, 2018 (April 2018 contract)
Silver $18.160 per ounce September 8, 2017 (Continuous chart))
Copper $3.3335 per pound ($7,349 per tonne) December 28, 2017 (May 2018 contract)
Comex copper is presently trading at $3.0895 per pound ($6,811 per tonne), still lack luster at 7.3% below December's high. Improving global growth has kept the red metal above the key $3 per pound. Trade war fears dipped the red metal below this mark but copper is now back above $3. Recent weakness must be watched!
Copper futures remain down year-to-date on the Shanghai Futures Exchange (SHFE).
China growth resulted in a GDP 6.9% for 2017 compared to 6.7% for 2016. The GDP projection for 2018 is 6.5%, down but still fairly robust. Encouragingly, the Q1 result is a better-than-expected 6.8% although industrial production fell to 6.0%. Watch this one too, pardner.
Recent U.S. import tariff threats on steel, aluminum and other Chinese exports cloud the outlook for metals. Sanctions on Russian aluminum producer Rusal have spiked aluminum prices to 7-year highs (whose output represents 6% of global supply) but have fallen since with softening of U.S. position.
First round U.S./China trade talks have concluded with no major issues resolved new talks are scheduled to be held in Washington.
Total copper stored in LME and Nymex warehouses is slightly higher than last week at 0.543 million tonnes.
LME inventories are stabilizing:
It is instructive to keep our eyes on the Nymex inventories which are behind the LME and falling (LME 298,000 versus Nymex 245,440 tonnes):
My Input to Kitco News
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 $16.7 per ounce.
Gold price has experienced lift from rising geopolitical tensions and drag from a U.S. Dollar Index (DXY) that hit a new 6-month high this morning*. For the week, there has been more lift than drag with Comex gold trading just a few dollars under its morning high of $1,307.2 per ounce. Gold has also regained ground lost last week to a broad set of assets.
The collapse of the U.S./North Korean summit and confusion about U.S. trade tactics has put new wind under the lustrous metal that had been basing below the $1,300-level since mid-May. However, political concerns about Italy and its soaring bond rates have plummeted the euro driving the value of the greenback higher. Gold investors in Europe have benefited most with the yellow metal breaking the key 1,120€ per ounce-level.
I remain bullish in a bearish 6-week downtrend and believe gold will secure $1,310 per ounce or higher next week with silver following to $16.7 per ounce. The Comex May 21st low of $1,281.2 will remain the near-term bottom.
By the numbers, gold is up 1.0% for the week outpacing the the S&P 500 (+0.8%), key commodities copper and oil (+0.2% & +4.8%) and the euro (+2.1%). As an alternate safe haven, the Japanese yen is a nose ahead of gold (-0.4%). [see Weekly Summary and charts below]
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. There has been talk from China that currency devaluation may be used as a tool in a U.S./China trade war, just talk for now. Something to watch: the yuan has been weakening since mid-April.
The yuan stabilized below 7 USD/CNY for 2017 and had been trending steadily stronger in the new year. The yuan is weaker than last week at 6.3894 USD/CNY, and putting more daylight above the March 26th low (i.e. stronger level) of 6.2342. A low 1-month yuan volatility of 0.29% is lower than major currency levels - something else to watch (1-month volatilities of euro, yen and gold*).
* the euro & yen 1-month volatilites are 1.09% & 0.62% respectively; Comex gold 1-month volatility is 0.95%
Weekly Summary for May 25, 2018 AM
Weekly Summary for May 25, 2018 AM
(click on table for larger size)
Yearly Summary for 2017
(click on table for larger size)
Comex gold gained nearly 14% for the year but was outpaced by Comex copper that enjoyed a 32% uptick in price. Comex silver lagged both for a respectable 7.2% gain. Overall, gold gained 12% on the broader Bloomberg Commodity Index (BCOMTR:IND) which includes everything from crude oil to things that oink. In terms of major currencies, gold in terms of yen advanced almost 10% but slipped 0.4% relative to the strengthening euro.
Although gold slipped 5% in value relative to the S&P 500 it was not a bad year at all for the yellow metal!
Gold Price Revised Outlook for 2018:
My gold range for 2017 was $1,250 to $1,400. We closed 2017 comfortably above $1,300 at $1,309.3 (February contract).
Let's assume 2018, like 2017, is a mix of buoyant market expectations and rising rates with occasional geopolitical, political and economic shocks. Gold will feel the headwinds of the former and enjoy price spikes in times of market stress. My revised forecast is a floor price of $1,285 with highs challenging but not exceeding $1,380 per ounce [5/21/2018 Comex gold tested $1,281.2 on an intraday basis]
2018 will prove a less bullish period for gold than last year with higher interest rates in the U.S. Inflation will be another key factor to monitor, it has been on the rise (see chart above in discussion).
The difference between interest rates and inflation expectations drive gold price; if the former leads the latter, there could be stiff headwinds for the lustrous metal. A trade war that results in slower growth and higher inflation could be potentially very bullish for gold.
Here's the beer bet for 2018: Gold will fall below $1,220 before rising above $1,380. We ended 2017 in the middle of that range with prices just above $1,300 - a fair starting point.
Which side of this bet you take depends on whether you have a half-empty or half-full view on interest rate direction and economic prospects, both global and domestic. Now that I've risen the floor to $1,285, it looks like the half-full folks may have something to celebrate in 2018.
Important charts to watch remain the gold-to-S&P500 or AUSP (see "Chart to Watch" below) and gold in terms of major currencies euro and Japanese yen (directly below). An explanation of the charts below is given in my latest Kitco column:
The Gartman Gold Trade Revisited (Kitco News, 2/14/2018)
Note the resumed divergence of the euro-yen spread in the second chart.
Click on the image for a larger size:
Gold in euro & yen terms with good margin above 2013 lows
Note upside trend of higher lows for gold in U.S. dollars for 2018 (dotted blue line).
Gold euro/yen spread widens again in 2018
Note for currency buffs: Value parity in the above chart occurs when the EUR/JPY cross rate is 139.24; something to watch for - presently 127.17 yen per euro as the gold euro/yen spread increases (above chart).
Here's a chart to watch for 2018. 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 (0.4973) trended higher but then bearishly bottomed again in July, 2017 and more recently December, 12, 2017 (0.4661). Currently this AM the AUSP is 0.4797 bearishly below the key 0.5-level but bullishly trending higher. There is now a weak trend of higher-lows from December 2017.
Cheers,
Colonel Possum & Mariana
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