Gold now has the real possibility to stage a significant rally, which could last through year-end.
For some time we have noted that gold needs to break through US$ 1'210/oz. to get something going on the upside.
Yesterday, Gold was finally able to close over US$ 1'210 (Attachment 1, Gold 30-minutes chart). We are very encouraged as the Usual Suspects that show up clobbering any hint of a rally, were not in the market.
Let's wait another day or so to see if gold can hold its gains.Attachment 2, Gold Daily chart, shows the push through the resistance line.
In terms of the Big Picture, it's Closing Prices were interested in, not the Intraday moves which are just noise.
Attachment 1
Attachment 2
As is usual on the upside, Gold Shares have been outperforming in a big way.
$HUI, the ARCA Gold Bugs Index (Attachment 3) gained +7.4% and broke the 50-day Moving Average on the upside.
Attachment 3
Below are the stocks in the $XAU and their respective performance yesterday.
"#Gold offers enormous portfolio utility in today's complex and treacherous investment environment."
How cheap is gold today?
Barron's Cover
Gold Is Cheap. Inflation Is Coming. You Do the Math
The Fed may have to relent, in part because the upward pressure on rates is squeezing developing economies that have dollar-denominated bonds or other obligations. If the markets sense that the Fed is about to hold off, the dollar could drop and gold would probably rally. His view is that "gold offers enormous portfolio utility in today's complex and treacherous investment environment."
How cheap is gold today?
One way to measure it against stocks is a comparison with the Dow Jones Industrial Average. It effectively takes 22 ounces of gold to buy one unit of the Dow, which finished on Friday at a record 26,743. The most recent low in that relationship occurred in 2011, when the Dow/gold ratio dropped to 7.8. Then, gold was near its all-time high of $1,900 an ounce.
The century-old peak of 40 occurred in 1999, when gold traded at about $290 an ounce and the Dow stood around 11,500. The low came at the top of the commodity boom in 1980, when the metal and the Dow were at parity around 800 after a decade-long stretch when the Dow moved little. Commodities overall are historically cheap versus stocks.
#Gold exploration at $223m highest since the second quarter of 1997. The June quarter also exceeded spending in the second half of 2011 when gold prices reached all-time highs above $1,900 an ounce
Total number of meters of drilling on new deposits highest in six years and more than triple the total for the first quarter of 2016, the low of the market
Mining exploration spending in Australia jumps to 5-year high
Australia is the world's number two gold producer; the country's tightening its grip on the trade in iron ore and coking coal; comes in at no 6 for copper; and is set to increase output of mineral-du-jour lithium from the current 38% to nearly half the global total within five years.
That's the result not only of a rich mineral endowment but massive amounts of money spent on exploration across the continent.
After a sharp drop-off when it became clear that boom times for Chinese economic growth were beginning to taper, new data from the Australian Bureau of Statistics shows the country's miners and explorers are once again pouring money into the sector.
ABS announced this week the country's mineral exploration expenditure jumped by 26.6% during the second quarter compared to last year to total $563.4m. That's the highest level since the third quarter of 2013.
Spending on base metals rose at the fastest pace, up 38%, to the highest since the final quarter of 2012. Iron ore exploration also appears to be escaping the doldrums after two quarters of sequential growth (although nothing close to spending from 2011 to 2014 when iron ore was worth double it is now).
Most striking is the amount of money chasing gold. Spending on gold exploration at $223m was the highest since the second quarter of 1997. The June quarter also exceeded spending in the second half of 2011 when gold prices reached all-time highs above $1,900 an ounce.
Although smaller in absolute terms, greenfield capex is back in focus with investment in exploration on new deposits rising 37% to $54m during the June quarter compared to 24% more spent on expanding existing resources ($70.7m).
A total of 2.57 million metres were drilled during the quarter, up a whopping 44.3% year on year. Here the focus on new discoveries was even more evident with drills at new deposits working much harder – up 57% to just shy of 1m metres – versus at existing deposits which rose by 38%.
The total number of metres of drilling on new deposits was the highest in six years and more than triple the total for the first quarter of 2016, when metals and mineral markets started to bottom. Holes drilled at greenfield projects as a proportion of overall metres was the highest since 2010, ABS data show.
Encouraging for the Australian industry is that spending is much better spread across sectors compared to the height of the China-induced supercycle in commodity demand.
During the go-go years spending topped $1 billion during two quarters – the final quarter of 2011 and the second quarter of 2012.
But during that period coal and iron made up 51% of total exploration spending. The most recent figures show the share of Australia's top export earners falling to 22% of the total.
