"The history of Eureka lies in its future." - Lambert Molinelli, 1878

DISCLOSURE

The author/editor of the Eureka Miner owns common shares of local mining stocks, General Moly (GMO), McEwen Ming (MUX) and Newmont Mining (NEM); together with benchmark miner Freeport-McMoRan (FCX). Please do your own research, markets can turn on you faster than a feral cat.

Friday, December 28, 2012

Happy New Year! General Moly Rolls on Mt. Hope

Happy New Year! Eureka, Nevada
 
Latest Nevada Gas Prices (click this link)

My latest Kitco commentary: Copper & Gold – Fast Eddie’s Lucky Run


This morning's...
COMEX Gold price = $1,660.3/oz (February contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 96.82 (gold value is elevated with respect to key commodities oil, copper and silver)
Value Adjusted Gold Price© (VAGP) = $1,432.9/oz
COMEX - VAGP = $227.4/oz; gold is trading at a  premium to key commodities.


Morning Miners!

Mariana and I visited Mt. Hope General Manager Mike Iannacchione the day after Christmas at Eureka Moly LLC. He gave us a quick project update and shared a positive view on the China recovery, South Korea and the big picture for molybdenum in 2013.

The General Moly (subsidiary Eureka Moly LLC) Mt. Hope project is a molybdenum mine 23 miles north of Eureka with an expected mine life off 44 years. Mt. Hope contains approximately 1.3 billion pounds of proven and probable molybdenum reserves. Final permitting is complete, financing is coming together and mine construction will commence this spring. Together with a broad array of industrial uses, molybdenum is a key strengthening alloy in high-quality steel products.

Mike is trying to think of all manner of ways to start something in the winter time to save schedule next year. Even with poor weather, tree clearing may be possible if the snow permits. He is also actively working with Caterpillar to get the big machinery in play. Archaeologists have returned to  Mt. Hope to wrap up their evaluations but are constrained by weather too.

Even though the current stalemate on the U.S. fiscal cliff negotiation has kept domestic markets in the lurch, Asians markets are showing signs of recovery. The Japanese stock market hit 21-month highs this morning in anticipation of further monetary accommodation by the new Abe government with a focus on infrastructure projects.

The South Korean KOSPI stock index has rallied from its multi-month mid-November low and the Chinese Shanghai composite is up from February 2009 levels plumbed in early December. Improving conditions in both Japan and China will be positive in 2013 for South Korean steel producer POSCO (PKX). POSCO (subsidiary POS-Minerals) owns a 20% share of Mt. Hope and Mike reminded me that having a share of the project is as important for the steel producer as future production of Mt. Hope molybdenum.

This morning's trading has POSCO (PKX) up on a down market day and General Moly (GMO) pulling back a tad:

POSCO (PKX)  $81.22 up 0.38%
General Moly (GMO)  $3.74 down 0.53%

The S&P 500 is down 0.44% at 1,411.58
The KOSPI is up 0.49% at 1,997.50 (2,000 is a key level)
The Shanghai Composite is up 1.24% at 2,233.25

Here is an interesting article by James Areddy of the Wall Street Journal about Hanlong financing of the Mt. Hope project:

In Nevada, a Chinese King of the Hill (James T. Areddy, WSJ, 12/28/2012)

James is the lead WSJ correspondent in Shanghai and contacted me several months ago to check on how things were going with the Mt. Hope project.

Moly prices are thankfully back in mid-$11 per pound territory, another sign of improving prospects for the minor metals in 2013. However, we need to see prices continue to trend up to the $15-level before sounding the all-clear:

Metals Week Average:
US$11.525

As of December 24, 2012
(updated weekly)

Ryan's Notes Average:
US$11.55

As of December 21, 2012
(updated twice weekly)

The London Metal Exchange (LME)  3-month seller's contract is US$26,000 per metric ton (US$11.79 per pound)

The best of luck to Mike and the General Moly Team!

Where do gold, silver and copper prices go next week? Checkout my today's input to the Weekly Kitco Gold Survey below.

Enjoy another cup of Raine's delicious Red Label TGIF and have a great weekend.

The Colonel and Mariana wish you all a Happy New Year and thank you for following the Report!

The Colonel's Gold, Silver & Copper Prices for Next Week


Here is my input to the Kitco Weekly Gold Survey:

12/28/2012 (10:47 CT)

Q. Where do you see gold’s price headed next week, up, down or unchanged?

A. Up, $1,680 per ounce target.

Q. Why?

A. Thin holiday trading and the stalled U.S. fiscal cliff negotiations have put closing COMEX gold prices in “freeze frame” since last Friday varying by only several dollars per ounce. Assuming some comprise is reached next week to forestall the worst consequences of taxation and sequestration, gold should be poised to move higher. My target is therefore a neutral bias from the mean of December’s highs and lows ($1,725.0 and $1,636.0 per ounce, respectively). This will bring gold bullishly above the 200-day average which is presently $1,667.5 per ounce.

Since last week the yellow metal has also lost additional value to key commodities oil and copper but has recovered some value relative to the broader markets. Less the fiscal cliff, the underpinnings for gold and base metals remain supportive given worldwide accommodative monetary policies, indications the Chinese economy has bottomed and some signs of stabilization in Europe.

For $1,680 per ounce gold we can expect to see silver in a range of $29.4-$33.5 per ounce; and copper in a range of $3.42-$3.64 per pound. Both silver and copper are expected to have a positive bias above their respective means.

As measured by the Eureka Miner’s Gold Value Index (GVI, Ref 1), the value of gold relative to global commodities copper and oil and companion metal silver is 96.82, staying below the key-100 level at and 1-month moving average of 98.36 (bearish gold trend). The 2012 high was 103.73 on Nov. 13.

The ratio of gold-to-the S&P 500 (AUSP) has recovered some after a precipitous drop to mid-August levels on Dec. 20. It is now 7.1% below its 2012 high (1.2710, Nov.15) at 1.1802 but up 3.5% from the December low. The latest price action indicates gold has lost considerable value relative to the broader markets but is now trending up from a bottom.

Background Notes:
  1. My target price of $1,680 per ounce is a neutral bias from the geometric mean of the given highs and lows for December.
  2. Given the target gold price, the silver price ranges are derived from the 1-month gold ratio mean (GSR) and its respective ratio stability (CRS©). A similar technique was used to predict the price range for copper.
  3. My Gold Value Index© (GVI) equals 96.82 or 6.7% below the 2012 high of 103.73. Today gold value is below its 1-month moving average of 98.36; a value of 100 represents a historically high-value of gold relative to key commodities oil, copper and silver.
  4. The gold-to-copper ratio today is 460.81 pounds per ounce and below its 3-month moving average of 477.46 and 6-year trend of 484.04; falling below the long-term trend line is a bullish indication for the red metal; trending above 500 pounds per ounce, bearish (Ref 3).  The 1-month gold-to-copper ratio stability is a very low 1.53%. The 1-month rolling correlation is +0.54; 3-month is +0.43. 3-month relative volatility is 1.47X gold and price sensitivity (beta) is +0.64
  5. The gold-to-silver ratio (GSR) is above its historical norm at 55.205; the 3-month rolling correlation is +0.98, relative volatility is 2.00X gold and price sensitivity (beta) is +1.77. The GSR is above its 3-month average of 52.78; the 1-month gold-to-silver ratio stability is 3.28%.
Ref 2: Copper and Gold - In the Eye of the Storm (Kitco News, 10/30/2012)
Ref 3: Copper and Gold - The Bank Shot (Kitco News, 11/19/2012)
Ref 4: Copper & Gold – Fast Eddie’s Lucky Run (Kitco News, 12/03/2012)

Cheers,

Colonel Possum

Headline photograph by Mariana Titus

Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market

Friday, December 21, 2012

The Colonel Wishes You a Merry Christmas!

A White Christmas for 2012, Eureka, Nevada
 
Latest Nevada Gas Prices (click this link)

My latest Kitco commentary: Copper & Gold – Fast Eddie’s Lucky Run


This morning's...
COMEX Gold price = $1,651.3/oz (February contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 98.18 (gold value is elevated with respect to key commodities oil, copper and silver)
Value Adjusted Gold Price© (VAGP) = $1,405.3/oz
COMEX - VAGP = $246.0/oz; gold is trading at a  premium to key commodities.


Morning Miners!

Today is the first day of the 14th b'ak'tun of the Mayan Calendar and I guess the world didn't come to an end after all. Thirty three months ago this report predicted the DOW Industrial Average would break 12,901 before the apocalypse - that did happen.

DOW 12,901 by the End of the World? (Eureka Miner's Market Report, 4/01/2010)

This February the DOW broke that level and even with all the woe surrounding the present fiscal cliff negotiations, the mighty average is presently trading at 13,140.79 down 170.93 points from yesterday's close.

In the long run markets are robust even under the harrowing circumstances of the last several years. It's easy (and understandable) to be a pessimist but the market is up over 20% from April Fool's 2010 and that sure beats the return from a bank CD, pardner. I will pass to the next reality an eternal optimist but apparently that won't occur today unless something comes from the heavens this afternoon.

Here's some other fun comparisons from that morning in April to today:

COMEX gold  $1,123.4/oz (4/1/2010) $1,651.3/oz (today) up 47.0%
COMEX silver  $17.940/oz (4/1/2010) $30.010/oz (today) up 67.2%
COMEX copper $3.5960/lb (4/1/2010) $3.5450/lb (today) down 1.4%

Precious metals have been a better bet than the broader markets; not so, copper.

Where do gold, silver and copper prices go from here? Checkout my today's input to the Weekly Kitco Gold Survey below.

Enjoy another cup of Raine's delicious Red Label TGIF and have a great weekend.

The Colonel and Mariana wish you all a very Merry Christmas and thank you for following the Report!

The Colonel's Gold, Silver & Copper Prices for Next Week


Here is my input to the Kitco Weekly Gold Survey:

12/21/2012 (10:50 CT)

Q. Where do you see gold’s price headed next week, up, down or unchanged?

A. Up, $1,675 per ounce target.

Q. Why?

A. The dimming prospects for a successful avoidance of the U.S. fiscal cliff are casting a long shadow on global markets. This has caused the rather unusual circumstance of multi-month downtrends in both the U.S. dollar and gold. The yellow metal has also lost value to key commodities oil and copper as well as the broader markets. My sense is that the yellow metal is now oversold and should benefit next week from a relief rally albeit not to the highs of mid-December. My target is therefore a negative bias below the mean of December’s highs and lows ($1,725.0 and $1,636.0 per ounce, respectively).

Less the fiscal cliff, the underpinnings for gold and base metals remain supportive given worldwide accommodative monetary policies, indications the Chinese economy has bottomed and some signs of stabilization in Europe.

For $1,675 per ounce gold we can expect to see silver in a range of $29.7-$32.8 per ounce; and copper in a range of $3.30-$3.69 per pound. Both silver and copper are expected to have a negative bias in price below their respective means.

As measured by the Eureka Miner’s Gold Value Index (GVI, Ref 1), the value of gold relative to global commodities copper and oil and companion metal silver is 98.18, staying below the key-100 level at and 1-month moving average of 99.14 (bearish gold trend). The 2012 high was 103.73 on Nov. 13.

The ratio of gold-to-the S&P 500 (AUSP) has dropped precipitously to mid-August levels. It is now 8.7% below its 2012 high (1.2710, Nov.15) at 1.1604. The latest price action indicates gold has lost considerable value relative to the broader markets but may be near a bottom.

Background Notes:
  1. My target price of $1,675 per ounce is a negative bias below the geometric mean of the given highs and lows for December.
  2. Given the target gold price, the silver price ranges are derived from the 1-month gold ratio mean (GSR) and its respective ratio stability (CRS©). A similar technique was used to predict the price range for copper since its 3-month correlation with gold is still positive (although the 1-month is negative).
  3. My Gold Value Index© (GVI) equals 98.18 or 5.3% below the 2012 high of 103.73. Today gold value is below its 1-month moving average of 99.14; a value of 100 represents a historically high-value of gold relative to key commodities oil, copper and silver.
  4. The gold-to-copper ratio today is 465.81 pounds per ounce and below its 3-month moving average of 478.08 and 6-year trend of 483.58; falling below the long-term trend line is a bullish indication for the red metal; trending above 500 pounds per ounce, bearish (Ref 3).  The 1-month gold-to-copper ratio stability is 2.78%. The 1-month rolling correlation is -0.12; 3-month is +0.53. 3-month relative volatility is 1.60X gold and price sensitivity (beta) is +0.86
  5. The gold-to-silver ratio (GSR) is above its historical norm at 55.025; the 3-month rolling correlation is +0.87, relative volatility is 1.89X gold and price sensitivity (beta) is +1.65. The GSR is above its 3-month average of 52.54; the 1-month gold-to-silver ratio stability is 2.45%.
Ref 2: Copper and Gold - In the Eye of the Storm (Kitco News, 10/30/2012)
Ref 3: Copper and Gold - The Bank Shot (Kitco News, 11/19/2012)
Ref 4: Copper & Gold – Fast Eddie’s Lucky Run (Kitco News, 12/03/2012)
Cheers,

Colonel Possum



Headline photograph by Mariana Titus

Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market

Friday, December 7, 2012

General Moly $$$; The Colonel's Gold, Silver & Copper prices for Next Week

Stars and Stripes, Eureka, Nevada
 
Latest Nevada Gas Prices (click this link)

The next Market Report will be December 21, 2012

My latest Kitco commentary: Copper & Gold – Fast Eddie’s Lucky Run


This morning's...
COMEX Gold price = $1,702.9/oz (February contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 98.80 (gold value is elevated with respect to key commodities oil, copper and silver)
Value Adjusted Gold Price© (VAGP) = $1,440.2/oz
COMEX - VAGP = $262.7/oz; gold is trading at a  premium to key commodities.


Morning Miners!

This will be a short report this morning as ole Colonel prepares for a road trip next week.  The next report is bright and early Friday, Dec. 21 - winter solstice for 2012 and the last day of the Mayan long calendar. Being an optimist, I don't believe the world will end on that day.

The latest news for General Moly is receipt of $100M from POS-Minerals (subsidiary of POSCO, 10% owner of Mt. Hope). Here's yesterday's press release:

General Moly Announces Receipt of $100 Million Contribution Payment from Joint Venture Member POS-Minerals to Commence Construction at the Mt. Hope Project (Press release, 12/6/2012)

I continue to believe that copper price action will continue to shed light on gold's next move as explained in my Kitco commentary, Copper & Gold – Fast Eddie’s Lucky Run.

Where do gold, silver and copper prices go from here? Checkout my today's input to the Weekly Kitco Gold Survey below.

Enjoy another cup of Raine's delicious Red Label TGIF and have a great weekend!

The Colonel's Gold, Silver & Copper Prices for Next Week


Here is my input to the Kitco Weekly Gold Survey:

12/07/2012 (10:38AM CT)

1.      Where do you see gold’s price headed next week, up, down or unchanged?

Up, $1,730 per ounce target.

2.      Why?

The better-than-expected U.S. jobs report boosted both the dollar and gold this morning. Next week’s FOMC meeting is expected to give gold additional lift with an announcement of further monetary accommodation as Operation Twist draws to conclusion. Without additional catalyst, the yellow metal should bias positively above $1,715 per ounce; the range mean between the November highs and lows (Feb. contracts: $1,757.1 high, Nov. 23; $1,674.4 low, Nov. 5).

The price of gold remains range bound against a backdrop of compound uncertainties: the impending U.S. fiscal cliff, Europe’s sovereign debt crisis, China’s change in leadership and conflicts in the Middle East. However, there are further signs that the Chinese economy and has bottomed which should be supportive of gold and base metals– this week both the Shanghai composite and neighboring South Korean KOSPI have rallied off their lows.

For $1,730 per ounce gold we can expect to see silver in a range of $31.4-$34.1 per ounce; and copper in a range of $3.39-$3.82 per pound. Both silver and copper are expected to have a positive bias in price above their respective range means.

As measured by the Eureka Miner’s Gold Value Index (GVI, Ref 1), the value of gold relative to global commodities copper and oil and companion metal silver is 98.80, staying below the key-100 level at and 1-month moving average of 101.03 (bullish commodities). The 2012 high was 103.73 on Nov. 13.

The ratio of gold-to-the S&P 500 (AUSP) has dropped another 0.5% this week and is 5% below its 2012 high (1.2710, Nov.15) at 1.2024. The latest price action indicates gold continues to lose value relative to the broader markets.

My Oct. 30 Kitco commentary (Ref 2) posits that copper would be the next harbinger for metal prices and the broader markets. At that time the ratio of gold-to-copper had undergone a dramatic mean reversion - expansion of the daily ratio from that state would be bearish copper; compression would be a bullish. In early November an ounce of gold bought more than 500 pounds of copper, a decidedly bearish level; the trend higher reversed which was a short-term bullish sign for the red metal (my latest commentary, Ref 3 & Ref 4). Significantly, the gold-to-copper ratio is now below its 3-month average and 6-year trend at 464.1 pounds per ounce.

Any positive movement in the current headline issues (e.g., progress on resolving the U.S. fiscal cliff) would be constructive for the red metal. However, the 1-month correlation of gold and copper is now negative which may cap the current the rally in copper and suggest that gold remains range bound for the short term.


Background Notes:
  1. My target price of $1,730 per ounce is a positive bias above the geometric mean of the given trading range.
  2. Given the target gold price, the silver price ranges are derived from the 1-month gold ratio mean (GSR) and its respective ratio stability (CRS©). A similar technique was used to predict the price range for copper since its 3-month correlation with gold is still positive (although the 1-month is negative).
  3. My Gold Value Index© (GVI) equals 98.80 or 4.8% below the 2012 high of 103.73. Today gold value is below its 1-month moving average of 101.03; a value of 100 represents a historically high-value of gold relative to key commodities oil, copper and silver.
  4. The gold-to-copper ratio today is 464.07 pounds per ounce and below its 3-month moving average of 478.87 and 6-year trend of 482.31; trending below this trend line is a bullish indication for the red metal; trending above 500 pounds per ounce, bearish (Ref 3).  The 1-month gold-to-copper ratio stability is a borderline divergent at 2.99%. The 1-month rolling correlation is -0.46; 3-month is +0.75. 3-month relative volatility is 1.99X gold and price sensitivity (beta) is +1.48
  5. The gold-to-silver ratio (GSR) is slightly above its historical norm at 51.346; the 3-month rolling correlation is +0.87, relative volatility is 1.94X gold and price sensitivity (beta) is +1.70. The GSR is below its 3-month average of 52.312; The 1-month gold-to-silver ratio stability is a low 2.01%.
Ref 2: Copper and Gold - In the Eye of the Storm (Kitco News, 10/30/2012)
Ref 3: Copper and Gold - The Bank Shot (Kitco News, 11/19/2012)
      Ref 4: Copper & Gold – Fast Eddie’s Lucky Run (Kitco News, 12/03/2012)


Cheers,

Colonel Possum



Headline photograph by Mariana Titus

Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market

Friday, November 30, 2012

What's Up with POSCO? The Colonel's Gold, Silver & Copper Prices

Sweet Sage, Eureka, Nevada
 
Latest Nevada Gas Prices (click this link)

NEW WEEKLY SCHEDULE

Friday Commentary & Kitco Gold Survey
The Colonel's Weekly Gold, Silver & Copper Price Predictions
Weekly Market Roundup
- Gold & Silver Report
- Copper & Molybdenum Report
- Oil Watch
- Debt Crisis Watch
- Stock Market Update
- Eureka Miner's Million Dollar Grubstake Portfolio


My latest Kitco commentary: Copper and Gold - The Bank Shot (11/19/2012)


This morning's...
COMEX Gold price = $1,726.8/oz (February contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 98.88 (gold value is elevated with respect to key commodities oil, copper and silver)
Value Adjusted Gold Price© (VAGP) = $1459.2/oz
COMEX - VAGP = $267.6/oz; gold is trading at a  premium to key commodities.


Morning Miners!

A bumpy week for gold but there are emerging signs that December may see a bounce in the markets. Besides all the back-and-forth on the U.S. fiscal cliff, the recovery of China's economy under new leadership has cast much uncertainty on the metals & miners - is there a ray of light from South Korea?

Monitoring China's Shanghai Composite Index hasn't been too encouraging. It has lost more than 20% since early March - the technical definition of bear country for their stock market. However, there have lately been economic indicators that show a bottom may be in for the dragon. I prefer to track what is happening next door in South Korea because their markets are more transparent and China remains a major customer.

The South Korean stock market,or KOSPI, is on the mend and so is its steel producer POSCO (PKX). The latter is important to Eureka because POSCO owns a 20% share of the Mt. Hope molybdenum project and will be sending General Moly a chunk of funding in the next several weeks now that the permitting process is complete.

The KOSPI has bounced off its lows and fares a lot better than the Shanghai. Amazingly the South Korean iShares exchange traded fund EWY, which tracks major companies , is nearly at its 52-week high (59.73 vs 61.57). POSCO was near the lows of 2011 on Nov.21 and is now confidently marching higher (74.66 today, up 5% from the lows earlier this month). I'm betting the the Chinese economy will turn around and the South Koreans are seeing something we are missing.

Molybdenum spot and futures prices are also above the key $11 per pound mark - another positive sign (see moly report below). General Moly (GMO) share price is up 3.3% for the week at $3.75.

It has been a less stellar week for most gold mining stocks given the recent downward pressures on gold. Here's how Barrick Gold(ABX), McEwing Mining (MUX, formerly US Gold) and Timberline Resources (TLR) compare to last Friday's closing prices:

ABX $35.53 (11/23) to $34.52 (today, AM) down 2.8%
MUX $3.82 (11/23) to  $3.65 (today, AM) down 4.5%
TLR $0.315 (11/23) to  $0.30 (today, AM) down 4.8%


The mining sector overall is showing technical signs of forming a bottom. The Eureka Miner's Index© (EMI) is on the rise at 136.4 above the key 100-level and the 1-month moving average of 110.8.

Copper is up today $0.0315 per pound at $3.6370 showing considerable strength compared to gold. I continue to believe that future copper price action will shed light on gold's next move as explained in my Kitco commentary, Copper and Gold - The Bank Shot.

Where do gold, silver and copper prices go from here? Checkout my today's input to the Weekly Kitco Gold Survey below.

Enjoy another cup of Raine's delicious Red Label TGIF and have a great weekend!

The Colonel's Gold, Silver & Copper Prices for Next Week


Here is my input to the Kitco Weekly Gold Survey:

11/30/2012 (10:43 AM CT)

Q. Where do you see gold’s price headed next week, up, down or unchanged?

A. Down, $1,715 per ounce target.

Q. Why?

A. There were numerous bearish indications for gold this week. The yellow metal lost value to key commodities copper and oil, and the broader markets. As the month draws to a close, gold was the weakest gainer in the precious metal complex.

The price of gold remains range bound against a backdrop of compound uncertainties: the impending U.S. fiscal cliff, Europe’s sovereign debt crisis, China’s change in leadership and conflicts in the Middle East.

U.S. dollar strength had been a headwind for gold prices but has weakened nearly 2% in the past two weeks. Nonetheless, U.S. dollar-denominated gold price is expected to remain range bound for the short-term. Until a new catalyst appears, my target of $1,715 per ounce is the range mean between the November highs and lows (Feb. contract: $1,757.1 high, Nov. 23; $1,674.4 low, Nov. 5).

For $1,715 per ounce gold we can expect to see silver in a range of $31.5-$34.6 per ounce; and copper in a range of $3.46-$3.68 per pound.

As measured by the Eureka Miner’s Gold Value Index (GVI, Ref 1), the value of gold relative to global commodities copper and oil and companion metal silver is 98.88, falling below the key-100 level at and 1-month moving average of 101.86 (potentially bullish commodities). The 2012 high was 103.73 on Nov. 13.

The ratio of gold to the S&P 500 (AUSP) has dropped 2% this week and is 4% below its 2012 high (1.2710, Nov.15) at 1.2188. The latest price action indicates gold is losing value relative to the broader markets.

My Oct. 30 Kitco commentary (Ref 3) posits that copper will be the next harbinger for metal prices and the broader markets. At that time the ratio of gold-to-copper had undergone a dramatic mean reversion - expansion of the daily ratio from that state would be bearish copper; compression would be a bullish. Three weeks ago an ounce of gold bought more than 500 pounds of copper, decidedly bearish; the trend higher has now reversed – a short-term bullish sign for the red metal (my latest commentary, Ref 4). Significantly, the gold-to-copper ratio is now below its 3-month average and 6-year trend at 474.8 pounds per ounce.

Any positive movement in the current headline issues (e.g., progress on resolving the U.S. fiscal cliff) would be constructive for the red metal. This could blunt future gold rallies and be bullish for base metals and the broader markets for the remainder of 2012.

Finally, the Brent-WTI spread in crude oil futures remains elevated at $22.56 per barrel and a 25.5% premium. Continuing troubles in the Middle East keep the spread at $20+ per barrel levels although a portion of that can be attributed to over-supply in North America. This is less a driver for gold now as the 3-month oil/gold correlation is +0.5, and the 1-month is +0.6. A regional conflagration could cause a sharp rise in both crude oil prices and the WTI/Brent spread.

Background Notes:
  1. My target price of $1,715 per ounce is the geometric mean of the given trading range.
  2. Given the target gold price, the silver price ranges are derived from the 1-month gold ratio mean (GSR) and its respective ratio stability (CRS©). A similar technique was used to predict the price range for copper since its correlation with gold is again positive.
  3. My Gold Value Index© (GVI) equals 98.88 or 4.7% below the 2012 high of 103.73. Today gold value is below its 1-month moving average of 101.9; a value of 100 represents a historically high-value of gold relative to key commodities oil, copper and silver.
  4. The gold-to-copper ratio today is 474.8 pounds per ounce and below its 3-month moving average of 480.5 and 6-year trend of 481.3; trending below this trend line is a bullish indication for the red metal; trending above 500 pounds per ounce would be decidedly bearish (Ref 3).  The 1-month gold-to-copper ratio stability is a very low 1.51%. The 1-month rolling correlation is +0.35; 3-month is +0.85. 3-month relative volatility is 2.10X gold and price sensitivity (beta) is +1.78
  5. The gold-to-silver ratio (GSR) is below its historical norm at 50.39; the 3-month rolling correlation is +0.91, relative volatility is 2.06X gold and price sensitivity (beta) is +1.87. The GSR is below its 3-month average of 52.34; The 1-month gold-to-silver ratio stability is a low 2.31%.
Ref 2: $1,900 Gold - At the Crossroads (Kitco News, 10/15/2012)
Ref 3: Copper and Gold - In the Eye of the Storm (Kitco News, 10/30/2012)
Ref 4: Copper and Gold - The Bank Shot (Kitco News, 11/19/2012)


Friday's Market Roundup


Mining Report

This morning's mining stocks with % price change from yesterday's close:

Barrick (ABX) $34.27 down 1.81%
Newmont (NEM) $46.60 down 0.96%
McEwen Mining (MUX) $3.67 down 0.54%; (formerly US Gold, UXG)
General Moly (Eureka Moly, LLC) (GMO) $3.73 down 1.32%
Thompson Creek (TC) $2.92  up 1.32%
Freeport-McMoRan (FCX) $38.99 down 0.69% (a bellwether mining stock spanning copper, gold & molybdenum)
Timberline Resources (TLR) $0.30 down 6.25%

The Steels  (a "tell" for General Moly & Thompson Creek):

ArcelorMittal (MT) $15.29 down 0.26% - global steel producer
POSCO (PKX) $74.67 up 0.61% - South Korean integrated steel producer

The Eureka Miner's Index© (EMI) was re-calibrated 8/09 to reflect current 200-day moving averages for benchmark miners.

The EMI is above-par at 136.4, up from last week's 120.26 and above the 1-month moving average of 110.75. The 1-month average remains above the key 100-level and trending bullish.

The EMI gives us the market temperature for the factors that have the greatest impact on mining in Eureka County. The record 2010-2012 high for the EMI is 816.78 set 01/04/2011; the low was set 10/4/2011 at 22.88. The 2012 YTD low is 39.45 recorded 05/23/2012. An EMI of 100 is the boundary between hot and cold markets for the metals & miners.

Gold & Silver Report

This morning's...

COMEX gold is down $2.7/oz at $1,726.8/oz (February contract, most active)

COMEX silver is down $0.161/oz at $34.270/oz (March contract, most active)

The gold-to-silver-ratio (Au:Ag) is 50.388 oz/oz


The Eureka Miner’s Gold Value Index© (GVI) is above-par at 98.88, down from last week's 101.65 and above its 1-month average of 101.86. Gold value is elevated with respect to commodities oil, copper and silver. The record high for 2010-2012 is 109.97 set on Oct. 4, 2011; the 2012 peak was 103.61 set on June 25, 2012.

The Value Adjusted Gold Price© (VAGP) is $1,459.2/oz which is $267.6/oz below the current COMEX gold price.

The GVI gauges the value of gold in relation to oil, copper and silver independent of currency. These three commodities were chosen for relative value comparison because 1) oil derivatives are a common cost element for all miners, 2) copper has proven to be a reliable proxy for global growth and 3) silver is a precious and industrial metal that now competes with gold for investment and as a hedge against fiat currencies.

The Value Adjusted Gold Price (VAGP) is a level that supports current oil, copper & silver prices based on historical commodity norms. If the daily COMEX price is less than the VAGP, then gold is undervalued; if above, overvalued.

Copper & Molybdenum Report

This morning's...

COMEX copper is up $0.0315/lb at $3.6370/lb (March contract, most active)

The gold-to-copper ratio is 474.79 lb/oz; ratios in excess of 400 lb/oz are indicative of a bearish price domain; the ratio is above its 3-month moving average of 480.50 (Cu bullish short-term; remains in a bearish Price Domain B)


The latest western molybdenum oxide spot prices (courtesy of Thompson Creek Metals):

Metals Week Average:
US$11.15

As of December 3, 2012
(updated weekly)

Ryan's Notes Average:
US$11.10

As of November 27, 2012
(updated twice weekly)

The LME futures 3-month seller's contract:

US$11.34/lb (US$25,000/metric ton)

Weekly Oil Watch

Latest Nevada Gas Prices (click this link)

Understanding the Price of Oil (click this link for a quick overview on crude oil prices)

On February 1st, 2011, we identified North Sea Brent crude oil as a good barometer for the crises in the Middle East and North Africa (MENA). Things are stabilizing some in MENA: the Israeli-Hamas conflict has ended in cease fire; the Iran standoff on nuclear weapon capability continues. Brent is above $110/bbl maintaining a spread above the North American benchmark, Western Texas Intermediate or "Texas light sweet crude", traded on the NYMEX.

Here are the key front-month contracts this morning:



NYMEX light sweet crude $88.46
ICE North Sea Brent crude $111.02
Spread (ICE- NYMEX) = $22.56 (last report, $21.96 )

Here are the March contracts* with a narrower spread:

NYMEX light sweet crude $89.61
ICE North Sea Brent crude $109.41
Spread (ICE- NYMEX) = $19.80 (last report, $19.38)

* NYMEX futures contracts have rolled forward, we now show January and March

The gold-to-WTI is 19.521 bbl/oz; ratios above 18.0 bbl/oz are considered bearish for oil


Prices for 2012 have risen again; we have $105+ Brent and $85+ NYMEX in March signalling stubbornly high oil prices for winter and early-spring. A front-month spread between Brent and WTI >$20/bbl is a trouble sign; the present spread is above that warning level, however, some of this can be attributed to the over-supply condition in North America.


Daily Debt Crisis Watch

July 26, 2011 we introduced the Debt Crisis Index (DCI). The DCI is computed in the mornings and at the market close Friday in much the same way we do the EMI and GVI indices. Today, the DCI is 56.5, down from last Friday's 62.1. A level above 200 is time for serious concern - we are still well below that level. The highest level recorded since inception was 271.0 Aug. 9, 2011; the lowest level is 51.2 set July 18, 2012

Global sovereign debt issues have been an overhang on markets for many, many months starting with the Dubai crisis in late November, 2009 and spreading to the euro-zone in 2010-2011 and continuing into 2012.

Stock Market Morning Update

The DOW is down 5.36 points to 13,016.46; the S&P 500 is down 1.06 points at 1,414.89

The Eureka Miner's Grubstake Portfolio is down 1.11% at $1,338,552.50  (what's this?).

Cheers,

Colonel Possum



Headline photograph by Mariana Titus

Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market

Monday, November 26, 2012

Completion of Permitting Process for the Mt. Hope Project

*** SPECIAL REPORT ***

Morning Miners!

At 5:34AM General Moly announced completion of their Mt. Hope molybdenum project permitting. Here's the press release:

General Moly Announces Completion of Permitting Process for the Mt. Hope Project with Receipt of Water Pollution Control Permit (Press Release, 11/26/2012)

I believe this will put in motion funding from South Korean steel giant POSCO (PKX) of $100M within 15 days.


Bruce D. Hansen, Chief Executive Officer of General Moly, said:

We are pleased to receive the Water Pollution Control Permit from the Nevada Division of Environmental Protection and conclude the permitting process required for the construction of the Mt. Hope Project. I want to thank our team as well as our regulatory agency partners for their long hours, hard work and commitment to getting the job done right.

and,

We will now pivot aggressively to finalizing our project financing and initiating the construction and development of the world-class Mt. Hope Project. We are moving forward toward our goal of becoming the largest pure play primary molybdenum producer in the world.

General Moly is up 2.2% at $3.71 per share in early trading; POSCO (PKX) is up 0.6% at $72.97.

Western molybdenum is hovering just below $11 per pound:

Metals Week Average:
US$10.925

As of November 19, 2012
(updated weekly)

Ryan's Notes Average:
US$10.925

As of November 20, 2012
(updated twice weekly) 

The London Metal Exchange molybdenum 3-month seller's contract is $11.33 per pound ($25,000 per metric ton)

Cheers,

Colonel Possum


Friday, November 23, 2012

Gold $1,750 Bounce; The Colonel's Gold, Silver & Copper Prices for Next Week

Scott Raine roasting coffee beans the old fashioned way in Honduras - early days of a Raine's famous Red Label!

Latest Nevada Gas Prices (click this link)


My latest Kitco commentary: Copper and Gold - The Bank Shot (11/19/2012)

Morning Miners!

This is a short report today for a short holiday trading Friday - the ole Colonel hopes you had a terrific Thanksgiving Day!

Scott Raine sent the report some great photos from his days in Honduras with the Peace Corps. The headline shot is Scott roasting coffee beans the old fashioned way - early days of Raine's famous Red Label brew.



COMEX gold got a nice bounce mid-morning to the$1,750 per ounce level. You can read about what is expected to happen next week in my the input to the Kitco Weekly Gold Survey (below) and latest commentary, Copper and Gold - The Bank Shot.

Thanks again to Scott, enjoy another cup of his delicious Red Label  and have a great weekend!

The Colonel's Gold, Silver & Copper Prices for Next Week



Here is my input to the Kitco Weekly Gold Survey:

11/23/2012 (11:03 CT)

Q. Where do you see gold’s price headed next week, up, down or unchanged?

A. Sideways, $1,750 per ounce target.

Q. Why?

A. The price of gold has been range bound against a backdrop of compound uncertainties: the impending U.S. fiscal cliff, Europe’s sovereign debt crisis, China’s change in leadership and conflicts in the Middle East. However, the Israel-Hamas cease fire and new signs that the Chinese economy has indeed bottomed (e.g., HSBC PMI over the key-50 level for the first time is 13 months) has given a mid-morning holiday boost to gold to the $1,750 per ounce level. This may mark a high point when higher volume returns next week.

U.S. dollar strength has been a headwind for gold prices but has weakened more that 1% from last Friday. The yellow metal continues to show strength relative to key commodities and the broader markets but has weakened some from last Friday.

U.S. dollar-denominated gold price is expected to remain range bound for the short-term with a bullish trend for the near- and long-term. Until a new catlyst appears, my target of $1,750 per ounce may be the top of a new range with early-November support above $1,700 ($1,739.4 high, Nov. 11; $1,703 low, Nov. 7).

For $1,750 per ounce gold we can expect to see silver in a range of $32.3-$34.1 per ounce; and copper in a range of $3.45-$3.60 per pound.

As measured by the Eureka Miner’s Gold Value Index (GVI, Ref 1), the value of gold relative to global commodities copper and oil and companion metal silver remains near its high for 2012 (103.73, Nov. 13) at 101.19 but has fallen below its 1-month moving average of 102.08 (potentially bullish commodities).

The ratio of gold to the S&P 500 (AUSP) is also near its 2012 high (1.2752, June 4) at 1.2376 but showing signs of weakening. The latest price action indicates gold is maintaining value relative to the broader markets. 

My Oct. 30 Kitco commentary (Ref 3) posits that copper may be the next harbinger for metal prices and the broader markets. At that time the ratio of gold-to-copper had undergone a dramatic mean reversion - expansion of the daily ratio from that state would be bearish copper; compression would be a bullish. Two weeks ago an ounce of gold bought more than 500 pounds of copper, decidedly bearish; the trend higher has stalled – a short-term bullish sign for the red metal (my latest commentary,  Ref 4).

Any positive movement in the current headline issues (e.g., progress on resolving the U.S. fiscal cliff) would be constructive for the red metal. This could blunt future gold rallies and be bullish for base metals and the broader markets for the remainder of 2012.

Finally, the Brent-WTI spread in crude oil futures remains elevated at $23.20 per barrel and a 26.5% premium. Continuing troubles in the Middle East keep the spread at $20+ per barrel levels although a portion of that can be attributed to over-supply in North America. This is less a driver for gold now as the 3-month oil/gold correlation is +0.2 and the 1-month is +0.5. A regional conflagration could cause a sharp rise in both crude oil prices and the WTI/Brent spread.

Background Notes:

  1. My target price of $1,750 per ounce may define the top of a new trading range.
  2. Given the target gold price, the silver price ranges are derived from the 1-month gold ratio mean (GSR) and its respective ratio stability (CRS©). A different technique was used to predict the price range for copper since its 1-month correlation with gold is near-zero.
  3. My Gold Value Index© (GVI) equals 101.48 just below a high for 2012 of 103.73. Today gold value is below its 1-month moving average of 102.08; a value of 100 represents a historically high-value of gold relative to key commodities oil, copper and silver.
  4. The gold-to-copper ratio today is 494.4 pounds per ounce and above its 3-month moving average of 480.0; trending below this average towards the 400 pounds per ounce level would be a bullish indication for the red metal; trending above 500 pounds per ounce would be decidedly bearish (Ref 3).  The 1-month gold-to-copper ratio stability is a very low 1.44% (1-month rolling correlation is +0.08; 3-month is +0.87. 3-month relative volatility is 1.89X gold and price sensitivity (beta) is +1.64
  5. The gold-to-silver ratio (GSR) is near its historical norm at 52.794; the 3-month rolling correlation is +0.96, relative volatility is 1.94X gold and price sensitivity (beta) is +1.85. The GSR is below its 3-month average of 52.57; The 1-month gold-to-silver ratio stability is a low 1.29%.

Ref 2: $1,900 Gold - At the Crossroads (Kitco News, 10/15/2012)
Ref 3: Copper and Gold - In the Eye of the Storm (Kitco News, 10/30/2012)
Ref 4: Copper and Gold - The Bank Shot (Kitco News, 11/19/2012)


Cheers,

Colonel Possum


Headline photograph by Scott Raine

Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market