In yesterday’s analysis, we discussed how meaningful gold and silver’s pre-market decline was given a relatively small move in the USD Index. The implications were quite bearish for the PM market, especially that we had just seen a target being reached in gold stocks. And because mining stocks had just underperformed gold for the first time in weeks. Yet, before the day was over, the USD, gold and silver had all reversed and erased most of their daily moves. Does it make the outlook bullish again? Is gold still likely to reach $1,300 shortly?

No. The USD Index indeed reversed its course, but the precious metals’ initial reaction shows how vulnerable they are with regard to the rallies in the USD Index. This is not the kind of reaction that one wants to see when keeping a long position. It’s the one that is preferred while holding a short one.

Let’s take a look at the charts for details…. CLICK for the complete article

·         The best performing metal this week was gold, up 0.14 percent. St Barbara produced a record-breaking 403,089 ounces, up 6 percent from the 2017 fiscal year, according to Bloomberg. This is the first time the company has exceeded 400,000 ounces in a year. Mining in higher grade zones of the South West Brank resulted in an average grade of 13.2 grams per ton of gold. At June 30, the total cash at bank and term deposits was A$344 million, up from A$262 million on March 31.

·         Top officials at the Chinese Central Bank gave their assurances on Tuesday that yuan devaluation would not be used as a weapon in the trade war despite speculation that the weakening currency is a deliberate attempt to gain an advantage over the United States. The yuan lost 3.7 percent over the past three weeks, making it the worst performing currency in Asia for the period. “Since the start of the week, everyone’s become a lot more nervous about what’s happening in China,” says currency and metals strategist Georgette Boele of ABN Amro. 

·         The yuan’s share in the Russian Central Bank’s foreign-exchange and gold assets almost tripled in the last three months, jumping from only 1 percent in the third quarter to 2.8 percent. “The rise in the share of yuan assets… reflects Russia’s intentions to diversify away from major currencies,” said emerging markets currency strategist Piotr Matys. Russian policymakers cited China’s economic success in the past year and the renminbi’s appreciation against the U.S. dollar to explain their decision to buy yuan.

·         The worst performing metal this week was platinum, down 1.02 percent as declining European diesel sales continue to weigh on demand.  Platinum is used to reduce emissions in diesel engines and that segment of the automobile market has fallen to 38 percent versus a year ago at 47 percent in wake of the VW emission rigging scandal. Gold imports to India dropped over 25 percent in June from a year earlier, reports Bloomberg. The rupee’s extended slump hit record lows last month, making overseas goods more expensive. Between the weaker rupee and changing attitudes among Millennials, Indian jewelers are struggling to gain new customers as young, urban professionals increasingly choose vacations, electronics and other luxuries over jewelry. India’s gold consumption has been declining since 2010 due to government crackdowns on “black money,” which moves outside the official economy and escapes taxation.

·         Centerra Gold’s Mount Milligan mine is facing a water shortage that could impact production. The company has requested the BC Environmental Assessment Office update its environmental assessment to allow for access to additional ground- and surface water sources through 2020. Without additional water, Centerra could see decreased output levels in quarter four of 2018.

·         Exchange-traded funds with a focus on commodities experienced outflows for the eighth straight week, reports Bloomberg. Precious metal funds also suffered from outflows, with SPDR Gold Shares experiencing the steepest loss at $686 million. However, VanEck Vectors Gold Miners added a net $178.2 million in a single trading session, increasing the fund’s assets by 2.1 percent, according to Bloomberg. This is the largest one-day increase since May 29 and the twelfth straight day of inflows.

·         As seen in the chart below, gold stocks have outperformed bullion for the past five weeks. In fact, the spread between the two shows outperformance of gold equities by over 500 points.   This increase in the value of the gold mining companies relative to gold is borne out by the money flows cited in the prior bullet point, in that money is coming out of precious metal funds and instead are buying the stocks of the companies that mine gold. Perhaps this rotation is anticipating the seasonal buying pattern in the yellow metal, which normally rises as the fall season approaches, but the stocks can perform much stronger than gold bullion itself.

·         Forecasts from Australia, the world’s second-largest producer of gold, expect the yellow metal to “perform well” in the second half of 2018, reports Bloomberg, namely due to political uncertainty and trade tensions. The Department of Industry, Innovation and Science said in its quarterly commodities outlook, “Any sustained overheating in the U.S. economy would likely see inflation rise and gold demand rise, as investors seek an inflation hedge.”

·         Commodity bull Goldman Sachs says the trade war between China and the U.S. will have an economic impact, but a “small” one, reports Bloomberg, particularly when it comes to the threat on raw materials. The investment bank forecasts a 10 percent return on commodities over 12 months as the dollar drops, and reiterated its bullish call on crude oil. In another bit of news this week, it seems that returns on U.S. Treasuries have turned Japanese investors sour on America. In reaction to Japan shedding Treasuries, investors there have plowed record amounts into U.S. stocks, corporate bonds and agency-backed securities, writes Bloomberg.

·         According to Bloomberg, the U.S. dollar could be the best place for global investors to find safety amidst a trade war and higher rates from the Federal Reserve.  “That’s because the conflict is unfolding alongside what could be an even more powerful dynamic: U.S. monetary-policy normalization,” the article continues. Demand for the dollar is rising higher, leaving gold (historically known as the safe-haven asset) to drown. In fact, the yellow metal is heading for the lowest close in a year.

·         U.S. authorities demanded documents related to possible corruption and money laundering from Glencore Plc this week, sending the stock down the most in two years. “The documents relate to the company’s business in Nigeria, the Democratic Republic of Congo and Venezuela from 2007 to present,” reports Bloomberg. Two days after the plunge in price, Glencore announced that it will spend up to $1 billion buying back its own shares before the end of the year. Some analysts say this buyback plan makes major acquisitions by Glencore less likely in the near future.

·         The Associated Press reported on Friday that some immigrant U.S. Army reservists and recruits who enlisted in the military with a promised path to citizenship are quietly and abruptly being discharged. Immigration attorney and retired Army Reserve lieutenant colonel Margaret Stock, who helped create the immigrant recruitment program, said she has been inundated over the past few days by recruits being discharged. “Immigrants have been serving in the Army since 1775,” Stock said. “We wouldn’t have won the revolution without immigrants. And we’re not going to win the global war on terrorism today without immigrants.”

http://www.usfunds.com/

Temperatures will soar across much of the U.S. the next few days, approaching 100 degrees Fahrenheit (38 Celsius) from Chicago to New York as the summer’s first heat wave takes hold and spurs electricity demand. Heat affects more than daily life, it also has a huge impact on business and economic output… CLICK to watch the video

4 Lessons in Mining Never To Be Forgotten – R. Zurrer for Money Talks

The histories of North America’s rushes for gold and silver are filled with outrageous stories and larger-than-life characters. And here’s one you haven’t heard before: A massive silver rush, one that was started by a wild fox.

It’s an incredible tale ripped from the pages from history. But it holds lessons for today’s investors.

Let me tell you the tale, and you be the judge. It’s the story of how silver was discovered in Canada.

What Happened After the Gold Miners Struck It Rich and/or Went Home Busted

The story begins after the fabled gold rush in the Cariboo, when the gold miners struck it rich, went home busted, or both.

There’s some dispute about what happened next. But one fact everyone can agree on is that Canada’s big silver deposits weren’t discovered until 1903.

That’s when Fred LaRose, a blacksmith working at his forge in the far reaches of Northern Ontario, was being continually bothered by a fox.

Foxes aren’t rare in that part of Canada — they’re about as common as weasels, but with big fluffy tails and better publicists. Usually, though, foxes are smart enough to stay away from people. This darned fox kept coming close — too close.

Fred’s short temper flared hotter than the iron he was working … now he could see the fox’s beady eyes staring at him from a bush. He turned and hurled his hammer at the critter. He missed the fox and went to retrieve his hammer. Behind the bushes, he found his hammer alright. But he also found a glittering vein of ore thrusting right through the surface of the rock.

Fred didn’t know it was silver at first. He showed a sample to the owner of the Matabanick Hotel in Haileybury, telling him that the rock seemed to contain “some kind of damned metal.” The hotel owner then showed the rock to T.W. Gibson, the director of Canada’s Bureau of Mines. Gibson’s conclusion: The rock contained niccolite (nickel-rich ore).

As often happens in these stories, the experts were wrong.

Still, by 1903, nickel was worth something. So, Gibson forwarded the sample to Ontario’s official geologist, Willet Green Miller, who passed it along to Ontario’s assayer, A.G. Burrows. Burrows looked at the rock and pronounced it silver.

Miller trucked on out to Fred’s camp, saw that there were indeed big veins of ore and chunks of metal, just lying scattered around! It was promising enough that he came back with two assistants to do a full geological survey.

Miller wrote in his report of “pieces of native silver as big as stove lids or cannon balls lying on the ground, as well as cobalt bloom and niccolite.”

The cobalt captured his fancy. So, near the ore deposit, by the railroad line on the shore of Long Lake, he set up a sign reading: “Cobalt Station.”

And that’s how Canada’s silver town became known as Cobalt Station. Where the miner’s pick-ax struck, Cobalt Station sprang into existence out of the wilderness.

But let’s not forget Fred LaRose, the hot-tempered blacksmith. Unlike many early gold and silver prospectors, Fred didn’t miss out. He staked out his LaRose Mine and sold half of it to investors led by two brothers, Noah and Henry Timmins, who became big names in Canadian silver.

LaRose sold half his stake for $3,500, a large sum in 1903. A lawyer managed to snag another 20%. Finally, the Timmins boys bought the rest of LaRose’s stake for $25,000, an even larger sum.

But the brothers got a bargain. The LaRose mine went on to produce over 25 million ounces of silver.

Others arrived to make their fortunes. A man named Tom Hebert discovered what later became the Nipissing Mine. More than half a million dollars’ worth of silver was dug out of a single vein.

Two Discoveries in One Week!

Another man, William G. Trethewey, arrived all the way from Cornwall, in Britain. On his second day in the area, he found a rich deposit that became the Trethewey Mine.

He staked his claim, then moved a short distance away and found what would become another mine, the Coniagas. The silver pulled from that mine was described as “consisting of slabs of native metal stripped off the walls of the vein like boards from a barn.”

Most prospectors spend their entire lives without finding a single worthwhile mine. Trethewey found two of the richest silver mines in Canada’s history in one week.

On and on they came. LaRose’s hammer toss launched a hundred mines. Most ran out quickly, but by the end of 1905, there were 15 mines in operation. In the first 60 years of their active life, the mines of the Cobalt camp shipped a total of nearly 1,185,000 metric tons of rich silver ore and concentrates. The total production exceeded 420,500,000 ounces of pure silver. At today’s prices, that’s over $33.6 billion worth of the precious metal.

As always seems to happen, the boom was followed by a bust, and in the end, the only thing Cobalt Station was rich in was history.

Lessons Never to Be Forgotten

Lesson #1. Don’t underestimate the potential value of a great discovery, no matter how accidental it may be.

I made one of my best silver “discoveries” in the green room of a Canadian broadcaster. It was there that I ran into a silver company’s chief executive quite by accident. His story was so compelling I just couldn’t break away.

I went down to visit the mine, and came back with an investable story. And my subscribers made a wagon-load of money.

Lesson #2. Don’t always believe the so-called “experts.”

Sometimes your gut feeling and intuition are more accurate. Most of Wall Street, for instance, has been consistently wrong about silver for years. They didn’t see the turnarounds coming in gold, oil or base metals, either.

Lesson #3. Don’t expect every prospect to turn into a winner.

Sometimes, stories are too good to be true. When a guy tells me he has a prospect north of the Arctic Circle, that he’s finding diamonds as big as his fist, that he’s got gold nuggets the size of his head, and all he needs is $10 million to develop it properly, I smile, nod and cross him off my list. Those are the easy ones to discard.

Other times, it’s not so easy to spot the losers. Management may be sharp. They may even have plenty of money in the bank. But something goes wrong. Why? Because management has no track record … or the numbers in their financial statements just don’t add up … or I myself miss something. That can happen too.

Lesson #4. Avoid the easy-come-easy-go syndrome.

Too many people who get rich quick get poor again quicker. That’s why it’s smart to take some money off the table when positions run up quickly. Bulls and bears make money. Chickens can too. It’s the pigs that get slaughtered.

Keep these lessons in mind as we go forward in what could turn out to be the greatest bull market for precious metals of all time.

After all, you never know when a stray fox will change your luck next.

All the best,

Sean

Today’s videos and charts (double click to enlarge):

SFS Key Charts & Video Update

SF60 Key Charts & Video Update

SF Juniors Key Charts & Video Analysis

SF Trader Time Key Charts & Video Analysis

Thanks,

Morris

Morris Hubbartt: Chief Market Analyst, Trading Risk Specialist.

website: www.superforcesignals.com
email: trading@superforcesignals.com
email: trading@superforce60.com 

SFS Web Services
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Jun 15, 2018
Morris Hubbartt