Loading...

Follow Eureka Miner's Market Report on Feedspot

Continue with Google
Continue with Facebook
or

Valid
Time takes its toll on Ruby Hill (2014)
Eureka, Nevada 

Friday, June 14, 2019 AM

Next Week Target Gold Price: $1,360 per ounce, Target Silver Price: $15.09 per ounce.
High/Low range: $1,360/$1,317 per ounce

Here's an easy-to-understand overview on gold (32 slides, read explanation below each slide): History of gold and which countries have the most

An interesting article on the role of arsenic is the formation of Carlin-type Nevada gold deposits: Resolving the 'invisible' gold puzzle (May 1, 2019 , Helmholtz Association of German Research Centres)

Morning Miners!

I'm back stateside after taking my sweetheart Mariana to Europe to celebrate her birthday -  a benchmark number for total journey's around the sun!

The closest I got to markets since April 26th was an UBER ride past the historical Paris Bourse (which has since moved to EuroNext Paris) and whizzing by the LME copper warehouse in Rotterdam on a high speed train. Apparently, I've picked a good time to return - gold is on a tear. I wish the same were true for copper!


The yellow metal touched $1,362.2 per ounce on the Comex Exchange in the wee hours this morning. The red metal is still wallowing below $6,000 per tonne but up for the week; Comex copper is presently trading at $2.6380 per pound ($5,816 per tonne).

Kitco Editor Allen Sykora carried my thoughts this morning in the Kitco News Weekly Gold Survey:

Richard Baker, editor of the Eureka Miner’s Report, commented that not only has gold benefited from its role as a safe haven, but real interest rates remain suppressed given high demand for U.S. Treasury notes, which he noted is a bullish development for non-interest-bearing assets like gold.

“As oil prices have fallen on weakening demand, gold has proved resilient and, more recently, on the move higher,” Baker said. “A gold price model based on Brent [crude], 10-year real rates, [the] euro and Japanese yen demonstrates high fidelity since early March. That model suggests that Comex gold should return to this morning's highs closing above $1,360 per ounce next week. Silver should follow above the $15-per-ounce level.”

My complete input to Kitco News is given below.

The referenced gold model looks like this (click on image for larger size):


3-Month Gold Model Demonstrates High Fidelity

Keep the faith! My bottom line bet is that gold will go further up the stairs in 2019.

This mornings' price action:

Comex gold (6/19 contract) $1,347.3 per ounce, 
Comex silver (7/19 contract) $14.950 per ounce
Comex copper (7/19 contract) $2.6380 per pound

Have a good weekend!

General Moly Secures Water Rights

Monday General Moly (GMO) announced a major milestone for the Mt. Hope Project:


Bruce D. Hansen, Chief Executive Officer, said, 

“We are extremely pleased that the State Engineer has considered our applications and the efforts made to resolve the concerns and protests of third parties, including the ranchers and growers in the Kobeh Valley and Diamond Valley water basins, and the County of Eureka in once again approving our water rights. We maintain our commitment to the Eureka Producers’ Cooperative through the establishment of the Sustainability Trust to help Diamond Valley conserve water and enhance the viability of the agricultural community. The approval of our water applications represents a major milestone for the development of the Mt. Hope Project.”

GMO share price: $0.3611

Crossroads for Silver Remain

Comex silver is below $15 per ounce. 

The gold-to-silver ratio (GSR) above 90 is very near recently set new highs. It is ready for a move down - bullish for silver if the Lustrous One recovers more territory. This morning the Comex GSR is 90.12. This chart shows the peak GSR was 90.97 June 10 (click for larger image size). The 10-year average GSR is much lower at 66.2 ounce per ounce.

Gold-to-Silver Ratio

Historical note:

If gold and silver are legal tender (see gold overview link below headline photo), then you have to come up with a set value for them and figure out which is more valuable than the other. In 1792, the U.S. fixed its price at 15:1. This means that 1 troy ounce — the long-used standard for measuring precious metals — of gold was worth 15 troy ounces of silver. Over the years, as this ratio has changed, precious metal investors have used it as a signal of when to buy.

At 90:1, silver is historically very, very cheap relative to gold!

Stay tuned.

Inflation Watch

Inflation expectations made a high April 23, 2018 above trend lines of higher lows (dotted lines, click on chart for larger size). Those trend lines were broken dramatically to the downside late last year and now struggle to recover.


10-year Inflation Expectations

Note: In the above chart inflation expectations peaked at 2.14% February 2, 2018 and then moved higher April 23 to 2.18%. May 29 broke a trend line of higher-lows falling to 2.04%. The older trend lines of higher-lows are shown in dark blue. Those trends extend from June 21, 2017 low of 1.66%. We were recovering from the January 3 low of 1.68% and are again below the level of November 27, 2017 (red dashed line). The Wednesday expectations are 1.71%.

Many believe, including the ole Colonel, that gold price is more sensitive to inflation expectations than other measure of inflation. My January Kitco News commentary explains the importance of tracking "real rates" which are a function of inflation expectations:


Interest rates and inflation numbers going forward are greatly influenced by central bank policy worldwide. This 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 these columns are updated in this report.

 Old Glory
Eureka, Nevada

Scorecard 

Here's a scorecard on where we stand with some of our favorite metals. 

Intraday highs on the Comex futures exchange (note new continuous chart baseline): 

Gold $1,365.4 per ounce (continuous chart April, 2018)
Silver $18.160 per ounce (continuous chart September 2017))
Copper $3.2955 per pound ($7,265 per tonne, continuous chart December 2017)



Comex copper rose 0.40% for the week. Presently trading at $2.6380 per pound ($5,816 per tonne), the red metal is now 20.0% below the December 2017 high - technically in bear territory again. Maintaining prices above $6,000 per tonne is a key benchmark to price recovery; above $6,500 is bullish. 

Improving global growth had kept the red metal above the key $3 per pound-level in 2017. Initial trade war fears in 2018 dipped the red metal below this mark but copper then rebounded above $3. Trade war tensions with China and deteriorating economic conditions there coupled with a strong U.S. dollar sent the red metal plummeting. Copper continues to suffer with a bleaker global growth forecast and an unresolved U.S./China trade conflict. 

Total copper stored in LME and Nymex warehouses is 0.241 million tonnes and less than one-half the 0.5 million tonne mark of early-2018. The Nymex warehouse tonnage is behind the LME and now below the 40,000 tonne mark.

LME inventories thankfully got a bump up in late-May: 


It is important to keep our eyes on the Nymex inventories which are still falling (LME 210,900 versus Nymex 30,204 tonnes):


My Input to Kitco News 

Next Week target gold price $1,360 per ounce. Target silver price $15.09 per ounce.

Here is my input to the Kitco News Weekly Gold Survey:

Gold rallies in a conducive environment for moving higher as safe haven assets get a boost from tensions in the Gulf of Oman, slowing global growth and trade war uncertainty. Real rates* are also surpressed given high demand for U.S. Treasurys - a bullish development for noninterest bearing assets like gold. 

One striking and persistent correlation has been between gold and Brent crude oil, the latter being a proxy for global growth. As oil prices have fallen on weakening demand, gold has proved resilient and, more recently, on the move higher. A gold price model based on Brent, 10-year real rates, euro and Japanese yen demonstrates high fidelity since early-March (see attached). That model suggests that Comex gold should return to this morning's highs closing above $1,360 per ounce next week. Silver should follow above the $15 per ounce-level.

It is noteworthy that key gold ratios are very high emphasizing how inexpensive commodities have become relative to the lustrous metal. The gold-to-silver ratio is greater than 90, a historic level. The gold-to-copper ratio is above 500 pounds per ounce which signals more market turbulence ahead. The gold-to-WTI ratio is also elevated although not extreme topping 25 barrels per ounce. 

An exciting time for gold market participants.

* real 10-year rate is now 0.41%; down 12 bps on a 1-month basis, down 38 bps on a 1-year basis (source: Bloomberg News)

Additional Note:

The fate of the Chinese yuan remains a key tell for gold and copper; a material drop in valuation could impact copper negatively. Something to watch: the yuan dramatically weakened from mid-April 2018, strenghtened and then weakened again this year.

The yuan stayed below 7.0 USD/CNY for 2018, starting stronger  and then followed by a weakening trend. The yuan is currently at 6.9231 USD/CNY and with a lot of daylight above the March 26, 2018 low (i.e. much stronger level) of 6.2342. 1-month yuan volatility is a very low 0.16%. Something to watch compared to 1-month volatilities of euro, yen and gold.

The euro & yen 1-month volatilites are 0.56% & 0.69% respectively; Comex gold 1-month volatility is an elevated 2.10%.

Weekly Summary June 14, 2019



Yearly Summary for 2018


(click on table for larger size)

Although Comex gold price lost some steam in 2018 (down 2.1%) it made healthy gains on key commodities copper and oil (up 22.8% & 30.2%). Against the broader Bloomberg Commodity Index (BCOMTR:IND), it advanced a respectable 10.3%. 

Importantly the yellow metal outpaced the S&P 500 stock index by 4.3% making it a better investment than domestic stocks for 2019. This leaves gold it in a strong position for 2019.

Only the Japanese yen, an alternative safe haven, fared better by gaining 4.1% over gold for the year.

Yearly Summary for 2017


(click on table for larger size)

Comex gold gained nearly 14% for 2017 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 Outlook for 2019

*** Soon to be revised for 2019 (2H) ***

My Kitco Commentary on gold prices and real rates:


In addition to real rates, other important charts to monitor are 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 this Kitco News column:

The Gartman Gold Trade Revisited (Kitco News, 2/14/2018)

Gold value for all three currencies is up for the week. Relative value has generally trended higher from a double-bottom in U.S. dollar terms (August 17 & September 27, 2018) 

Click on the image for a larger size:


Gold in euro & yen terms with margin above 2013 lows

Divergence has resumed for gold in terms of euro compared to yen:

Read Full Article
  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 
Prophecy Development Corp. 
(Click here  to see a cool video - Eureka County takes an important step into a future of strategic & critical mineral production)

Friday, April 26, 2019 AM

Next Week Target Gold Price: $1,290 per ounce, Target Silver Price: $15.13 per ounce.
High/Low range: $1,310/$1,280 per ounce

Here's an easy-to-understand overview on gold (32 slides, read explanation below each slide): History of gold and which countries have the most

Morning Miners!

This will be the last Friday report until June 14th - I'm taking my sweetheart Mariana to Europe to celebrate her Birthday (let's just say its a benchmark for total journey's around the sun).

On many levels, I'm very excited about Prophecy Development's Gibellini Vanadium project - its history and promising future.

Louis Gibellini, Jr. is a  key figure in this story. He excelled at single-jack, the hand drilling of rock with steel bits and hammer. Manual hard rock drilling built the early mines until replaced later by compressed air drills. "Louie," as he preferred to called called, would become the Nevada State Single-Jack Champion and also held the world title for a number of years. At age 63, he set a new Nevada State record hammering an 11 9/32-inch hole into a granite block in 10 minutes with a 4-pound hammer! (read more about Louie in my Elko Daily Free Press story: Eureka's Windfall)

One of Louie's many other talents was prospecting in Eureka County. The zinc mine at Lone Mountain and vanadium exploration in the south-eastern portion of the county are two examples. Prophecy Development Corporation is now developing his vanadium claims in a big way with permitting expected in the first quarter of 2021 followed by mine construction and first production in the fourth quarter of 2022.

If you want to see and hear the whole story, click on the link below the headline photo - a cool video - it rocks! Vanadium is an important step into a bright future of strategic & critical mineral production in Eureka County.

Gold reclaimed some important ground this week too. Here's how I told that story to Kitco News this morning:

"Gold has had a very strong week up 1% in morning trading as the yellow metal gains value on a broad array of assets including major currencies, key commodities and domestic equities. This performance is even more impressive given that the U.S. Dollar Index (DXY) is at 23-month highs with a lot of daylight above its 200-day moving average (98.04 vs. 95.95). 

Although beaten below the $1,300-level in the past several weeks, gold is making a comeback. The interest rate environment remains encouraging with Germany, Switzerland and Japan still underwater on their 10-year bonds. Even with a much better-than-expected Q1 report this morning (3.2% vs. 2.5%), the 10-year Treasury has once again dipped below 2.5%. This is keeping 10-year real rates contained near 0.5% - some 25 basis points below where they were a year ago.* 

Although the trade/inventory pop in GDP may lift the wings of Federal Reserve Hawks, decline in consumer spending should restrain resumption of aggressive rate hike policy. There are also still lots of goblins in the global closet with U.S./China trade negotiations and Brexit unresolved, a weakening Europe and slowing global growth. These are all bullish foundations for gold moving higher.

I believe Comex gold will regain $1,290 per ounce next week on a journey above $1,300 in the coming weeks. Silver is particularly interesting with a gold-to-silver (GSR) ratio still near late-2008 levels. If gold gets some giddy-up, silver will gallop to retake $16 ounce per ounce territory."

By the time I started writing this report, Comex gold had already created $1,290 per ounce.

Keep the faith! My bottom line bet is that gold will go further up the stairs in 2019.

This mornings' price action (gold marched above the $1,290-level after the early morning analysis):

Comex gold (6/19 contract) $1,286.4 per ounce, 
Comex silver (7/19 contract) $15.090 per ounce
Comex copper (7/19 contract) $2.8840 per pound

Have a good weekend!

Prophecy's Gibellini Vanadium Project Rocks!

Gibellini Site Plan

Crossroads for Silver Remain

Comex silver is now above $15 per ounce. 

The gold-to-silver ratio (GSR) is still very near highs not seen since November 2008. It is ready for a move down - bullish for silver if the Lustrous One recovers more territory. This morning the Comex GSR is 85.2. This chart shows the peak GSR was 86.7 April 15 (click for larger image size). The 10-year average GSR is much lower at 66.2 ounce per ounce.

Gold-to-Silver Ratio

Historical note:

If gold and silver are legal tender (see gold overview link below headline photo), then you have to come up with a set value for them and figure out which is more valuable than the other. In 1792, the U.S. fixed its price at 15:1. This means that 1 troy ounce — the long-used standard for measuring precious metals — of gold was worth 15 troy ounces of silver. Over the years, as this ratio has changed, precious metal investors have used it as a signal of when to buy.

At 85:1, silver is historically very, very cheap relative to gold!

Stay tuned.

Inflation Watch

Inflation expectations made a high April 23, 2018 above trend lines of higher lows (dotted lines, click on chart for larger size). Those trend lines were broken dramatically to the downside late last year and now struggle to recover.


10-year Inflation Expectations

Note: In the above chart inflation expectations peaked at 2.14% February 2, 2018 and then moved higher April 23 to 2.18%. May 29 broke a trend line of higher-lows falling to 2.04%. The older trend lines of higher-lows are shown in dark blue. Those trends extend from June 21, 2017 low of 1.66%. We were recovering from the January 3 low of 1.68% and now above the level of November 27, 2017 (red dashed line). The Wednesday expectations are up at 1.96%.

Bloomberg posted this U.S Labor Department chart which shows two other measures of inflation:


The Consumer Price Index (CPI) without food & energy (orange trace) is one monitored by the Federal Reserve. The fact that it has been trending down since mid-2018 suggests a decrease in the rate of inflation, called by economists "disinflation."

Many believe, including the ole Colonel, that gold price is more sensitive to inflation expectations (first chart). The Bloomberg chart is important because it influences Federal Reserve decisions on interest rates which also impact gold price.

My January Kitco News commentary explains the importance of tracking "real rates" which are a function of inflation expectations:


Interest rates and inflation numbers going forward are greatly influenced by central bank policy worldwide. This 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 these columns are updated in this report.

 Old Glory
Eureka, Nevada

Scorecard 

Here's a scorecard on where we stand with some of our favorite metals. 

Intraday highs on the Comex futures exchange (note new continuous chart baseline): 

Gold $1,365.4 per ounce (continuous chart April, 2018)
Silver $18.160 per ounce (continuous chart September 2017))
Copper $3.2955 per pound ($7,265 per tonne, continuous chart December 2017)



Comex copper dropped 1.2% for the week. Presently trading at $2.8760 per pound ($6,340 per tonne), the red metal is now 12.7% below the December 2017 high. Maintaining prices above $6,000 per tonne is a key benchmark to price recovery; above $6,500 is bullish. 

Improving global growth had kept the red metal above the key $3 per pound-level in 2017. Initial trade war fears in 2018 dipped the red metal below this mark but copper then rebounded above $3. Current trade war tensions with China and deteriorating economic conditions there coupled with a strong U.S. dollar sent the red metal plummeting. Copper has revived on optimism about a resolution of the U.S./China trade conflict. 

Total copper stored in LME and Nymex warehouses is 0.229 million tonnes and less than one-half the 0.5 million tonne mark of early-2018. The Nymex warehouse tonnage is behind the LME and now below the 40,000 tonne mark.

LME inventories thankfully picked up this week: 


It is important to keep our eyes on the Nymex inventories which are still falling (LME 194,800 versus Nymex 34,931 tonnes):


My Input to Kitco News 

Next Week target gold price $1,290 per ounce. Target silver price $15.13 per ounce.

Here is my input to the Kitco News Weekly Gold Survey:

Gold has had a very strong week up 1% in morning trading as the yellow metal gains value on a broad array of assets including major currencies, key commodities and domestic equities. This performance is even more impressive given that the U.S. Dollar Index (DXY) is at 23-month highs with a lot of daylight above its 200-day moving average (98.04 vs. 95.95). 

Although beaten below the $1,300-level in the past several weeks, gold is making a comeback. The interest rate environment remains encouraging with Germany, Switzerland and Japan still underwater on their 10-year bonds. Even with a much better-than-expected Q1 report this morning (3.2% vs. 2.5%), the 10-year Treasury has once again dipped below 2.5%. This is keeping 10-year real rates contained near 0.5% - some 25 basis points below where they were a year ago.* 

Although the trade/inventory pop in GDP may lift the wings of Federal Reserve Hawks, decline in consumer spending should restrain resumption of aggressive rate hike policy. There are also still lots of goblins in the global closet with U.S./China trade negotiations and Brexit unresolved, a weakening Europe and slowing global growth. These are all bullish foundations for gold moving higher.

I believe Comes gold will regain $1,290 per ounce next week on a journey above $1,300 in the coming weeks. Silver is particularly interesting with a gold-to-silver (GSR) ratio still near late-2008 levels. If gold gets some giddy-up, silver will gallop to retake $16 ounce per ounce territory.

* currently inflation expectations are rising at 1.96% compared to the January bottom of 1.68% (1/13/2019), source: FRED; current 10-year real rates are 0.54%, -25 bps y-o-y, source: Bloomberg

Additional Note:

The fate of the Chinese yuan remains a key tell for gold and copper; a material drop in valuation could impact copper negatively. Something to watch: the yuan dramatically weakened from mid-April 2018 and now is strengthening again.

The yuan stayed below 7.0 USD/CNY for 2018, starting stronger  and then followed by a weakening trend. It has re-strengthened in 2019. The yuan is currently at 6.7334 USD/CNY but with still a lot of daylight above the March 26, 2018 low (i.e. much stronger level) of 6.2342. 1-month yuan volatility is a very low 0.20%. Something to watch compared to 1-month volatilities of euro, yen and gold.

The euro & yen 1-month volatilites are 0.42% & 0.36% respectively; Comex gold 1-month volatility is 0.88%.

Weekly Summary April 26, 2019



Yearly Summary for 2018


(click on table for larger size)

Although Comex gold price lost some steam in 2018 (down 2.1%) it made healthy gains on key commodities copper and oil (up 22.8% & 30.2%). Against the broader Bloomberg Commodity Index (BCOMTR:IND), it advanced a respectable 10.3%. 

Importantly the yellow metal outpaced the S&P 500 stock index by 4.3% making it a better investment than domestic stocks for 2019. This leaves gold it in a strong position for 2019.

Only the Japanese yen, an alternative safe haven, fared better by gaining 4.1% over gold for the year.

Yearly Summary for 2017


(click on table for larger size)

Comex gold gained nearly 14% for 2017 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 Outlook for 2019 (1H)

*** Soon to be revised for 2019 (2H) ***

My 2019 Beer Bet: Gold will rise above $1,380 per ounce by May Day 2019

The first-half of 2019 will be a push-pull to higher $1,380+ gold prices underpinned by a trend of higher lows. This outlook is based on a weakening U.S. dollar and real interest rates that have peaked for the near-term against a volatile backdrop of Washington and geopolitical uncertainty.

Over the last five years, gold has been negatively correlated with 10-year real rates 71% of the time. This is reassuring given the popular assumption about opportunity cost for holding a gold position – the higher real rates go, the more costly to keep a non-interest bearing asset like gold. Falling real rates support rising gold prices and vice-versa. Less often, more dominant drivers are at play and gold price appears insensitive to changes in real rates. The low gold price volatility from mid-April to late-September is a good example. Over this time, the yellow metal behaved as a currency. It was highly correlated with the Chinese yuan; to a lesser degree, the euro and yen; and much less, to real rates. 

Which case will be true for the first half of 2019? My latest Kitco Commentary posits the former to be the most likely which is bullish for gold:

Read Full Article
  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 
Jackson Mine Hoisting Works (Walter S. Long, June 19, 1880)
Eureka, Nevada
Courtesy University of Nevada Reno Archives

Friday, April 12, 2019 AM

Next Week Target Gold Price: $1,290 per ounce, Target Silver Price: $14.93 per ounce.
High/Low range: $1,310/$1,280 per ounce

My 2019 Beer Bet: Gold will rise above $1,380 per ounce by May Day 2019 (getting a little scary!)

Here's an easy-to-understand overview on gold (32 slides, read explanation below each slide): History of gold and which countries have the most

Morning Miners!

Here's an oldie but goodie - do you remember the last time silver was $9 per ounce?

Ouch! It was right in the heart of the 2008-2009 financial crisis. At that time investors were liquidating everything of value and silver was among the first assets thrown overboard. On November 11, 2008, Comex silver was $9.074 per ounce and gold, $821 per ounce. Dividing those two numbers gave a gold-to-silver ratio (GSR) of 90.48 ounces of silver for an ounce of gold - a peak we haven't see for more than 10 years.

Guess what? The GSR set a new high yesterday of 86.64 fast closing in on the late-2008 levels. Of course, both metals have risen in U.S. dollar value but it is troubling that silver is back under $15 while gold hovers around $1,300 - the ratio tells the story.

Kitco News Editor Allen Sykora featured my thoughts in a market nugget this morning:

Eureka Miner’s Report: High Gold-Silver Ratio Unsustainable (Allen Sykora, Kitco News Market Nuggets, 4/12/2019)

The rise in the gold-silver ratio is unsustainable and will correct, says Richard Baker, editor of the Eureka Miner’s Report. This ratio measures how many ounces of silver it takes to buy an ounce of gold. A rising number means under performance by silver, and vice-versa. Baker points out that the silver has hit levels not seen since November 2008 during the financial crisis. The ratio was 86.6 Thursday, well above its 10-year average of 66.2. “This suggests silver is very, very cheap relative to the yellow metal, at least in historical terms,” Baker says. “The gold-to-copper ratio, although not extreme, is also elevated considering the safe-haven demand for gold has declined from earlier this year.”

More details are given below in my input to the Kitco News Weekly Gold Report and the next section.

Keep the faith! My bottom line bet is that gold will go further up the stairs in 2019.

This mornings' price action:

Comex gold (6/19 contract) $1,294.6 per ounce, 
Comex silver (5/19 contract) $14.980 per ounce
Comex copper (5/19 contract) $2.9400 per pound

Have a good weekend!

My latest Kitco News commentaries:



Crossroads for Silver Remain

Comex silver is now below $15 per ounce. 

The gold-to-silver ratio (GSR) is still very near yesterday's high today and ready for a move down - bullish for silver if the Lustrous One recovers more territory. This morning the Comex GSR is 86.42. This chart shows the peak GSR was 86.64 yesterday, April 11 (click for larger image size). The 10-year average GSR is much lower at 66.2 ounce per ounce.


Gold-to-Silver Ratio

Historical note:

If gold and silver are legal tender (see gold overview link below headline photo), then you have to come up with a set value for them and figure out which is more valuable than the other. In 1792, the U.S. fixed its price at 15:1. This means that 1 troy ounce — the long-used standard for measuring precious metals — of gold was worth 15 troy ounces of silver. Over the years, as this ratio has changed, precious metal investors have used it as a signal of when to buy.

At 86:1, silver is historically very very cheap relative to gold!

Stay tuned.

Inflation Watch

Inflation expectations made a high April 23, 2018 above trend lines of higher lows (dotted lines, click on chart for larger size). Those trend lines were broken dramatically to the downside late last year and now struggle to recover.


10-year Inflation Expectations

Note: In the above chart inflation expectations peaked at 2.14% February 2, 2018 and then moved higher April 23 to 2.18%. May 29 broke a trend line of higher-lows falling to 2.04%. The older trend lines of higher-lows are shown in dark blue. Those trends extend from June 21, 2017 low of 1.66%. We were recovering from the January 3 low of 1.68% and now above the level of November 27, 2017 (red dashed line). The Wednesday expectations are up at 1.94%.

Bloomberg posted this U.S Labor Department chart which shows two other measures of inflation:


The Consumer Price Index (CPI) without food & energy (orange trace) is one monitored by the Federal Reserve. The fact that it has been trending down since mid-2018 suggests a decrease in the rate of inflation, called by economists "disinflation."

Many believe, including the ole Colonel, that gold price is more sensitive to inflation expectations (first chart). The Bloomberg chart is important because it influences Federal Reserve decisions on interest rates which also impact gold price.

My January Kitco News commentary explains the importance of tracking "real rates" which are a function of inflation expectations:


Interest rates and inflation numbers going forward are greatly influenced by central bank policy worldwide. This 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 these columns are updated in this report.

 Old Glory
Eureka, Nevada

Scorecard 

Here's a scorecard on where we stand with some of our favorite metals. 

Intraday highs on the Comex futures exchange (note new continuous chart baseline): 

Gold $1,365.4 per ounce (continuous chart April, 2018)
Silver $18.160 per ounce (continuous chart September 2017))
Copper $3.2955 per pound ($7,265 per tonne, continuous chart December 2017)



Comex copper rose 1.6% for the week. Presently trading at $2.9400 per pound ($6,482 per tonne), the red metal is now 10.8% below the December 2017 high. Maintaining prices above $6,000 per tonne is a key benchmark to price recovery; above $6,500 is bullish. 

Improving global growth had kept the red metal above the key $3 per pound-level in 2017. Initial trade war fears in 2018 dipped the red metal below this mark but copper then rebounded above $3. Current trade war tensions with China and deteriorating economic conditions there coupled with a strong U.S. dollar sent the red metal plummeting. Copper has revived on optimism about a resolution of the U.S./China trade conflict. 

Total copper stored in LME and Nymex warehouses is 0.237 million tonnes, up for the week but less than one-half the 0.5 million tonne mark of early-2018. The Nymex warehouse tonnage is behind the LME and now below the 40,000 tonne mark.

LME inventories are thankfully picking up: 


It is important to keep our eyes on the Nymex inventories which are still falling (LME 197,525 versus Nymex 39,402 tonnes):


My Input to Kitco News 

Next Week target gold price $1,290 per ounce. Target silver price $14.93 per ounce.

Here is my input to the Kitco News Weekly Gold Report:

Although the U.S. dollar has retreated some today, its resurgent strength this week has weighed on gold and the metals. However, I believe the much bigger story is the gold-to-silver ratio (GSR) which hit levels not seen since November, 2008 in the heart of the 2008-2009 financial crisis (yesterday's GSR of 86.6 shines a lot of daylight above its 10-year average of 66.2, the GSR peaked at 90.5 11/21/2008). 

 This suggests silver is very, very cheap relative to the yellow metal, at least in historical terms. The gold-to-copper ratio (GCR), although not extreme, is also elevated considering the safe-haven demand for gold has declined from earlier this year. Are the metals seeing something that equities and currencies are not? Switching vantage points, one could also say that gold is overvalued relative to metals and due for a correction down.

The answer is unclear. If a U.S/China deal emerges and/or Brexit is resolved it is likely that global demand for metals will see some upside and gold ratios could revert to more historical levels. This is potentially a bearish scenario for gold. On the other hand, if slower global growth expectations prevail, Europe worsens and the U.S. economy slows there could be considerable upside for gold and more price declines for metals (copper below $2.72 per pound would be a tell).

One thing is true, the present GSR is unsustainable and will correct. I believe next week will see more downward pressure with on gold seeking the $1,290-level and silver following at $14.93 per ounce. 

Additional Note:

The fate of the Chinese yuan remains a key tell for gold and copper; a material drop in valuation could impact copper negatively. Something to watch: the yuan dramatically weakened from mid-April 2018 and now appears to be strengthening again.

The yuan stayed below 7.0 USD/CNY for 2018, starting stronger  and then followed by a weakening trend. It has re-strengthened in 2019. The yuan is currently at 6.7042 USD/CNY but with still a lot of daylight above the March 26, 2018 low (i.e. much stronger level) of 6.2342. 1-month yuan volatility is a very low 0.14%. Something to watch compared to 1-month volatilities of euro, yen and gold.

The euro & yen 1-month volatilites are 0.48% & 0.48% respectively; Comex gold 1-month volatility is 0.62%.

Weekly Summary April 12, 2019



Yearly Summary for 2018


(click on table for larger size)

Although Comex gold price lost some steam in 2018 (down 2.1%) it made healthy gains on key commodities copper and oil (up 22.8% & 30.2%). Against the broader Bloomberg Commodity Index (BCOMTR:IND), it advanced a respectable 10.3%. 

Importantly the yellow metal outpaced the S&P 500 stock index by 4.3% making it a better investment than domestic stocks for 2019. This leaves gold it in a strong position for 2019.

Only the Japanese yen, an alternative safe haven, fared better by gaining 4.1% over gold for the year.

Yearly Summary for 2017


(click on table for larger size)

Comex gold gained nearly 14% for 2017 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 Outlook for 2019 (1H)

My 2019 Beer Bet: Gold will rise above $1,380 per ounce by May Day 2019

The first-half of 2019 will be a push-pull to higher $1,380+ gold prices underpinned by a trend of higher lows. This outlook is based on a weakening U.S. dollar and real interest rates that have peaked for the near-term against a volatile backdrop of Washington and geopolitical uncertainty.

Over the last five years, gold has been negatively correlated with 10-year real rates 71% of the time. This is reassuring given the popular assumption about opportunity cost for holding a gold position – the higher real rates go, the more costly to keep a non-interest bearing asset like gold. Falling real rates support rising gold prices and vice-versa. Less often, more dominant drivers are at play and gold price appears insensitive to changes in real rates. The low gold price volatility from mid-April to late-September is a good example. Over this time, the yellow metal behaved as a currency. It was highly correlated with the Chinese yuan; to a lesser degree, the euro and yen; and much less, to real rates. 

Which case will be true for the first half of 2019? My latest Kitco Commentary posits the former to be the most likely which is bullish for gold:


In addition to real rates, other important charts to monitor are 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 this Kitco News column:

The Gartman Gold Trade Revisited (Kitco News, 2/14/2018)

Gold value for all three currencies is mixed for the week. It has generally trended higher from a double-bottom in U.S. dollar terms (August 17 & September 27, 2018) 

Click on the image for a larger size:


Gold in euro & yen terms with margin above 2013 lows

Divergence has resumed for gold in terms of euro compared to yen:

Read Full Article
  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 
Gold History in Windfall Canyon
Eureka, Nevada
Nevada's first gold bar poured from sediment-hosted disseminated, Carlin-type, gold deposits came from Windfall Canyon. The Deadwood Daily Pioneer-Times reported:

Eureka, Nev. July 23, [1909]. – The first gold bar ever produced in the Eureka district, being the product of the ore of the Windfall mine, was brought to Eureka recently from the Eureka Windfall Mining Company’s new cyanide mine…It is a beautiful yellow bar, weighing a little over 700 ounces and valued at $12,000 to $14,000. [Click here for more]

Friday, April 5, 2019 AM

Next Week Target Gold Price: $1,280 per ounce, Target Silver Price: $14.91 per ounce.
High/Low range: $1,310/$1,280 per ounce

My 2019 Beer Bet: Gold will rise above $1,380 per ounce by May Day 2019 (getting a little scary!)

Here's an easy-to-understand overview on gold (32 slides, read explanation below each slide): History of gold and which countries have the most

Morning Miners!

I'm getting a little nervous about my 2019 beer bet on gold (above). We've been in a very bullish environment for most of the year but there are some concerning headwinds building, at least for the near-term. Silver and copper are looking a bit under the weather too.

This too shall pass. 

Here's a simple price barometer check for clearer skies ahead: Comex gold (June) needs to survive a pressure drop to $1,280 per ounce (my target for next week), Comex (May) silver needs to maintain $15-plus per ounce after testing the $14.90-level, and copper must stay above $6,000 per tonne ($2.72 per pound).

A lot of things can happen to give overall market sentiment a boost - more positive progress on the U.S./China trade negotiations, a Brexit stalemate turnaround or continuing strong economy in the U.S. Any or all of these will give the metals some relief but may also reduce safe haven demand for gold.

This morning's job report for April was good and that's encouraging on the home front. 192,000 jobs were added compared to economist's expectation of 172,000. There were also upward revisions to the January and February numbers. Unemployment, by a separate survey, remains unchanged at 3.8%.

Hourly average wages were weaker-than-expected moving up 0.1% compared to an expected 0.3%. This supports the tame inflation theme for 2019.

Here's how I put some of these pieces together for gold in my input to the  Kitco News Weekly Gold Survey:

A U.S. Dollar Index just below 22-month highs and tame inflation expectations are creating increasing headwinds for gold. Real rates* are inching back up and the 10-year German Bund yield is once again positive chipping away at incentives buy gold.

Although a solid jobs report this morning indicates a resilient economy, a weaker-than-expected wage growth suggests inflation is in check. In terms of safe-haven demand, the U.S./China trade negotiations appear to be making progress and some of the fear has dissipated regarding Washington political turmoil and geopolitical tensions. 

Gold continues to struggle in terms of value relative to key commodities, major currencies and rebounding U.S. equities. For the week, gold has only made progress against copper and companion safe-haven yen [see Weekly Summary Chart below]

Taken altogether, the bullish outlook for gold is at best tempered for the near-term. I believe next week will retest this week's low and challenge the $1,280-level. Silver, after several recent forays into $14 territory will follow gold lower to $14.91 per ounce.

* currently inflation expectations are rising at 1.91% compared to the January bottom of 1.68% (1/13/2019), source: FRED; current 10-year real rates are rising from late-March lows, now 0.61% source: Bloomberg

Keep the faith! Gold will go further up the stairs in 2019.

This mornings' price action:

Comex gold (6/19 contract) $1,294.4 per ounce, 
Comex silver (5/19 contract) $15.075 per ounce
Comex copper (5/19 contract) $2.9050 per pound

Have a good weekend!

My latest Kitco News commentaries:



Moly Oxide Outlook Improves

In a recent presentation, General Moly (GMO) included some bullish forecasts on Moly Oxide pricing based on supply/demand outlook. You can find a .pdf of the slides here:


Crossroads for Silver Remain

Several weeks ago, I said a breakout for silver above $16 per ounce may occur soon and cautioned to watch the Indian rupee. The rupee had strengthened below 70 USD/INR and savvy investors in India have been buying U.S. dollars. This has not translated into a move higher for silver in dollar terms.

Today the rupee is 69.21 up (i.e. weaker) from its 68.60 low Monday, March 18th.

Comex silver has recently dipped below $15 per ounce and I now believe this could continue into next week.

The gold-to-silver ratio (GSR) is still very near its November high today and ready for a move down - bullish for silver if the Lustrous One recovers more territory. This morning the Comex GSR is 85.86. This chart shows the peak GSR was 86.16 last November (click for larger image size).


Gold-to-Silver Ratio

Historical note:

If gold and silver are legal tender (see gold overview link below headline photo), then you have to come up with a set value for them and figure out which is more valuable than the other. In 1792, the U.S. fixed its price at 15:1. This means that 1 troy ounce — the long-used standard for measuring precious metals — of gold was worth 15 troy ounces of silver. Over the years, as this ratio has changed, precious metal investors have used it as a signal of when to buy.

At 86:1, silver is historically very very cheap relative to gold!

Stay tuned.

Inflation Watch

Inflation expectations made a high April 23, 2018 above trend lines of higher lows (dotted lines, click on chart for larger size). Those trend lines were broken dramatically to the downside late last year and now struggle to recover.


10-year Inflation Expectations

Note: In the above chart inflation expectations peaked at 2.14% February 2, 2018 and then moved higher April 23 to 2.18%. May 29 broke a trend line of higher-lows falling to 2.04%. The older trend lines of higher-lows are shown in dark blue. Those trends extend from June 21, 2017 low of 1.66%. We were recovering from the January 3 low of 1.68% and now above the level of November 27, 2017 (red dashed line). The Wednesday expectations are heading back up from the November 2017 level at 1.91%.

My January Kitco News commentary explains the importance of tracking "real rates" which are a function of inflation expectations:


Interest rates and inflation numbers going forward are greatly influenced by central bank policy worldwide. This 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 these columns are updated in this report.

 Old Glory
Eureka, Nevada

Scorecard 

Here's a scorecard on where we stand with some of our favorite metals. 

Intraday highs on the Comex futures exchange (note new continuous chart baseline): 

Gold $1,365.4 per ounce (continuous chart April, 2018)
Silver $18.160 per ounce (continuous chart September 2017))
Copper $3.2955 per pound ($7,265 per tonne, continuous chart December 2017)



Comex copper fell 1% for the week retreating some from last week's gains. Presently trading at $2.9050 per pound ($6,404 per tonne), the red metal is now 11.8% below the December 2017 high. Maintaining prices above $6,000 per tonne is a key benchmark to price recovery; above $6,500 is bullish. 

Improving global growth had kept the red metal above the key $3 per pound-level in 2017. Initial trade war fears in 2018 dipped the red metal below this mark but copper then rebounded above $3. Current trade war tensions with China and deteriorating economic conditions there coupled with a strong U.S. dollar sent the red metal plummeting. Copper has revived on optimism about a resolution of the U.S./China trade conflict. 

Total copper stored in LME and Nymex warehouses is 0.209 million tonnes, down on the week and less than one-half the 0.5 million tonne mark of early-2018. The Nymex warehouse tonnage is behind the LME and still below the 50,000 tonne mark.

LME inventories sagging from mid-March gains: 


It is important to keep our eyes on the Nymex inventories which are still falling (LME 167,950 versus Nymex 41,425 tonnes):



My Input to Kitco News 

Next Week target gold price $1,280 per ounce. Target silver price $14.91 per ounce.

Here is my input to the Kitco News Weekly Gold Report:

A U.S. Dollar Index just below 22-month highs and tame inflation expectations are creating increasing headwinds for gold. Real rates* are inching back up and the 10-year German Bund yield is once again positive chipping away at incentives buy gold.

Although a solid jobs report this morning indicates a resilient economy, a weaker-than-expected wage growth suggests inflation is in check. In terms of safe-haven demand, the U.S./China trade negotiations appear to be making progress and some of the fear has dissipated regarding Washington political turmoil and geopolitical tensions.

Gold continues to struggle in terms of value relative to key commodities, major currencies and rebounding U.S. equities. For the week, gold has only made progress against copper and companion safe-haven yen.

Taken altogether, the bullish outlook for gold is at best tempered for the near-term. I believe next week will retest this week's low and challenge the $1,280-level. Silver, after several recent forays into $14 territory will follow gold lower to $14.91 per ounce.

* currently inflation expectations are rising at 1.91% compared to the January bottom of 1.68% (1/13/2019), source: FRED; current 10-year real rates are rising from late-March lows, now 0.61% source: Bloomberg

Additional Note:

The fate of the Chinese yuan remains a key tell for gold and copper; a material drop in valuation could impact copper negatively. Something to watch: the yuan dramatically weakened from mid-April 2018 and now appears to be strengthening again.

The yuan stayed below 7.0 USD/CNY for 2018, starting stronger  and then followed by a weakening trend. It has re-strengthened in 2019. The yuan is currently at 6.7181 USD/CNY but with still a lot of daylight above the March 26, 2018 low (i.e. much stronger level) of 6.2342. 1-month yuan volatility is a very low 0.15%. Something to watch compared to 1-month volatilities of euro, yen and gold.

The euro & yen 1-month volatilites are 0.49% & 0.45% respectively; Comex gold 1-month volatility is 0.64%.

Weekly Summary April 5, 2019



Yearly Summary for 2018


(click on table for larger size)

Although Comex gold price lost some steam in 2018 (down 2.1%) it made healthy gains on key commodities copper and oil (up 22.8% & 30.2%). Against the broader Bloomberg Commodity Index (BCOMTR:IND), it advanced a respectable 10.3%. 

Importantly the yellow metal outpaced the S&P 500 stock index by 4.3% making it a better investment than domestic stocks for 2019. This leaves gold it in a strong position for 2019.

Only the Japanese yen, an alternative safe haven, fared better by gaining 4.1% over gold for the year.

Yearly Summary for 2017


(click on table for larger size)

Comex gold gained nearly 14% for 2017 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 Outlook for 2019 (1H)

My 2019 Beer Bet: Gold will rise above $1,380 per ounce by May Day 2019

The first-half of 2019 will be a push-pull to higher $1,380+ gold prices underpinned by a trend of higher lows. This outlook is based on a weakening U.S. dollar and real interest rates that have peaked for the near-term against a volatile backdrop of Washington and geopolitical uncertainty.

Over the last five years, gold has been negatively correlated with 10-year real rates 71% of the time. This is reassuring given the popular assumption about opportunity cost for holding a gold position – the higher real rates go, the more costly to keep a non-interest bearing asset like gold. Falling real rates support rising gold prices and vice-versa. Less often, more dominant drivers are at play and gold price appears insensitive to changes in real rates. The low gold price volatility from mid-April to late-September is a good example. Over this time, the yellow metal behaved as a currency. It was highly correlated with the Chinese yuan; to a lesser degree, the euro and yen; and much less, to real rates. 

Which case will be true for the first half of 2019? My latest Kitco Commentary posits the former to be the most likely which is bullish for gold:


In addition to real rates, other important charts to monitor are 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 this Kitco News column:

The Gartman Gold Trade Revisited (Kitco News, 2/14/2018)

Gold value for all three currencies is mixed for the week. It has generally trended higher from a double-bottom in U.S. dollar..
Read Full Article
  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 
Spring Street & Richmond Mill Rhyolite Quarry
Eureka, Nevada
(Rhyolite white rock* was used for lightweight building blocks in the early days. Courtesy UNV Photo Archives)

* Rhyolite is an extrusive igneous rock, a felsic, silica-rich volcanic rock that includes obsidian and pumice. It has a composition similar to granite but has a much smaller grain size. It is composed of the light-colored silicates and is usually buff to pink in color.

Friday, March 29, 2019 AM

Next Week Target Gold Price: $1,310 per ounce, Target Silver Price: $15.23 per ounce.
High/Low range: $1,320/$1,280 per ounce

My 2019 Beer Bet: Gold will rise above $1,380 per ounce by May Day 2019

Here's an easy to understand overview on gold (32 slides, read explanation below each slide): History of gold and which countries have the most

Morning Miners!

A choppy week for metals.

Comex June gold dropped like a rock to $1,293.3 per ounce yesterday and then a tad lower to  $1,291.3 in the wee hours today. The yellow metal crawled back above the key $1,300-level this morning, I'll explain why this is likely a near-term bottom in a moment.

Comex copper got a nice bounce on renewed optimism about the fate of U.S./China trade negotiations. The red metal is trading just below $3 per pound at $2.9365 ($6,474 per tonne, remember >$6,500 or $2.95 is bull territory).

Comex silver - ouch! Checkout my thoughts below. The ole Colonel was looking for a breakout above $16 per ounce in the coming weeks - this week briefly dipped below $15! Some of the stars are  still in alignment for a bullish reversal. Presently silver is trading at $15.150 per ounce with the gold-to-silver ratio at a very high 86 ounce-per-ounce (i.e. silver is historically very very cheap relative to gold).

Editor Allen Sykora included my thoughts on gold in this mornings Kitco News Gold Survey:

“The Federal Reserve's preferred inflation indicator, the personal-consumption expenditure index, fell in January against anticipation of a rise,” said Richard Baker, editor of the Eureka Miner Report.

"This dropped 10-year inflation expectations to November 2017 levels. Fortunately, Treasury yields also fell this week, maintaining real rates around a low 0.5%. This and the re-emergence of negative 10-year bond yields in Germany, Switzerland and Japan maintain a bullish environment for gold.”

[The full report can be found below]

Market Dashboard Flashes Warnings (Update)


Warning Light #1

Last week we discovered the Treasury yield curve has some inversions. Historically, this is a harbinger of recession but doesn't foretell exactly when. Some economists believe inversion signals trouble within 12-18 months.

Something to keep in mind: Inversions don't always foretell recessions but all recessions are preceded by inversions.

Here are the Treasury maturities and yields - this morning (last Friday):

3-month   2.39%  (2.44%)  
6-month  2.43 %  (2.46%)  
12-month 2.40%  (2.44%)
2-year       2.26%  (2.32%)
5-year      2.23%  (2.24%
10-year     2.41%  (2.44%)
30-year     2.82  (2.87%)

Normally yields increase with maturity. In the above list, yields in red are smaller than the preceding yield - an abnormal condition. 

Warning light #2 (No update)

According to Bloomberg news Friday:

The U.S. posted its biggest monthly budget deficit on record last month, amid a 20 percent drop in corporate tax revenue and a boost in spending so far this fiscal year. The budget gap widened to $234 billion in February, compared with a fiscal gap of $215.2 billion a year earlier. That gap surpassed the previous monthly record of $231.7 billion set seven years ago, according to data compiled by Bloomberg.

Here's a way to look at this: total spending was $401 billion in February while the government took in $167 billion. There are 141.2 million individual taxpayers in the U.S. If everyone had to pony up the February deficit (which we don't, the Treasury just sells more bonds) it would work out to $1,660 per taxpayer. And that's just one month!

Ouch!

Warning Light #3

 Three key countries have returned to negative 10-year bond yields: Germany (-0.08%), Switzerland (-0.43%) and Japan (-0.10%). Negative yields are a positive indication for gold. 

Keep the faith! Gold will go further up the stairs in 2019.

This mornings' price action:

Comex gold (6/19 contract) $1,302.8 per ounce, 
Comex silver (5/19 contract) $15.150 per ounce
Comex copper (5/19 contract) $2.9365 per pound

Have a good weekend!

My latest Kitco News commentaries:



Crossroads for Silver?

Several weeks ago, I said a breakout for silver above $16 per ounce may occur soon and cautioned to watch the Indian rupee. The rupee had strengthened below 70 USD/INR and savvy investors in India have been buying U.S. dollars. This has not translated into a move higher for silver in dollar terms.

Today the rupee is 69.15 up (i.e. weaker) from its 68.60 low Monday, March 18th.

Nuts. Comex silver actually dipped below $15 per ounce this week.

The gold-to-silver ratio (GSR) is very near its November high today and ready for a move down - bullish for silver if the Lustrous One recovers more territory. This morning the Comex GSR is 85.99. This chart shows the peak GSR was 86.16 last November (click for larger image size).


Gold-to-Silver Ratio

Historical note:

If gold and silver are legal tender (see gold overview link below headline photo), then you have to come up with a set value for them and figure out which is more valuable than the other. In 1792, the U.S. fixed its price at 15:1. This means that 1 troy ounce — the long-used standard for measuring precious metals — of gold was worth 15 troy ounces of silver. Over the years, as this ratio has changed, precious metal investors have used it as a signal of when to buy.

At 86:1, silver is historically very very cheap relative to gold!

Stay tuned.

Inflation Watch

Inflation expectations made a high April 23, 2018 above trend lines of higher lows (dotted lines, click on chart for larger size). Those trend lines were broken dramatically to the downside late last year and now struggle to recover.


10-year Inflation Expectations

Note: In the above chart inflation expectations peaked at 2.14% February 2, 2018 and then moved higher April 23 to 2.18%. May 29 broke a trend line of higher-lows falling to 2.04%. The older trend lines of higher-lows are shown in dark blue. Those trends extend from June 21, 2017 low of 1.66%. We were recovering from the January 3 low of 1.68% and now above the level of November 27, 2017 (red dashed line). The Wednesday expectations are heading back to the November 2017 level at 1.84%.

My latest Kitco News commentary explains the importance of tracking "real rates" which are a function of inflation expectations:


Interest rates and inflation numbers going forward are greatly influenced by central bank policy worldwide. This 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 these columns are updated in this report.

 Old Glory
Eureka, Nevada

Scorecard 

Here's a scorecard on where we stand with some of our favorite metals. 

Intraday highs on the Comex futures exchange (note new continuous chart baseline): 

Gold $1,365.4 per ounce (continuous chart April, 2018)
Silver $18.160 per ounce (continuous chart September 2017))
Copper $3.2955 per pound ($7,265 per tonne, continuous chart December 2017)



Comex copper rose over 3% for the week on renewed hopes for a U.S./China trade resolution. Presently trading at $2.9365 per pound ($6,474 per tonne), the red metal is now 10.9% below the December 2017 high. Maintaining prices above $6,000 per tonne is a key benchmark to price recovery; above $6,500 is bullish. 

Improving global growth had kept the red metal above the key $3 per pound-level in 2017. Initial trade war fears in 2018 dipped the red metal below this mark but copper then rebounded above $3. Current trade war tensions with China and deteriorating economic conditions there coupled with a strong U.S. dollar have sent the red metal plummeting. Copper has revived on optimism about a resolution of the U.S./China conflict. A stunning drop in February exports and downward revision of the official GDP target weighs on prices. 

Total copper stored in LME and Nymex warehouses is 0.215 million tonnes, down on the week and less than one-half the 0.5 million tonne mark of early-2018. The Nymex warehouse tonnage is behind the LME and still below the 50,000 tonne mark.

LME inventories sagging from last week's gains: 


It is instructive to keep our eyes on the Nymex inventories are still falling (LME 170,725 versus Nymex 44,427 tonnes):


My Input to Kitco News 

Next Week target gold price $1,310 per ounce. Target silver price $15.23 per ounce.

Here is my input to the Kitco News Weekly Gold Report:

A resurgent U.S. dollar and tamer than expected inflation data weighed on gold this week. Down nearly 1% for the week in morning trading, the yellow metal lost relative value across the board - to key commodities, major currencies and recovering U.S. equities.

The Federal Reserve's preferred inflation indicator, the personal-consumption expenditure index (PCE), fell in January against anticipation of a rise. This dropped 10-year inflation expectations to November 2017 levels. Fortunately, Treasury yields also fell this week maintaining real rates around a low 0.5%. This and the re-emergence of negative 10-year bond yields in Germany, Switzerland and Japan maintain a bullish environment for gold. 

The U.S Dollar Index (.DXY) has a lot of daylight above its 200-day moving average and near early-March highs. Nonetheless, Comex gold has struggled back above the key-$1,300-level after yesterday's fall below. It slipped in value relative to oil and copper, the euro and yen, and the S&P 500.

I believe yesterday's foray to $1,290 territory marks a near term low gold and we will see a return to $1,310 per ounce next week with silver following at $15.23 per ounce.

* currently inflation expectations are 1.84% compared to the January bottom of 1.68% (1/13/2019), source: FRED; current 10-year real rates are 0.53% source: Bloomberg

Additional Note:

The fate of the Chinese yuan remains a key tell for gold and copper; a material drop in valuation could impact copper negatively. Something to watch: the yuan dramatically weakened from mid-April 2018 and now appears to be strengthening again.

The yuan stayed below 7.0 USD/CNY for 2018, starting stronger  and then followed by a weakening trend. It has re-strengthened in 2019. The yuan is currently at 6.7072 USD/CNY but with still a lot of daylight above the March 26, 2018 low (i.e. much stronger level) of 6.2342. 1-month yuan volatility is a very low 0.15%. Something to watch compared to 1-month volatilities of euro, yen and gold.

The euro & yen 1-month volatilites are 0.43% & 0.51% respectively; Comex gold 1-month volatility is 0.72%.

Weekly Summary March 29, 2019



Yearly Summary for 2018


(click on table for larger size)

Although Comex gold price lost some steam in 2018 (down 2.1%) it made healthy gains on key commodities copper and oil (up 22.8% & 30.2%). Against the broader Bloomberg Commodity Index (BCOMTR:IND), it advanced a respectable 10.3%. 

Importantly the yellow metal outpaced the S&P 500 stock index by 4.3% making it a better investment than domestic stocks for 2019. This leaves gold it in a strong position for 2019.

Only the Japanese yen, an alternative safe haven, fared better by gaining 4.1% over gold for the year.

Yearly Summary for 2017


(click on table for larger size)

Comex gold gained nearly 14% for 2017 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 Outlook for 2019 (1H)

My 2019 Beer Bet: Gold will rise above $1,380 per ounce by May Day 2019

The first-half of 2019 will be a push-pull to higher $1,380+ gold prices underpinned by a trend of higher lows. This outlook is based on a weakening U.S. dollar and real interest rates that have peaked for the near-term against a volatile backdrop of Washington and geopolitical uncertainty.

Over the last five years, gold has been negatively correlated with 10-year real rates 71% of the time. This is reassuring given the popular assumption about opportunity cost for holding a gold position – the higher real rates go, the more costly to keep a non-interest bearing asset like gold. Falling real rates support rising gold prices and vice-versa. Less often, more dominant drivers are at play and gold price appears insensitive to changes in real rates. The low gold price volatility from mid-April to late-September is a good example. Over this time, the yellow metal behaved as a currency. It was highly correlated with the Chinese yuan; to a lesser degree, the euro and yen; and much less, to real rates. 

Which case will be true for the first half of 2019? My latest Kitco Commentary posits the former to be the most likely which is bullish for gold:


In addition to real rates, other important charts to monitor are the gold-to-S&P500 or AUSP (see "Chart to Watch" below) and gold..
Read Full Article
  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 
Old HWY 50 by North End Slag Piles
Eureka, Nevada (circa 1942)
(photo looking south towards Eureka town site: former site of the Eureka Consolidated Mill on the right; slag piles on the left. Courtesy UNV Photo Archives)

Friday, March 22, 2019 AM

Next Week Target Gold Price: $1,320 per ounce, Target Silver Price: $15.52 per ounce.
High/Low range: $1,340/$1,300 per ounce

My 2019 Beer Bet: Gold will rise above $1,380 per ounce by May Day 2019

Morning Miners!

Comex gold took a healthy bounce to $1,320.2 per ounce yesterday. This morning, the yellow metal has fallen back to trade at $1,311.6 but I believe there is more upside - look for gold to retest $1,320 next week. 

Silver may surprise too but patience is the word (see next section). Comex copper is singing the blues falling below $2.9 per pound, presently at $2.8770. Increasing signs of global slowing and unexpected weakness in Germany have tarnished the red metal lately. Price could reverse on falling supply although the London Metal Exchange got healthy infusion of the stuff this week (please see "Scorecard" below).

Editor Allen Sykora included my thoughts in this mornings Kitco News Gold Survey:

Gold soared, although later in the week the yellow metal backed down from its highs. A dovish Fed tends to help precious metals two ways – by weighing down the U.S. dollar, which has an inverse relationship with gold, and by lowering the so-called “opportunity cost,” or lost income from holding metals instead of an interest-rate-bearing asset.

“The Federal Reserve cleared an obstacle for gold this week by implying they are done with rate hikes this year,” said Richard Baker, editor of the Eureka Miner Report. “The 10-year Treasury fell below 2.5% this morning in a rolling response to this decision coupled with expectations for slower growth in 2019. Inflation expectations have returned to their March high resulting in 10-year real rates fast approaching 0.5%.

“This substantially reduces the opportunity cost for holding a gold position and clears the runway for higher gold prices on future safe-haven demand.”

[The full report can be found below]

The following is an update from this morning:

Going to the next level of the mine shaft, we find that the Treasury yield curve has some inversions. Historically, this is a harbinger of recession but doesn't foretell exactly when. Here are the Treasury maturities and yields at market close today (4:04 p.m. EDT):

3-month   2.44%
6-momth  2.46%
12-month 2.44%
2-year       2.31%
5-year       2.24%
10-year     2.44%
30-year     2.87%

Normally yields increase with maturity. In the above list, yields in red are smaller than the preceding yield - an abnormal condition. Not a good sign.

According to Bloomberg news this afternoon:

The U.S. posted its biggest monthly budget deficit on record last month, amid a 20 percent drop in corporate tax revenue and a boost in spending so far this fiscal year. The budget gap widened to $234 billion in February, compared with a fiscal gap of $215.2 billion a year earlier. That gap surpassed the previous monthly record of $231.7 billion set seven years ago, according to data compiled by Bloomberg.

Ouch!

Finally, the much watched yield on the German 10-year Bund went negative today at -0.02%. From the list above, the comparable U.S. yield is 2.44%. Negative yields are a further positive for gold. 

Keep the faith! Gold will go further up the stairs in 2019.

This mornings' price action:

Comex gold (4/19 contract) $1,311.6 per ounce, 
Comex silver (5/19 contract) $15.420 per ounce
Comex copper (5/19 contract) $2.8770 per pound

Have a good weekend!

My latest Kitco News commentaries:



What About Silver?

Last week I said a breakout for silver above $16 per ounce may occur in the coming weeks and cautioned to watch the Indian rupee. The rupee has been strengthening below 70 USD/INR and savvy investors in India have been buying U.S. dollars. This has not translated into a move higher for silver in dollar terms...yet.

Today the rupee is 68.97 up (i.e. weaker) from its 68.60 low Monday, March 18th.

However, a gold-to-silver ratio (GSR) around 85 is ready for a move down - bullish for silver if the Lustrous One recovers more territory. This morning the Comex GSR is 85.06. This chart shows the peak GSR was 86.16 last November (click for larger image size).


Gold-to-Silver Ratio

Stay tuned.

Inflation Watch

Inflation expectations made a high April 23, 2018 above trend lines of higher lows (dotted lines, click on chart for larger size). Those trend lines were broken dramatically to the downside late last year but now recovery appears to be underway as shown in this chart:


10-year Inflation Expectations

Note: In the above chart inflation expectations peaked at 2.14% February 2, 2018 and then moved higher April 23 to 2.18%. May 29 broke a trend line of higher-lows falling to 2.04%. The older trend lines of higher-lows are shown in dark blue. Those trends extend from June 21, 2017 low of 1.66%. Currently, we are recovering from the January 3 low of 1.68% and now above the level of November 27, 2017 (red dashed line). The Wednesday expectations are maintaining some upward momentum at 1.96%.

My latest Kitco News commentary explains the importance of tracking "real rates" which are a function of inflation expectations:


Interest rates and inflation numbers going forward are greatly influenced by central bank policy worldwide. This 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 these columns are updated in this report.

 Old Glory
Eureka, Nevada

Scorecard 

Here's a scorecard on where we stand with some of our favorite metals. 

Intraday highs on the Comex futures exchange (note new continuous chart baseline): 

Gold $1,365.4 per ounce (continuous chart April, 2018)
Silver $18.160 per ounce (continuous chart September 2017))
Copper $3.2955 per pound ($7,265 per tonne, continuous chart December 2017)



Comex copper fell 1% for the week on global slowing fears. Presently trading at $2.877 per pound ($6,343 per tonne), the red metal is now 12.7% below the December 2017 high. Maintaining prices above $6,000 per tonne is a key benchmark to price recovery; above $6,500 is bullish. 

Improving global growth had kept the red metal above the key $3 per pound-level in 2017. Initial trade war fears in 2018 dipped the red metal below this mark but copper then rebounded above $3. Current trade war tensions with China and deteriorating economic conditions there coupled with a strong U.S. dollar have sent the red metal plummeting. Copper had revived on optimism about a March resolution of the U.S./China conflict. A stunning drop in February exports and downward revision of the official GDP target weighs on prices. 

Total copper stored in LME and Nymex warehouses is 0.226 million tonnes, sharply up on the week but still less than one-half the 0.5 million tonne mark of early-2018. The Nymex warehouse tonnage is behind the LME still below the 50,000 tonne mark.

LME inventories up sharply this week: 


It is instructive to keep our eyes on the Nymex inventories are still falling (LME 179,275 versus Nymex 47,614 tonnes):


My Input to Kitco News 

Next Week target gold price $1,320 per ounce. Target silver price $15.52 per ounce.

Here is my input to the Kitco News Weekly Gold Report:

The Federal Reserve cleared an obstacle for gold this week by implying they are done with rate hikes this year. The 10-year Treasury fell below 2.5% this morning in a rolling response to this decision coupled with expectations for slower growth in 2019. Inflation expectations have returned to their March high resulting in 10-year real rates fast approaching 0.5%.* This substantially reduces the opportunity cost for holding a gold position and clears the runway for higher gold prices on future safe-haven demand. With unresolved U.S./China trade and Brexit deals on the table against a background of global slowing, it is reasonable to believe a return to safe-haven assets is likely.

Although the Indian rupee remains below 70 USD/INR, some savvy investors there are buying U.S. dollars. It remains to be seen whether this will translate to buying gold and silver in dollar terms. However, a strengthening rupee remains a bullish indication. All in all, I believe gold will see additional lift to $1,320 per ounce next week on its path to $1,380 per ounce by May. My target gold price is $1,320 with silver following at $15.52 per ounce.

* currently inflation expectations are 1.96% compared to the January bottom of 1.68% (1/13/2019), source: FRED; current 10-year real rates are 0.54%, down 20 basis points year-on-year, source: Bloomberg

Additional Note:

The fate of the Chinese yuan remains a key tell for gold and copper; a material drop in valuation could impact copper negatively. Something to watch: the yuan dramatically weakened from mid-April 2018 and now appears to be strengthening again.

The yuan stayed below 7.0 USD/CNY for 2018, starting stronger  and then followed by a weakening trend. It has re-strengthened in 2019. The yuan is currently at 6.7124 USD/CNY but with still a lot of daylight above the March 26, 2018 low (i.e. much stronger level) of 6.2342. 1-month yuan volatility is a low 0.17%. Something to watch compared to 1-month volatilities of euro and yen.

The euro & yen 1-month volatilites are 0.42% & 0.41% respectively; Comex gold 1-month volatility is 1.09%.

Weekly Summary March 22, 2019



Yearly Summary for 2018


(click on table for larger size)

Although Comex gold price lost some steam in 2018 (down 2.1%) it made healthy gains on key commodities copper and oil (up 22.8% & 30.2%). Against the broader Bloomberg Commodity Index (BCOMTR:IND), it advanced a respectable 10.3%. 

Importantly the yellow metal outpaced the S&P 500 stock index by 4.3% making it a better investment than domestic stocks for 2019. This leaves gold it in a strong position for 2019.

Only the Japanese yen, an alternative safe haven, fared better by gaining 4.1% over gold for the year.

Yearly Summary for 2017


(click on table for larger size)

Comex gold gained nearly 14% for 2017 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 Outlook for 2019 (1H)

My 2019 Beer Bet: Gold will rise above $1,380 per ounce by May Day 2019

The first-half of 2019 will be a push-pull to higher $1,380+ gold prices underpinned by a trend of higher lows. This outlook is based on a weakening U.S. dollar and real interest rates that have peaked for the near-term against a volatile backdrop of Washington and geopolitical uncertainty.

Over the last five years, gold has been negatively correlated with 10-year real rates 71% of the time. This is reassuring given the popular assumption about opportunity cost for holding a gold position – the higher real rates go, the more costly to keep a non-interest bearing asset like gold. Falling real rates support rising gold prices and vice-versa. Less often, more dominant drivers are at play and gold price appears insensitive to changes in real rates. The low gold price volatility from mid-April to late-September is a good example. Over this time, the yellow metal behaved as a currency. It was highly correlated with the Chinese yuan; to a lesser degree, the euro and yen; and much less, to real rates. 

Which case will be true for the first half of 2019? My latest Kitco Commentary posits the former to be the most likely which is bullish for gold:


In addition to real rates, other important charts to monitor are 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 this Kitco News column:

The Gartman Gold Trade Revisited (Kitco News, 2/14/2018)

Gold value for all three currencies is up for the week. It has generally trended higher from a double-bottom in U.S. dollar terms (August 17 & September 27, 2018) 

Click on the image for a larger size:


Gold in euro & yen terms with margin above 2013 lows

Divergence has resumed for gold in terms of euro compared to yen:



Gold euro/yen spread widens again in 2018
Read Full Article
  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 

The Eureka Consolidated Mill in 1883 and Today
Eureka, Nevada
(photo above looking west: Louis Monaco, courtesy UNV;
photo below looking northeast: after 2018 EPA remediation,
road follows old railroad grade, slag pile in background)


Friday, March 15, 2019 AM

Next Week Target Gold Price: $1,310 per ounce, Target Silver Price: $15.42 per ounce.
High/Low range: $1,330/$1,280 per ounce

My 2019 Beer Bet: Gold will rise above $1,380 per ounce by May Day 2019

Morning Miners!

A sigh of relief as Comex April gold climbs above the $1,300-level. It touched $1,306.3 per ounce before falling back to trade at $1302.7 this morning. The lows for the week stayed above the March 7 dip to $1,208.8 so we should be on our way up the shaft.

I believe a breakout for silver above $16 per ounce is in the cards in the coming weeks - watch the Indian rupee. A gold-to-silver ratio (GSR) around 85 is ready for a move down - bullish for silver if the Lustrous One recovers more territory. The GSR is 84.98 ounce-per-ounce.

Editor Allen Sykora included my thoughts in this mornings Kitco News Gold Survey:

Richard Baker, editor of the Eureka Miner Report, said that gold “demonstrated buoyancy but not much more” this week. Still, he sees factors in favor of the yellow metal. “However, a rate environment supportive of higher gold prices is still in play,” Baker said. “The weekly move lower in the 10-year Treasury yields and a slight uptick in inflation expectations over that same period has pushed real rates to a new 2019 low of 0.65% -- this is 8 basis points below a year-over-year comparison and a full 14 bps on a monthly basis.

“Additionally, the Indian rupee has strengthened below 70 USD/INR for seven out of the last eight market days. This makes gold and silver denominated in U.S. dollars cheaper for Indian buyers on a relative basis. These are potentially bullish developments.”

[The full report can be found below]

Keep the faith! Gold will go further up the stairs in 2019.

This mornings' price action:

Comex gold (4/19 contract) $1,302.7 per ounce, 
Comex silver (5/19 contract) $15.330 per ounce
Comex copper (5/19 contract) $2.900 per pound

Have a good weekend!

My latest Kitco News commentaries:



Barrick & Newmont JV in Nevada (Update)

Tim Burmeister, the new mining editor for the Elko Daily Free Press, posted several good updates this week on the ongoing Barrick/Newmont drama unfolding in Northern Nevada:


Newmont shareholder vote on Goldcorp merger set April 11 (Businesswire, Elko Daily Free Press, 3/12/2019)

Barrick, Newmont joint venture offices to be in Elko (Timothy Burmeister, Elko Daily Free Press, 3/12/2019)

The best of luck to Tim on his new assignment!

Inflation Watch

Inflation expectations made a high April 23, 2018 above trend lines of higher lows (dotted lines, click on chart for larger size). Those trend lines were broken dramatically to the downside late last year but now recovery appears to be underway as shown in this chart:


10-year Inflation Expectations

Note: In the above chart inflation expectations peaked at 2.14% February 2, 2018 and then moved higher April 23 to 2.18%. May 29 broke a trend line of higher-lows falling to 2.04%. The older trend lines of higher-lows are shown in dark blue. Those trends extend from June 21, 2017 low of 1.66%. Currently, we are recovering from the January 3 low of 1.68% and now above the level of November 27, 2017 (red dashed line). The Wednesday expectations are maintaining some upward momentum at 1.92%.

My latest Kitco News commentary explains the importance of tracking "real rates" which are a function of inflation expectations:


Interest rates and inflation numbers going forward are greatly influenced by central bank policy worldwide. This 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 these columns are updated in this report.

 Old Glory
Eureka, Nevada

Scorecard 

Here's a scorecard on where we stand with some of our favorite metals. 

Intraday highs on the Comex futures exchange (note new continuous chart baseline): 

Gold $1,365.4 per ounce (continuous chart April, 2018)
Silver $18.160 per ounce (continuous chart September 2017))
Copper $3.2955 per pound ($7,265 per tonne, continuous chart December 2017)



Comex copper added a little for the week, up 0.2%. Presently trading at $2.900 per pound ($6,393 per tonne), the red metal is now 12.0% below the December 2017 high. Maintaining prices above $6,000 per tonne is a key benchmark to price recovery; above $6,500 is bullish. 

Improving global growth had kept the red metal above the key $3 per pound-level in 2017. Initial trade war fears in 2018 dipped the red metal below this mark but copper then rebounded above $3. Current trade war tensions with China and deteriorating economic conditions there coupled with a strong U.S. dollar have sent the red metal plummeting. Copper had revived on optimism about a March resolution of the U.S./China conflict. A stunning drop in February exports and downward revision of the official GDP target weighs on prices. 

Total copper stored in LME and Nymex warehouses is 0.162 million tonnes and is less  than one-third the 0.5 million tonne mark of early-2018. The Nymex warehouse tonnage is behind the LME falling below the 50,000 tonne mark.

LME inventories continue to fall after January gains: 


It is instructive to keep our eyes on the Nymex inventories which are also still falling (LME 111,775 versus Nymex 49,912 tonnes):


My Input to Kitco News 

Next Week target gold price $1,310 per ounce. Target silver price $15.42 per ounce.

Here is my input to the Kitco News Weekly Gold Report:

Gold price this week demonstrated buoyancy but not much more.

This morning it bobbed above the key $1,300 per ounce waterline to eek out a small weekly gain and resisted a return to recent lows $20 below. Background fears of "no deals" in the near term for either China or Brexit coupled with a slowing global economy provide flotation for the yellow metal. However, domestic stocks, which are poised to make 7-week gains, and a resiliently strong U.S. dollar have stalled a return to the $1,320-level.* 

A rate environment supportive of higher gold prices is still in play. The weekly move lower in the 10-year Treasury yields and a slight uptick in inflation expectations over that same period has pushed real rates to a new 2019 low of 0.65% - this is 8 basis points below a year-over-year comparison and a full 14 bps on a monthly basis.** Additionally, the Indian rupee has strengthened below 70 USD/INR for 7 out of the last 8 market days. This makes gold and silver denominated in U.S. dollars cheaper for Indian buyers on a relative basis. These are potentially bullish developments.

All in all, I believe gold will see some additional lift next week along with silver. My target gold price is $1,310 with silver following at $15.42 per ounce. 

* gold has lost nearly 3% of value relative to the S&P 500 this week.
** currently inflation expectations are 1.92% compared to the January bottom of 1.68% (1/13/2019), source: FRED; 10-year treasury rate falls below 2.6% this AM.

Additional Note:

The fate of the Chinese yuan remains a key tell for gold and copper; a material drop in valuation could impact copper negatively. Something to watch: the yuan dramatically weakened from mid-April 2018 and now appears to be strengthening again.

The yuan stayed below 7.0 USD/CNY for 2018, starting stronger  and then followed by a weakening trend. It has re-strengthened in 2019. The yuan is currently at 6.7127 USD/CNY but with still a lot of daylight above the March 26, 2018 low (i.e. much stronger level) of 6.2342. A 1-month yuan volatility is a moderate 0.35%. Something to watch compared to 1-month volatilities of euro and yen.

The euro & yen 1-month volatilites are 0.42% & 0.43% respectively; Comex gold 1-month volatility is an elevated 1.50%.

Weekly Summary March 15, 2019



Yearly Summary for 2018


(click on table for larger size)

Although Comex gold price lost some steam in 2018 (down 2.1%) it made healthy gains on key commodities copper and oil (up 22.8% & 30.2%). Against the broader Bloomberg Commodity Index (BCOMTR:IND), it advanced a respectable 10.3%. 

Importantly the yellow metal outpaced the S&P 500 stock index by 4.3% making it a better investment than domestic stocks for 2019. This leaves gold it in a strong position for 2019.

Only the Japanese yen, an alternative safe haven, fared better by gaining 4.1% over gold for the year.

Yearly Summary for 2017


(click on table for larger size)

Comex gold gained nearly 14% for 2017 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 Outlook for 2019 (1H)

My 2019 Beer Bet: Gold will rise above $1,380 per ounce by May Day 2019

The first-half of 2019 will be a push-pull to higher $1,380+ gold prices underpinned by a trend of higher lows. This outlook is based on a weakening U.S. dollar and real interest rates that have peaked for the near-term against a volatile backdrop of Washington and geopolitical uncertainty.

Over the last five years, gold has been negatively correlated with 10-year real rates 71% of the time. This is reassuring given the popular assumption about opportunity cost for holding a gold position – the higher real rates go, the more costly to keep a non-interest bearing asset like gold. Falling real rates support rising gold prices and vice-versa. Less often, more dominant drivers are at play and gold price appears insensitive to changes in real rates. The low gold price volatility from mid-April to late-September is a good example. Over this time, the yellow metal behaved as a currency. It was highly correlated with the Chinese yuan; to a lesser degree, the euro and yen; and much less, to real rates. 

Which case will be true for the first half of 2019? My latest Kitco Commentary posits the former to be the most likely which is bullish for gold:


In addition to real rates, other important charts to monitor are 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 this Kitco News column:

The Gartman Gold Trade Revisited (Kitco News, 2/14/2018)

Gold value for all three currencies is mixed this week. It has generally trended higher from a double-bottom in U.S. dollar terms (August 17 & September 27, 2018) 

Click on the image for a larger size:


Gold in euro & yen terms with margin above 2013 lows

Divergence has resumed for gold in terms of euro compared to yen:



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 at 126.32, it is divergent from parity.

Chart to Watch

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..
Read Full Article
  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 
Windfall Mine (circa 1930s), Eureka, Nevada

Friday, March 08, 2019 AM

Next Week Target Gold Price: $1,310 per ounce, Target Silver Price: $15.43 per ounce.
High/Low range: $1,330/$1,280 per ounce

My 2019 Beer Bet: Gold will rise above $1,380 per ounce by May Day 2019

Morning Miners!

The good, the bad and the ugly.

I've started this report with those words before and this week warrants a repeat. Enjoying life in the $1,300+ neighborhood for sometime, Comex gold dipped to $1,280.8 per ounce Thursday. Comex  copper, after nearly touching $3 per pound earlier this month, fell below $6,500 per tonne ($2.95 per pound) - a key plateau for bullish recovery.

Fortunately, the yellow metal bounced to $1,301.3 after the monthly jobs report release and is presently trading at $1,299.0 per ounce. The red metal remains in the doldrums at $2.8850 per pound.

Here's how I described the situation to Kitco News this morning:

The good and the bad this week are reflected in this morning's February jobs report; we find ugly far from our shores. Low headline unemployment and strong wage growth suggest a vibrant domestic economy. The bad part is a big miss on jobs added (by separate survey) supporting notions that the economy is indeed slowing. China and Europe both face ugly economic numbers underlining a global slowdown in progress. China's much worst-than-expected drop in exports coupled with an official downward revision of GDP show the impact of the U.S./China trade tensions. A similar downgrade of euro zone GDP, ECB Draghi's pessimistic outlook and re-introduction of stimulus measures tumbled the euro currency. 


How does gold react? On a weekly basis the yellow metal has not moved much at all. However, response to Draghi tested the $1,280-level yesterday and this morning's mixed report returned gold to trade near $1,300 per ounce. Importantly, gold made solid value gains relative to equities and commodities for the week [see weekly Summary Chart below]. This is a bullish for more gains next week as 10-year real rates still remain below 1%.

My target gold price is $1,310 with silver following at $15.43 per ounce. 

Eureka Mining Report's Baker: The Good, Bad And Ugly (Allen Sykora, Kitco News, 03-09-2019)

In fairness, the mixed jobs report may have some funnies due to severe weather in February and the lingering effects of the government shutdown. Only 20,000 jobs were added compared to an expectation of 180,000 although headline unemployment is 3.8% (by separate survey). 

Encouragingly, there were upward revisions to both the December and January numbers resulting in a healthy 3-month average of 186,000 jobs per month. Average hourly earnings also popped 0.4% suggesting robust wage growth. Participation rate held at 63.2% with more women returning to the workforce.

On the international scene, China exports plunged a startling 20.7%  and the official GDP target was lowered from 6.5% to 6.0% (partially explaining the slump in copper prices). European Central Bank Cheif Mario Draghi sees "a period of continued weakness and pervasive uncertainty " in the euro zone. He re-introduced stimulus for banks and lowered GDP estimates from 1.7% to 1.1%.

The good, the bad and the ugly.

When a Good Gold Model Goes Bad

The breakdown of a good gold model tells us something fundamental has changed in the drivers of gold price. The model below, introduced in February, is based on the the Japanese yen (USD/JPY), 10-year real rates and the Chinese yuan (USD/CNY). It demonstrated good accuracy over a three-month period. The estimation error was less than 1% and the model explained all but 10% of the variance in gold price (in statistical terms R-squared = 0.900). This week that model broke down rather dramatically. I am presently sorting through the pieces to determine what new forces are in play. Stay tuned.


(click on chart for larger image)

Keep the faith! Gold will go further up the stairs in 2019.

This mornings' price action:

Comex gold (4/19 contract) $1,299.0 per ounce, 
Comex silver (5/19 contract) $15.295 per ounce
Comex copper (5/19 contract) $2.8850 per pound

Have a good weekend!

My latest Kitco News commentaries:



Inflation Watch

Inflation expectations made a high April 23, 2018 above trend lines of higher lows (dotted lines, click on chart for larger size). Those trend lines were broken dramatically to the downside late last year but now recovery appears to be underway as shown in this chart:


10-year Inflation Expectations

Note: In the above chart inflation expectations peaked at 2.14% February 2, 2018 and then moved higher April 23 to 2.18%. May 29 dramatically broke a trend line of higher-lows falling to 2.04%. The older trend lines of higher-lows are shown in dark blue. Those trends extend from June 21, 2017 low of 1.66%. Currently, we are recovering from the January 3 low of 1.68% and now above the level of November 27, 2017 (red dashed line). The Wednesday expectations are maintaining upward momentum at 1.91%.

My latest Kitco News commentary explains the importance of tracking "real rates" which are a function of inflation expectations:


Interest rates and inflation numbers going forward are greatly influenced by central bank policy worldwide. This 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 these columns are updated in this report.

 Old Glory
Eureka, Nevada

Scorecard 

Here's a scorecard on where we stand with some of our favorite metals. 

Intraday highs on the Comex futures exchange (note new continuous chart baseline): 

Gold $1,365.4 per ounce (continuous chart April, 2018)
Silver $18.160 per ounce (continuous chart September 2017))
Copper $3.2955 per pound ($7,265 per tonne, continuous chart December 2017)



Comex copper headed back downhill this week. Presently trading at $2.8850 per pound ($6,360 per tonne), the red metals is now  12.5% below the December 2017 high. Maintaining prices above $6,000 per tonne is a key benchmark to price recovery; above $6,500 is bullish. 

Improving global growth had kept the red metal above the key $3 per pound-level in 2017. Initial trade war fears in 2018 dipped the red metal below this mark but copper then rebounded above $3. Current trade war tensions with China and deteriorating economic conditions there coupled with a strong U.S. dollar have sent the red metal plummeting. Copper had revived on optimism about a March resolution of the U.S./China conflict. A stunning drop in February exports and downward revision of the official GDP target weighed on prices this week.

Total copper stored in LME and Nymex warehouses is 0.174 million tonnes and is more than one-half below the 0.5 million tonne mark of early-2018. The Nymex warehouse tonnage is behind the LME and now considerably below the 75,000 tonne mark.

LME inventories continue to fall after January gains: 


It is instructive to keep our eyes on the Nymex inventories which are also still falling (LME 120,075 versus Nymex 54,178 tonnes):


My Input to Kitco News 

Next Week target gold price $1,310 per ounce. Target silver price $15.43 per ounce.

Here is my input to the Kitco News Weekly Gold Report:

The good, the bad & the ugly.

The good and the bad this week are reflected in this morning's February jobs report; we find ugly far from our shores. Low headline unemployment and strong wage growth suggest a vibrant domestic economy. The bad part is a big miss on jobs added (by separate survey) supporting notions that the economy is indeed slowing. China and Europe both face ugly economic numbers underlining a global slowdown in progress. China's much worst-than-expected drop in exports coupled with an official downward revision of GDP show the impact of the U.S./China trade tensions. A similar downgrade of euro zone GDP, ECB Draghi's pessimistic outlook and re-introduction of stimulus measures tumbled the euro currency. 

How does gold react? On a weekly basis the yellow metal has not moved much at all. However, response to Draghi tested the $1,280-level yesterday and this morning's mixed report returned gold to trade near $1,300 per ounce. Importantly, gold made solid value gains relative to equities and commodities for the week*. This is a bullish for more gains next week as 10-year real rates still remain below 1%** [see Weekly Summary Chart]

My target gold price is $1,310 with silver following at $15.43 per ounce. 

* +2.7% gain on the S&P 500 and +1.1% gain on the broader Bloomberg Commodity Index (BCOM)

** currently inflation expectations are 1.91% compared to the January bottom of 1.68% (1/13/2019), source: FRED; 10-year real rate = 0.74%

Additional Note:

The fate of the Chinese yuan remains a key tell for gold and copper; a material drop in valuation could impact copper negatively. Something to watch: the yuan dramatically weakened from mid-April 2018 and now appears to be strengthening again.

The yuan stayed below 7.0 USD/CNY for 2018, starting stronger  and then followed by a weakening trend. It has re-strengthened in 2019. The yuan is currently at 6.7200 USD/CNY but with still a lot of daylight above the March 26, 2018 low (i.e. much stronger level) of 6.2342. A 1-month yuan volatility is a moderate 0.47%. Something to watch compared to 1-month volatilities of euro and yen.

The euro & yen 1-month volatilites are 0.41% & 0.57% respectively; Comex gold 1-month volatility is an elevated 1.39%.

Weekly Summary March 08, 2019



Yearly Summary for 2018


(click on table for larger size)

Although Comex gold price lost some steam in 2018 (down 2.1%) it made healthy gains on key commodities copper and oil (up 22.8% & 30.2%). Against the broader Bloomberg Commodity Index (BCOMTR:IND), it advanced a respectable 10.3%. 

Importantly the yellow metal outpaced the S&P 500 stock index by 4.3% making it a better investment than domestic stocks for 2019. This leaves gold it in a strong position for 2019.

Only the Japanese yen, an alternative safe haven, fared better by gaining 4.1% over gold for the year.

Yearly Summary for 2017


(click on table for larger size)

Comex gold gained nearly 14% for 2017 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 Outlook for 2019 (1H)

My 2019 Beer Bet: Gold will rise above $1,380 per ounce by May Day 2019

The first-half of 2019 will be a push-pull to higher $1,380+ gold prices underpinned by a trend of higher lows. This outlook is based on a weakening U.S. dollar and real interest rates that have peaked for the near-term against a volatile backdrop of Washington and geopolitical uncertainty.

Over the last five years, gold has been negatively correlated with 10-year real rates 71% of the time. This is reassuring given the popular assumption about opportunity cost for holding a gold position – the higher real rates go, the more costly to keep a non-interest bearing asset like gold. Falling real rates support rising gold prices and vice-versa. Less often, more dominant drivers are at play and gold price appears insensitive to changes in real rates. The low gold price volatility from mid-April to late-September is a good example. Over this time, the yellow metal behaved as a currency. It was highly correlated with the Chinese yuan; to a lesser degree, the euro and yen; and much less, to real rates. 

Which case will be true for the first half of 2019? My latest Kitco Commentary posits the former to be the most likely which is bullish for gold:


In addition to real rates, other important charts to monitor are 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 this Kitco News column:

The Gartman Gold Trade Revisited (Kitco News, 2/14/2018)

Gold value for all three currencies is mixed this week following a rally from a double-bottom in U.S. dollar terms (August 17 & September 27, 2018) 

Click on the image for a larger size:


Gold in euro & yen terms with margin above 2013 lows

Divergence has resumed for gold in terms of euro compared to yen:


Read Full Article
  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 
Heavy Metal, Eureka, Nevada (2012)

Friday, March 01, 2019 AM

Next Week Target Gold Price: $1,310 per ounce, Target Silver Price: $15.48 per ounce.
High/Low range: $1,338/$1,298 per ounce

My 2019 Beer Bet: Gold will rise above $1,380 per ounce by May Day 2019

Morning Miners!

Even with all the scary headlines lately, copper continues to rally. Early this morning Comex copper came within a whisker of the elusive $3 per pound-level touching $2.977 or $6,563 per tonne. The metric level of $6,500 is considered a bullish plateau by some experts. Bottom of the shaft to sunlight prices have soared a stunning 17% since January.

Is Dr. Copper is seeing something on the horizon? A favorable U.S./China trade outcome this month? Total warehouse inventories have fallen for months (see below), any pickup in global demand sets the stage for higher prices in the supply/demand equation. Just a few years ago, prices rarely fell $3 per pound - boy, do I miss the Commodity Super Cycle!

The Lustrous One wears less rosy global glasses. Gold has scored higher lows since August 2018. By fall, it accelerated even higher on safe haven demand. After reaching a 10-month peak in February, morning prices briefly dipped below $1,300 support (Comex gold $1,299.4 at 8:00 a.m. Eureka time). Comex was $1,308.6 when I did my earlier morning analysis. Let's see where the yellow metal closes.

Is the ole Colonel worried...?

Kitco News Editor Allen Sykora carried my thoughts today in his Weekly Gold Survey :

Richard Baker, editor of the Eureka Miner Report, also looks for the metal to recover.

“Tides ebb and flow,” Baker said. “I continue to maintain that the yellow metal will break $1,380 before May Day. Geopolitical tensions -- including the Indo-Pakistani conflict, failed U.S.-North Korea Summit, Brexit deadline and U.S.-China trade negotiations -- create enough uncertainty to keep the safe-haven waters flowing."

“Importantly, the environment for higher prices is still favorable. Inflation expectations are creeping up even though the 10-year Treasury yields are rising. This keeps real rates below 1%. Given low opportunity cost and negative interest rates in major economies outside the U.S., there are few obstacles to prevent a flood tide to higher gold prices given one or more geopolitical shocks.”

My full Kitco report is included below.

Don't worry be happy.

Here is a gold model introduced several weeks ago based on the the Japanese yen (USD/JPY), 10-year real rates and the Chinese yuan (USD/CNY). It demonstrates good accuracy over a three-month period. The estimation error is less than 1% and explains all but 10% of the variance in gold price (in statistical terms R-squared = 0.900 which is still quite good). This suggests gold has transitioned from a pure safe-haven play to more currency-like behavior with a strong correlation with the yuan:

(click on chart for larger image)

Keep the faith! Gold will go further up the stairs in 2019.

This mornings' price action:

Comex gold (4/19 contract) $1,308.6 per ounce, 
Comex silver (5/19 contract) $15.465 per ounce
Comex copper (5/19 contract) $2.9645 per pound

Have a good weekend!

My latest Kitco News commentaries:




Inflation Watch

Inflation expectations made a high April 23, 2018 above trend lines of higher lows (dotted lines, click on chart for larger size). Those trend lines were broken dramatically to the downside late last year but now recovery appears to be underway as shown in this chart:


10-year Inflation Expectations

Note: In the above chart inflation expectations peaked at 2.14% February 2, 2018 and then moved higher April 23 to 2.18%. May 29 dramatically broke a trend line of higher-lows falling to 2.04%. This Wednesday expectations are picking up more momentum at 1.93%. The older trend lines of higher-lows are shown in dark blue. Those trends extend from June 21, 2017 low of 1.66%. Currently, we are recovering from the January 3 low of 1.68% and now above the level of November 27, 2017 (red dashed line).

My latest Kitco News commentary explains the importance of tracking "real rates" which are a function of inflation expectations:


Interest rates and inflation numbers going forward are greatly influenced by central bank policy worldwide. This 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 these columns are updated in this report.

 Old Glory
Eureka, Nevada

Scorecard 

Here's a scorecard on where we stand with some of our favorite metals. 

Intraday highs on the Comex futures exchange (note new continuous chart baseline): 

Gold $1,365.4 per ounce (continuous chart April, 2018)
Silver $18.160 per ounce (continuous chart September 2017))
Copper $3.2955 per pound ($7,265 per tonne, continuous chart December 2017)



Comex copper continues its bullis advance trading up from last Friday at $2.9645 per pound ($6,536 per tonne), now  only 10.0% below the December 2017 high. Maintaining prices above $6,000 per tonne is a key benchmark to price recovery; above $6,500 is bullish. 

Improving global growth had kept the red metal above the key $3 per pound-level in 2017. Initial trade war fears in 2018 dipped the red metal below this mark but copper then rebounded above $3. Current trade war tensions with China and deteriorating economic conditions there coupled with a strong U.S. dollar have sent the red metal plummeting. However, copper is now technically only in correction territory (i.e. 10% down) given recent optimism about a U.S./China trade deal this spring.

Total copper stored in LME and Nymex warehouses is 0.188 million tonnes and is more than one-half below the 0.5 million tonne mark of early-2018. The Nymex warehouse tonnage is behind the LME and now considerably below the 100,000 tonne mark.

LME inventories continue to fall after January gains: 


It is instructive to keep our eyes on the Nymex inventories which are also still falling (LME 130,925 versus Nymex 57,629 tonnes):


My Input to Kitco News 

Next Week target gold price $1,320 per ounce. Target silver price $15.60 per ounce.

Here is my input to the Kitco News Weekly Gold Report:

Gold certainly experienced an ebb tide this week. It fell in dollar value nearly 2% and in relative value to major currencies, key commodities and domestic equities. This morning Comex gold came very close to breaking the key psychological $1,300-level dipping to $1,305.4 per ounce (4/19 contract). 

Tides ebb and flow. I continue to maintain that the yellow metal will break $1,380 before May Day. Geo-political tensions including the Indo-Pakistani conflict, failed U.S./North Korea Summit, Brexit deadline and U.S./China trade negotiations create enough uncertainty to keep the safe-haven waters flowing. Importantly, the environment for higher prices is still favorable. Inflation expectations are creeping up even though the 10-year treasury yields are rising. This keeps real rates below 1%*. Given low opportunity cost and negative interest rates in major economies outside the U.S., there are few obstacles to prevent a flood tide to higher gold prices given one or more geo-political shocks.

My model shows a statistical range for gold prices of $1,298 to $1,338 per ounce next week. My target gold price is $1,310 with silver following at $15.48 per ounce. 

*Currently inflation expectations are 1.93% compared to the January bottom of 1.68% (1/13/2019), source: FRED; 10-year real rate = 0.78%

Additional Note:

The fate of the Chinese yuan remains a key tell for gold and copper; a material drop in valuation could impact copper negatively. Something to watch: the yuan dramatically weakened from mid-April 2018 and now appears to be strengthening again.

The yuan stayed below 7.0 USD/CNY for 2018, starting stronger  and then followed by a weakening trend. It has re-strengthened in 2019. The yuan is currently at 6.7066 USD/CNY but with still a lot of daylight above the March 26, 2018 low (i.e. much stronger level) of 6.2342. A 1-month yuan volatility is a moderate 0.47%. Something to watch compared to 1-month volatilities of euro and yen.

The euro & yen 1-month volatilites are 0.47% & 0.62% respectively; Comex gold 1-month volatility is 0.75%.

Weekly Summary March 01, 2019



Yearly Summary for 2018


(click on table for larger size)

Although Comex gold price lost some steam in 2018 (down 2.1%) it made healthy gains on key commodities copper and oil (up 22.8% & 30.2%). Against the broader Bloomberg Commodity Index (BCOMTR:IND), it advanced a respectable 10.3%. 

Importantly the yellow metal outpaced the S&P 500 stock index by 4.3% making it a better investment than domestic stocks for 2019. This leaves gold it in a strong position for 2019.

Only the Japanese yen, an alternative safe haven, fared better by gaining 4.1% over gold for the year.

Yearly Summary for 2017


(click on table for larger size)

Comex gold gained nearly 14% for 2017 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 Outlook for 2019 (1H)

My 2019 Beer Bet: Gold will rise above $1,380 per ounce by May Day 2019

The first-half of 2019 will be a push-pull to higher $1,380+ gold prices underpinned by a trend of higher lows. This outlook is based on a weakening U.S. dollar and real interest rates that have peaked for the near-term against a volatile backdrop of Washington and geopolitical uncertainty.

Over the last five years, gold has been negatively correlated with 10-year real rates 71% of the time. This is reassuring given the popular assumption about opportunity cost for holding a gold position – the higher real rates go, the more costly to keep a non-interest bearing asset like gold. Falling real rates support rising gold prices and vice-versa. Less often, more dominant drivers are at play and gold price appears insensitive to changes in real rates. The low gold price volatility from mid-April to late-September is a good example. Over this time, the yellow metal behaved as a currency. It was highly correlated with the Chinese yuan; to a lesser degree, the euro and yen; and much less, to real rates. 

Which case will be true for the first half of 2019? My latest Kitco Commentary posits the former to be the most likely which is bullish for gold:


In addition to real rates, other important charts to monitor are 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 this Kitco News column:

The Gartman Gold Trade Revisited (Kitco News, 2/14/2018)

Gold value for all three currencies has stalled for now after a rally from a double-bottom in U.S. dollar terms (August 17 & September 27, 2018) 

Click on the image for a larger size:


Gold in euro & yen terms with margin above 2013 lows

Divergence has resumed for gold in terms of euro compared to yen:



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 127.47 suggesting a pause in divergence from parity.

Chart to Watch

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...
Read Full Article
  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 

Red Metal Rocks, Mariana Titus (2011)

Friday, February 22, 2019 AM

Next Week Target Gold Price: $1,340 per ounce, Target Silver Price: $15.96 per ounce.
High/Low range: $1,352/$1,314 per ounce

My 2019 Beer Bet: Gold will rise above $1,380 per ounce by May Day 2019

Morning Miners!

Where to begin? A great week for the metals as corporate elephants begin to dance.

Let's start with copper. Today, the red metal rocked on the London Metal Exchange (LME) to $6,458 per tonne, the highest level since last July. That's $2.93 per pound coming very close to the key-$3 per pound level. Comex copper followed, trading within a penny or two of the LME this morning - up nearly 5% for the week. Most of this pop comes from improving sentiment about the ongoing U.S./China trade negotiations.

Comex gold was no slouch either coming within a whisker of the $1,350-level Wednesday ($1,349.4), currently trading currently at $1,331.5 per ounce. This is how I framed the outlook for Kitco News this morning:

Even with currents of optimism flowing, the broader view of declining global growth keeps safe haven plays like gold in gear. This is allied by a whiff of commodity inflation with higher oil prices and copper just below the key $3 per pound level - the broader Bloomberg Commodity Index (BCOM) is once again above 170, a high for 2019. Inflation expectations are also picking up keeping 10-year real rates suppressed below 1%. This provides an improving environment for gold investors. [see inflation expectation chart]

Gold also outpaced major currencies euro and yen this week and reaffirmed its positive correlation with a strengthening Chinese yuan - a very strong currency showing for the Lustrous One. [see currency charts]

[full report is included below]

Here is a new gold model based on the the Japanese yen (USD/JPY), 10-year real rates and the Chinese yuan (USD/CNY). It demonstrates good accuracy over a three-month period. The estimation error is less than 1% and explains all but 7% of the variance in gold price (in statistical terms R-squared = 0.924 which is quite good). This suggests gold is transitioning from a pure safe-haven play to more currency-like behavior with a strong correlation with the yuan:

(click on chart for larger image)

Keep the faith! Gold will go further up the stairs in 2019.

This mornings' price action:

Comex gold (4/19 contract) $1,331.5 per ounce, 
Comex silver (3/19 contract) $15.860 per ounce
Comex copper (3/19 contract) $2.9360 per pound

Have a good weekend!

My latest Kitco News commentaries:



Elephant Dance, Barrick & Newmont

On the corporate front, Barrick Gold (GOLD) acknowledged it has reviewed the possibility of a merger with Newmont Mining (NEM) in an all-stock transaction. You may remember Barrick and Newmont came close to merging before but talks in 2014 broke down. The two giant miners have also discussed a joint venture for their Nevada operations.The chief executives of these two giants  and Newcrest Mining (OTCPK:NCMGY), a potential partner in a merger deal, will all be in Florida next week for a BMO Capital Markets mining conference. Hmm....

McEwen Mining Reports

Yesterday released their report for 2018:


TORONTO, Feb. 21, 2019 (GLOBE NEWSWIRE) -- McEwen Mining Inc. (NYSE: MUX) (TSX: MUX) today reported fourth quarter and full year results for the period ended December 31, 2018. For the year, McEwen Mining achieved record production of 175,640 gold equivalent ounces(1) (“GEOs”), at cash costs of $817(2) per GEO and all-in sustaining costs (“AISC”) of $1,002 per GEO. Our 2019 production guidance is 210,000 GEOs, a 20% increase over 2018 production, at average cash costs and AISC per GEO of $877 and $1,034, respectively. 

During 2018, we invested heavily in areas that we believe will enhance our future growth and profitability. We invested $35 million in exploration, $66 million in construction at the Gold Bar Mine in Nevada, and $10 million to advance our Fenix and Los Azules projects. As a result we are reporting a consolidated net loss for 2018 of $45 million, or $0.13 per share. At December 31, 2018 we had cash and liquid assets of $38 million, including cash and restricted cash of $31 million. In August 2018 we raised $50 million in debt to fund construction of the Gold Bar Mine. We decided to debt finance a portion of the required capital rather than issuing equity because we strongly believed that higher gold and silver prices were close at hand, and that our share price should improve as a result.

McEwen stock (MUX) is above the $2-level at $2.01 per share. 

Inflation Watch

Inflation expectations made a 2018 high April 23, 2018 above trend lines of higher lows (dotted lines, click on chart for larger size). But now those trend lines have been broken dramatically to the downside as shown in this chart:

10-year Inflation Expectations

Note: In the above chart inflation expectations peaked at 2.14% February 2, 2018 and then moved higher April 23 to 2.18%. May 29 dramatically broke a trend line of higher-lows falling to 2.04%. This Wednesday expectations are picking up more momentum at 1.89%. The older trend lines of higher-lows are shown in dark blue. Those trends extend from June 21, 2017 low of 1.66%. Currently, we are recovering from the January 3 low of 1.68% and now above the level of November 27, 2017 (red dashed line).

My latest Kitco News commentary explains the importance of tracking "real rates" which are a function of inflation expectations:


Interest rates and inflation numbers going forward are greatly influenced by central bank policy worldwide. This 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 these columns are updated in this report.

 Old Glory
Eureka, Nevada

Scorecard 

Here's a scorecard on where we stand with some of our favorite metals. 

Intraday highs on the Comex futures exchange (note new continuous chart baseline): 

Gold $1,365.4 per ounce (continuous chart April, 2018)
Silver $18.160 per ounce (continuous chart September 2017))
Copper $3.2955 per pound ($7,265 per tonne, continuous chart December 2017)



Comex copper is very bullishly trading up from last Friday at $2.9360 per pound ($6,473 per tonne), now  only 10.9% below the December 2017 high. Maintaining prices above $6,000 per tonne is a key benchmark to price recovery. 

Improving global growth had kept the red metal above the key $3 per pound-level in 2017. Initial trade war fears in 2018 dipped the red metal below this mark but copper then rebounded above $3. Current trade war tensions with China and deteriorating economic conditions there coupled with a strong U.S. dollar have sent the red metal plummeting. However, copper is now technically only in correction territory (i.e. 10% down) given recent optimism about a U.S./China trade deal this spring.

Total copper stored in LME and Nymex warehouses is 0.204 million tonnes and is more than one-half below the 0.5 million tonne mark of early-2018. The Nymex warehouse tonnage is behind the LME and now considerably below the 100,000 tonne mark.

LME inventories are falling again after January gains: 


It is instructive to keep our eyes on the Nymex inventories which are still falling (LME 139,500 versus Nymex 65,119 tonnes):


My Input to Kitco News 

Next Week target gold price $1,340 per ounce. Target silver price $15.96 per ounce.

Here is my input to the Kitco News Weekly Gold Report:

Gold continues to show good resilience as market sentiment improves and global stock markets make gains with increasing optimism regarding U.S./China negotiations. Notably, the yellow metal made a dash at the $1,350-level Wednesday, retreated to this week's low yesterday at $1,323.3 per ounce (Comex, 4/19) only to find itself back in the middle of the range trading around $1,330 this morning.

What's up?

Even with currents of optimism flowing, the broader view of declining global growth keeps safe haven plays like gold in gear. This is allied by a whiff of commodity inflation with higher oil prices and copper just below the key $3 per pound level - the broader Bloomberg Commodity Index (BCOM) is once again above 170, a high for 2019*. Inflation expectations are also picking up keeping 10-year real rates suppressed below 1%**. This provides an improving environment for gold investors.

Gold also outpaced major currencies euro and yen this week and reaffirmed its positive correlation with a strengthening Chinese yuan - a very strong currency showing for the Lustrous One.

I believe we remain on a push-pull path to the $1,380-level by spring flowers. Next week should show further progress with a target price of $1,340 per ounce with silver following at $15.96 per ounce. 

* BCOM 159.72 (12/31/2018), currently 171.58
** currently inflation expectations are 1.89% compared to the January bottom of 1.68% (1/13/2019), source: FRED; 10-year real rate = 0.75% (Bloomberg)

Additional Note:

The fate of the Chinese yuan remains a key tell for gold and copper; a material drop in valuation could impact copper negatively. Something to watch: the yuan dramatically weakened from mid-April 2018 and now appears to be strengthening again.

The yuan stayed below 7.0 USD/CNY for 2018, starting stronger  and then followed by a weakening trend. It has re-strengthened in 2019. The yuan is currently at 6.7149 USD/CNY but with still a lot of daylight above the March 26, 2018 low (i.e. much stronger level) of 6.2342. A 1-month yuan volatility is a low 0.35%. Something to watch compared to 1-month volatilities of euro and yen.

The euro & yen 1-month volatilites are 0.54% & 0.53% respectively; Comex gold 1-month volatility is elevated at 1.12%.

Weekly Summary February 22, 2019



Yearly Summary for 2018


(click on table for larger size)

Although Comex gold price lost some steam in 2018 (down 2.1%) it made healthy gains on key commodities copper and oil (up 22.8% & 30.2%). Against the broader Bloomberg Commodity Index (BCOMTR:IND), it advanced a respectable 10.3%. 

Importantly the yellow metal outpaced the S&P 500 stock index by 4.3% making it a better investment than domestic stocks for 2019. This leaves gold it in a strong position for 2019.

Only the Japanese yen, an alternative safe haven, fared better by gaining 4.1% over gold for the year.

Yearly Summary for 2017


(click on table for larger size)

Comex gold gained nearly 14% for 2017 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 Outlook for 2019 (1H)

My 2019 Beer Bet: Gold will rise above $1,380 per ounce by May Day 2019

The first-half of 2019 will be a push-pull to higher $1,380+ gold prices underpinned by a trend of higher lows. This outlook is based on a weakening U.S. dollar and real interest rates that have peaked for the near-term against a volatile backdrop of Washington and geopolitical uncertainty.

Over the last five years, gold has been negatively correlated with 10-year real rates 71% of the time. This is reassuring given the popular assumption about opportunity cost for holding a gold position – the higher real rates go, the more costly to keep a non-interest bearing asset like gold. Falling real rates support rising gold prices and vice-versa. Less often, more dominant drivers are at play and gold price appears insensitive to changes in real rates. The low gold price volatility from mid-April to late-September is a good example. Over this time, the yellow metal behaved as a currency. It was highly correlated with the Chinese yuan; to a lesser degree, the euro and yen; and much less, to real rates. 

Which case will be true for the first half of 2019? My latest Kitco Commentary posits the former to be the most likely which is bullish for gold:


In addition to real rates, other important charts to monitor are 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 this Kitco News column:

The Gartman Gold Trade Revisited (Kitco News, 2/14/2018)

Gold value for all three currencies is trending higher after a double-bottom for gold in U.S. dollar terms (August 17 & September 27, 2018) 

Click on the image for a larger size:


Gold in euro & yen terms with margin above 2013 lows

Divergence has resumed for gold in terms of euro compared to yen:



Gold euro/yen spread widens again in 2018

Note for currency buffs:..
Read Full Article

Read for later

Articles marked as Favorite are saved for later viewing.
close
  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 

Separate tags by commas
To access this feature, please upgrade your account.
Start your free month
Free Preview