Gold, The Dollar And Gold Equities

September 13, 2017

My last update on gold was the break out above $1300 in late August. I commented that I believed the next target was $1360 to $1400 where there would be some resistance in that area. We seen a test of $1360 last week and since my call of a bottom in early July, gold has moved up nearly $150. Now is the time to make some adjustments to our positions, raising stops and some part profits, in stocks we bought back in June and July.

This is a chart of December Comex Gold and I will be using this until year-end as it is most active. If we can break above $1375 we could see a very big move in the gold stocks, but we have to consider the downside here to, because an almost $150 run to the upside is significant. We will soon arrive at the annual weakness or take down in gold during November/December. Therefore, we will likely see the best prices here in September or October. Also note the managed money long position and Commercial short position are around levels where we often see price corrections.

Gold still has upside momentum and the longs are in control. There are a few bullish factors that are working for gold that could result in more upside in the next two months:
• North Korea tensions: Kim Jong Un seems determined to provoke the U.S. into something.
• General equity markets are overpriced and have seen some weakness, Gold often moves higher as money flows out of stocks into alternatives.
• The US$ has broken down and further weakness is likely.

The US$ Index has broken down further to a new low of 91.32 last Friday. I expect the 93 area will now be resistance on the up side and technically there is little support for the US$ until around 80 on the index. I have been bearish on the US$ since March and this is a chart I used then outlining a possible top and the green arrow is today's update to this chart. I was concerned and watching for a break below 100 to signal a violation of the bottom of uptrend line and after that it was key for 93 area to hold and it has not. My comments have been nicknaming the rise since the election as the "Trump bump," and since then, the "Trump thump."

There are several bearish factors that could plague the US$ with more weakness. As I have been commenting, the Trump honeymoon is over and he is becoming a lame duck president. The old establishment and media are so focused on stopping and hindering anything he tries to do that little will get done. They will probably let him proceed with any of the dirty deeds like renegotiating NAFTA and, of course, the elite will be fine with their tax rate being lowered.

Further increases in interest rates will be a lot later than was expected, if at all. Fed members have been hawkish with comments about their concern with the inflation rate falling steadily this year. In July, Fed Chair Janet Yellen reiterated statements that Fed Governor Lael Brainard gave, namely that rates are close to a "neutral" level and not in need of rising much more. Recent economic numbers have been weaker as well.

Employment numbers have been missing expectations and generally so so under the Trump administration, averaging just over 170,000 per month since last October. Retail sales have been weak all year except for the 0.6% last reported for July. U.S. sales of new cars and trucks fell 2% in August, according to Autodata Corp, making it eight monthly declines in a row, the positive point is about one-half million flooded cars from Harvey will get replaced.

The Debt: Debt ceiling issue has only been put off until December 15th and Trump's tax cuts and budget is another issue of uncertainty for the markets.

Some of my Canadian readers have been commenting that the gold stocks have not done that well, and in some cases that is correct, but another factor at play here is the drop in the US$. The loonie has gained about 11% on the US$ since June, so Canadians have lost 11% of gold's gain and same with the gold stocks.

On the HUI (Gold Bugs Index) I pointed out the wedge formation in late June that I expected a break out to the up side and in late August a higher high on the index and just above 220 as my next target. We are now at that 220 level and about 225 up from the July low.

Updates

Raising stop/loss on Kinross Gold Corp. (K:TSX; KGC:NYSE) from C$3.90 to $5.10. OceanaGold Corp. (OGC:TSX; OGC:ASX) from $3.40 to $3.60. Argonaut Gold Inc. (AR:TSX) from $1.80 to $2.25

In July I suggested Call options on these three gold stocks:
Kinross Jan 5 Call $0.74 - now $1.12
Goldcorp Inc. (G:TSX; GG:NYSE) Jan 17 Call $1.47 - now $1.44
Yamana Gold Inc. (YRI:TSX; AUY:NYSE; YAU:LSE) Jan $3 Call 0.47 - now $0.95

Goldcorp has not done much but Yamana and Kinross have seen a decent move, up about 100% and if you bought on the US$ side you did much better. There is still lots more time on these but I would consider booking half profits now.

Jaxon Minerals Inc. (JAX:TSX.V) Recent Price $0.27
Entry Price $0.10 Opinion: Buy

The 1 to 1.25 share splits is complete so you now have 25% more shares. I reduced our entry price on the stock by 25% to reflect the split and rounded up to an even 10 cents.
Jaxon Mining Inc. has entered into a binding letter of intent (LOI) to acquire the historic Cronin silver-zinc-lead- gold mine, located 27 kilometres north of Smithers, B.C., in British Columbia's Skeena Arch.

Summary

Jason Cubitt, Jaxon's president and chief executive officer, comments: "The Cronin occurrence represents what we suspect to be the southern extent of our targeted mineralized trend. The type of mineralization and grade we see here is similar to our target silver mineralization at our Hazelton property and offers further evidence of the potential existence of a high-grade mineralized system of significant scale in this district. We look forward to applying modern technologies to the assessment of resource potential at Cronin and the rest of our landholdings in the area."

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The volume of all the gold ever mined can occupy a cube 63 feet on each side.