"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, June 29, 2012

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

Copper Nebula by Mariana Titus

 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: 2012 Copper & Gold - One Nice Thing (06/25/2012)

This morning's...
COMEX Gold price = $1,595.4/oz (August contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 100.59 (gold value gaps up, 5/4 & 6/1; gold value stalling with respect to key commodities oil, copper & silver)
Value Adjusted Gold Price© (VAGP) = $1,325.2/oz
COMEX - VAGP = $270.2/oz; gold is trading at a high premium to key commodities; the gold-to-copper ratio closes on its 3-month average (bullish condition, Cu overall neutral-bullish)


Morning Miners!

It is 6:06 AM. Have a cup of Friday Glad It's Gone. The Pinto Fire, which is now 90% contained, brought some frightening moments to residents of Eureka County this week. Unfortunately this is probably only the first scare of a long dry summer and fall. Before we move to market firestorms, here are two terrific reports from the front lines...



Pinto Fire

My neighbor and volunteer fireman Mike Mears sent me a great link for tracking fires this season:

National Interagency Fire Center

Mike and Scott Raine of Raine's Market were up close to the action Tuesday before the winds turned the fire east placing the Eureka town site and the Baumann ranch out of harm's way. Here are their reports:

Mike Mears Report (Update Wednesday, Jun 27, 2012 at 10:12 AM)

Colonel – Very hairy situation.  Fire started early Tuesday morning.  Lots of wind and apparently arcing power lines got things going.  We were toned out at around 12:15 am.  Fire began southeast of the Baumann Ranch and was already extremely active.  Winds were very erratic and moving the fire in all sorts of directions.  We started building fire lines with dozers and blades and doing what we could in the dark.  By the time the sun came up, we had at least 2500 acres burning and the fire started an easterly run towards the Pinto Creek Ranch in Newark Valley.  My team got pulled off the mountain to provide structure protection at the ranch.  Fire pushed close to the ranch, but then started another run to the north.  Anyway, we were on the fire line for about 14 ½ hours before they finally released us.  BLM has a ton of resources on it including two helicopters, two single engine air tankers, a large air tanker out of Battle Mountain, about 8 dozers and lots of personnel.  At this point, it is up to 4000 acres and they are showing 25% containment.  We’re a bit on edge as it tried a couple of times to run west which could be a threat to town or the Baumann’s.  We have a pretty solid line built to keep that from happening, but we’re all waiting for the tones to go out and find ourselves back on the fire today.  We’ll see what happens.  Lots of power lines down, but Mt. Wheeler managed to get power back to town.

Scott Raine's Report (Update Friday, Jun 29, 2012 at 11:16 PM)

The fire was a bit warm, it would have even qualified as a genuine firestorm at times, I saw 40 to 50 foot flames driven by the wind in the Pinon Juniper forest.  The 90% contained number is misleading though.  The Eureka and Diamond Valley Departments only left the fire to the BLM well after what I would call "all significant structure and private property danger" had passed about 14 hours after responding to the fire.  The remaining fire -if someone wanted to call it 10%- was largely in the rimrocks and large islands of unburned vegetation within the burned area.

The fire was largely within White Pine County, as were all structures closely threatened, but it was initially fought by the Eureka and Diamond Valley VFD fire engines alongside Eureka road department bulldozers, road graders, and water tender.  Local BLM had a truck on the scene early and by late morning other state and feds started arriving in fairly large numbers.  You can't ask for a faster response from Mount Wheeler Power, they had guys out looking for damaged lines with the first engines in.

In my opinion the vast majority of the habitat burned will be far better for having burned in a couple of years.  Much of the area was closed canopy pinon juniper or other decadent brush that didn't provide hardly any forage for wildlife or livestock.  Area springflows next year are likely to increase dramatically as well.  The big losses were the damage to the power lines and communication lines.  There were main transmission lines laying in the dirt...  That can't be cheap to fix.  We could use a few more cows, sheep, and woodcutters (if the BLM would let them cut / graze) to keep the overgrowth down in the future.


Hats off to Mike, Scott and their crews!

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

Any morning that oil jumps $4 and gold bounces $45 is a time to take notice. On the last day of the month and quarter, a surprising outcome to the recent EU summit has boosted commodities across the board on a falling dollar and surging euro. European leaders agreed on new measures to deal with the their mounting debt crisis. After all-night talks, the leaders of euro-zone agreed that rescue funds could be used for sovereign debt purchases without forcing countries to adopt extra austerity measures.

Additionally, China's central bank said it stands ready to keep credit and money supply growth at a steady and reasonable pace. This weekend China will releases its PMI numbers; if better-than-expected and European leaders demonstrate some new resolve, there could be a welcome change of tides for the metals and miners.

Here is my input to the Kitco Weekly Gold Report:

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

A. Up, $1,610 per ounce target

Q. Why?

Gold will likely remain range-bound in price performance between the June 6 intraday high ($1,642.4 per ounce) and last week’s low ($1,558.6 per ounce) with a bias above the psychologically important $1,600-level but failing to break the upper-end of the range.

The better than expected outcome of this week’s EU summit has resulted in a significant relief rally today. If this news is followed by new European resolve and encouraging Chinese economic data this weekend, the rally should extend into next week for not only gold but also key global commodities oil and copper.

Gold value relative to oil, copper and silver remains near the highs for 2012 and just below the 2011 peak. Gold value could now begin a gradual decline with a bullish expansion of gold ratios.  Both 1-month rolling correlations of oil and copper relative to gold have returned positive this week strengthening their 3-month positive correlations (>+0.6). Positive 1- and 3-month correlations typically signal a more bullish environment for commodity prices, an additional positive development.

For $1,610 per ounce gold we can expect to see silver in a range of $27.1-$29.3 per ounce; and copper in a range of $3.37-$3.61 per pound

Background Notes:

  1. My $1,610 per ounce target is slightly above the geometric mean ($1,599.95 per ounce) of the June 6 intraday high ($1,642.4) and last week’s low ($1,558.6). Gold price is likely to fail breaking resistance at the top-end.
  2. Given the target gold price, the silver and copper price ranges are derived from the 1-month gold ratio means (GSR & GCR) and their respective ratio stability (CRS©).
  3. My Gold Value Index© (GVI) equals 100.59 this morning and 8.5% below the Oct. 4 high of 109.97 but still near the recent peak of 102.74 set on June 1. Today gold value fell below its 1-month moving average of 101.33, a potentially bullish development for commodities.
  4. The gold-to-copper ratio today is 460.5 pounds per ounce and above its 3-month moving average of 456.52 pounds per ounce. Falling below this average and trending towards the 400 pounds per ounce level would be bullish for copper (1-month rolling correlation is +0.38; 3-month is +0.64). 3-month relative volatility is 2.25X gold and price sensitivity (beta) is +1.44
  5. The gold-to-silver ratio is above its historical norm at 57.90; 3-month rolling correlation is +0.0.87, relative volatility is 2.52X gold and price sensitivity (beta) is +2.20


Friday's Market Roundup


Mining Report

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

Barrick (ABX) $37.33 up 3.04%
Newmont (NEM) $48.13 up 2.14%
McEwen Mining (MUX) $2.98 up 6.05%  (formerly US Gold, UXG)
General Moly (Eureka Moly, LLC) (GMO) $3.11 up 2.64%
Thompson Creek (TC) $3.24 up 1.57%
Freeport-McMoRan (FCX) $33.93 up 3.66% (a bellwether mining stock spanning copper, gold & molybdenum)
Timberline Resources (TLR) $0.28 up 3.70%

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

ArcelorMittal (MT) $15.26 up 6.34% - global steel producer
POSCO (PKX) $80.10 up 2.55% - South Korean integrated steel producer

The Eureka Miner's Index© (EMI) was re-calibrated 5/24 to reflect current 200-day moving averages for benchmark miners.

The EMI is below-par at 77.58, down from last week's 72.12 and above the 1-month moving average of 69.23. The 1-month average is below the key 100-level (bearish condition)

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 up $45.0/oz at $1,595.4/oz (August contract, most active)

COMEX silver is up $1.264/oz at $27.555/oz (September contract, most active)

The gold-to-silver-ratio (Au:Ag) is 57.899 oz/oz

Silver 1-month CRS© is 1.94% (bullish stability level); weak stability divergence (Ag overall indicators neutral-to-bullish with rising gold prices)

The Eureka Miner’s Gold Value Index© (GVI) is below-par at 100.59, down from last week's 102.33 and below its 1-month average of 101.33. Gold value gaped up 5/4/2012 and 6/1/2012, and has now stalled; a possible bullish indication for key commodities. The record high for 2010-2012 is 109.97 set on Oct. 4, 2011; the 2012 peak was 102.74 set on June 1, 2012.

The Value Adjusted Gold Price© (VAGP) is $1,325.2/oz which is $270.2/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 $0.1330/lb at $3.4645/lb (September contract, most active)

The gold-to-copper ratio is 460.5 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 456.52 (Cu overall bearish conditions in a bearish Price Domain B)

Copper 1-month CRS© is 1.71% (bullish stability level); ratio weak divergence (overall Cu indicators neutral-bullish)

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

Metals Week Average:
US$13.25

As of June 25, 2012
(updated weekly)

Ryan's Notes Average:
US$13.05

As of June 26, 2012
(updated twice weekly)
European Molybdenum Oxide (Bloomberg average price, updated Wednesday & Friday):
US$12.90/lb

London metal Exchange (LME) molybdenum 3-month seller's contract:

US$13.02/lb (US$28,700/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). The next conflict could be in the Persian Gulf. Brent is below $100/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 $81.91
ICE North Sea Brent crude $95.49
Spread (ICE- NYMEX) = $13.58 (last report, $15.29)

Here are the October contracts* with a narrower spread:

NYMEX light sweet crude $82.71
ICE North Sea Brent crude $95.41
Spread (ICE- NYMEX) = $12.70 (last report, $12.75 )

* NYMEX futures contracts have rolled forward, we now show August and October

The gold-to-WTI is 19.477 bbl/oz; ratios above 18.0 bbl/oz are considered bearish for oil

NYMEX WTI 1-month CRS© is 2.40% (bullish stability level); weakening stability divergence (WTI overall indicators bearish)

Prices remain high for 2012 but have pulled back dramatically, we have $95+ Brent and $80+ NYMEX in October signalling moderating oil prices this summer and early fall. A front-month spread between Brent and WTI >$20/bbl is a trouble sign; the present spread is encouraging.

Daily Debt Crisis Watch

July 26th 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 67.3 up from last Friday's 72.6. A level above 200 is time for serious concern - we are now well below that level. The highest level recorded since inception was 271.0 Aug. 9, 2011; the lowest level is 65.1 on Mar. 13, 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 up 219.67 points to 12,821.93; the S&P 500 is up 25.95 points at 1,354.99

The Eureka Miner's Grubstake Portfolio is up 2.88% at $1,222,446.24 (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

Friday, June 15, 2012

General Moly on a Tear; The Colonel's Gold, Silver & Copper Prices for Next Week


 Good Day for a Picnic, Eureka, Nevada

SPECIAL NOTE: The Colonel will be on the road soon, the next Friday report will be bright and early June 29.

 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: 2012 Copper & Gold - One Nice Thing (06/25/2012)

This morning's...
COMEX Gold price = $1,625.7/oz (August contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 101.53 (gold value gaps up, 5/4 & 6/1; gold value trending higher with respect to key commodities oil, copper & silver)
Value Adjusted Gold Price© (VAGP) = $1,338.0/oz
COMEX - VAGP = $287.7/oz; gold is trading at a high premium to key commodities; the gold-to-copper ratio remains above its 3-month average (bearish condition, Cu overall bearish)



Morning Miners!

It is 5:59 AM. Have a cup of Summer's Nearly Here and a view of Eureka from a dog's perspective. It was quite a memorable week of markets and a turn of fortune for one of our local miners. Gold is back over the psychologically impotant $1,600 per ounce level and General Moly cleared two significant hurdles...


General Moly on a Tear

General Moly (GMO) stock price rocketed over 21% yesterday to $3.31 on an eye-popping daily volume of 1,499,579 shares. Investors were bullish on our moly miner this week with a series of positive outcomes. On Monday, GMO announced the approval of the Mt. Hope Project's 3M Plan (Monitoring, Management and Mitigation) by the Nevada State Engineer:

General Moly Announces Approval of 3M Plan for Mt. Hope Project (Press Release, 6/11/2012)


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

We are continuing to make good progress toward permitting the Mt. Hope Project and approval of the 3M Plan is another step in this direction. The community of Eureka County had substantial input in developing this robust 3M Plan and I am pleased with the result. Although our water permits remain subject to an appeal, we look forward to the Court's ruling, which could be in the next couple months. 

The Elko Daily Free Press carried this story:
  
State approves General Moly’s ‘3M’ Plan for Mt. Hope (By MARIANNE KOBAK McKOWN,  Elko Daily Free Press, 6/11/2012)

Mining Editor Marianne Kobak McKnown quoted Eureka County Commission Chairman Leonard Fiorenzi as saying, "We were fairly well pleased with it. We didn’t get everything we wanted, but we were happy with what we did.”

Then the water rights appeal cleared as GMO announced Thursday:


General Moly Announces Nevada State District Court Order Supporting Nevada State Engineer's Approval of Mt. Hope Water Rights (Press Release, 6/14/2012) 

Bruce Hansen then had this to say:

I am extremely pleased that the State Engineer's thorough and inclusive process in approving the Mt. Hope Project's water rights and permits has been affirmed by the Court. Obtaining water rights for the Mt. Hope Project has been a long process and I am eager to move beyond the protests and appeals of the past three years toward a more positive and engaged dialogue with the County of Eureka and its citizens. The 3M Plan, approved by the NSE earlier this week, provides mitigation protections to other water users if impacts are caused by the Mt. Hope project. With full access to our water rights and permits we look forward to the receipt of our remaining State and Federal permits and initiating construction activities later this year. The Mt. Hope project is moving forward. 

The ole Colonel congratulated Chief Operating Officer Bob Pennington by e-mail and his reply spoke volumes in seven words, "This is a real relief for us."

And a real relief for share holders and General Moly supporters, the Mt. Hope project is moving forward. 

The Elko Daily Free Press carried this article on the ruling:

Judge rules in favor of Mt. Hope (By MARIANNE KOBAK McKOWN,  Elko Daily Free Press, 6/15/2012)


The Eureka Miner respects the views of all miners, farmers and ranchers and their valuable contribution to Eureka County and hopes the 3M plan and resolution of the Mt. Hope water rights issue will provide an equitable solution for all concerned.

Hats off to the crew at General Moly and their local subsidiary Eureka Moly LLC.

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

Here is my input to the Kitco Weekly Gold Report:

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

A. Up, $1,640 per ounce target

Q. Why?

A. Gold will likely remain range-bound in price performance between the June 6  intraday high ($1,642.4 per ounce) and its June 8 low ($1,556.4 per ounce)  with a bias above the psychologically important $1,600-level but failing to break the upper-end of the range.

Greek elections this weekend and the potential for coordinated action by central banks perpetuate an unsettled political climate and fuel the expectations for further monetary easing in the U.S. and Europe – all potentially supportive for gold price.

As the European crisis continues without resolution against a backdrop of softer global growth and over-supply, base metals like copper are likely to see more downside in the near-term with a bearish expansion of gold-ratios. Gold value relative to oil, copper and silver remains near the highs for 2012 and just below the 2011 peak.

Both 1-month rolling correlations of oil and copper relative to gold remained negative this week and their positive 3-month positive correlations are softening (<+0.7). Negative 1- and 3-month correlations typically signal a very bearish environment for commodity prices so these continue to be key metrics to monitor going forward.

For $1,640 per ounce gold we can expect to see silver in a range of $28.2-$29.7 per ounce; and copper with a target price of $3.38 per pound and price floor of $3.16 per pound

Background Notes:

  1. My $1,640 per ounce target is above the geometric mean ($1,598.82 per ounce) of the June 6 intraday high ($1,642.4) and June 8 low ($1,556.4, June contract). Gold price is likely to fail breaking resistance at the top-end.
  2. Given the target gold price, the silver price ranges are derived from the 1-month gold ratio mean (GSR) and respective ratio stability (CRS©). Since copper is de-correlating form gold, a different technique is used to compute a target and floor for the red metal.
  3. My Gold Value Index© (GVI) equals 101.53 this morning and only 7.7% from the Oct. 4 high of 109.97; near the recent peak of 102.74 set on June 1. On a 1-month basis, gold value continues to trend strongly higher with respect to key commodities oil, copper & silver.
  4. The gold-to-copper ratio today is 480.76 pounds per ounce and above its 3-month moving average of 450.32 pounds per ounce. Remaining above this average and trending away from the 400 pounds per ounce level is bearish for copper (1-month rolling correlation is -0.47; 3-month is +0.69). 3-month relative volatility is 2.16X gold and price sensitivity (beta) is +1.50
  5. The gold-to-silver ratio is trending above its historical norm at 56.82; 3-month rolling correlation is +0.90, relative volatility is 2.38X gold and price sensitivity (beta) is 2.14


Friday's Market Roundup


Mining Report

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

Barrick (ABX) $39.02 up 0.08%
Newmont (NEM) $50.66 down 0.03%
McEwen Mining (MUX) $2.88 up 1.05%  (formerly US Gold, UXG)
General Moly (Eureka Moly, LLC) (GMO) $3.30 down 0.30%
Thompson Creek (TC) $3.21 up 0.94%
Freeport-McMoRan (FCX) $33.93 up 0.09% (a bellwether mining stock spanning copper, gold & molybdenum)
Timberline Resources (TLR) $0.33 unchanged

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

ArcelorMittal (MT) $14.44 up 3.74% - global steel producer
POSCO (PKX) $80.90 up 0.32% - South Korean integrated steel producer

The Eureka Miner's Index© (EMI) was re-calibrated 5/24 to reflect current 200-day moving averages for benchmark miners.

The EMI is below-par at 61.65, down from last week's 70.89 and above the 1-month moving average of 59.77. The 1-month average is below the key 100-level (bearish condition)

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 up $6.1/oz at $1,625.7/oz (August contract, most active)

COMEX silver is up $0.203/oz at $28.610/oz (July contract, most active)

The gold-to-silver-ratio (Au:Ag) is 56.833 oz/oz

Silver 1-month CRS© is 1.25% (bullish stability level); weak stability divergence (Ag overall indicators neutral-to-bullish with rising gold prices)

The Eureka Miner’s Gold Value Index© (GVI) is below-par at 101.53, up from last week's 100.47 and above its 1-month average of 97.91. Gold value gaped up 5/4/2012 and 6/1/2012, and is trending higher; a bearish indication for key commodities. The record high for 2010-2012 is 109.97 set on Oct. 4, 2011; the 2012 peak was 102.74 set on June 1, 2012.

The Value Adjusted Gold Price© (VAGP) is $1,338.0/oz which is $287.7/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 $0.0270/lb at $3.3815/lb (July contract, most active)

The gold-to-copper ratio is 480.76 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 450.32 (Cu overall bearish conditions in a bearish Price Domain B)

Copper 1-month CRS© is 3.35% (neutral stability level); ratio weak divergence (overall Cu indicators remain bearish)

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

Metals Week Average:
US$13.45

As of June 11, 2012
(updated weekly)

Ryan's Notes Average:
US$13.45

As of June 12, 2012
(updated twice weekly)

European Molybdenum Oxide (Bloomberg average price, updated Wednesday & Friday):
US$13.40/lb

London metal Exchange (LME) molybdenum 3-month seller's contract:

US$13.54/lb (US$29,850/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). The next conflict could be in the Persian Gulf. Brent is below $100/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 $83.85
ICE North Sea Brent crude $97.21
Spread (ICE- NYMEX) = $ (last report, $15.29)

Here are the September contracts* with a narrower spread:

NYMEX light sweet crude $84.44
ICE North Sea Brent crude $97.19
Spread (ICE- NYMEX) = $12.75 (last report, $14.05 )

* NYMEX futures contracts have rolled forward, we now show July and September

The gold-to-WTI is 19.388 bbl/oz; ratios above 18.0 bbl/oz are considered bearish for oil

NYMEX WTI 1-month CRS© is 6.02% (bearish stability level); strong stability divergence (WTI overall indicators bearish)

Prices remain high for 2012 but have pulled back dramatically, we have $95+ Brent and $80+ NYMEX in September signalling moderating oil prices this summer and early fall. A front-month spread between Brent and WTI >$20/bbl is a trouble sign; the present spread is encouraging.

Daily Debt Crisis Watch

July 26th 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 87.2 up from last Friday's 85.1. A level above 200 is time for serious concern - we are now well below that level. The highest level recorded since inception was 271.0 Aug. 9, 2011; the lowest level is 65.1 on Mar. 13, 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 up 68.75 points to 12,720.66; the S&P 500 is up 7.61 points at 1,336.71

The Eureka Miner's Grubstake Portfolio is up 0.25% at $1,250,708.21 (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

Friday, June 8, 2012

Back Country Photos; The Colonel's Gold, Silver & Copper Prices for Next Week

The Devil's Back Porch, Devil's Gate, Eureka, Nevada


Latest Nevada Gas Prices (click this link)


NEW WEEKLY SCHEDULE - The Eureka Miner takes a hiatus from daily reports

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: Gold Prices Faltering, Gold Value (Still) Rising (6/11/2012)

This morning's...
COMEX Gold price = $1,579.0/oz (August contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 100.64 (gold value gaps up, 5/4 & 6/1; gold value trending higher with respect to key commodities oil, copper & silver)
Value Adjusted Gold Price© (VAGP) = $1,311.0/oz
COMEX - VAGP = $268.0/oz; gold is trading at a high premium to key commodities; the gold-to-copper ratio remains above its 3-month average (bearish condition, Cu overall bearish)


Morning Miners!


It is 6:58 AM. Have a strong cup of Back Country java. It's been a rough market week for miners but let's start off with some terrific photos submitted to the Eureka Miner...


 
Back Country Photos

Eric Pastorino sent in some great photos of Eureka's back country and history taken by Ben Wilson from a recent trip to the Tonkin Springs man camp and the old Atlas Gold Bar Mine. The first three are the Tonkin Springs Ranch which includes possibly the first Damele family residence near turn of the century.





Here is one of the Atlas Gold Bar Mine pits. The ole Colonel would love to see this operation fire up again.



Presently, Midway Gold is pursuing the "Afgan Project" in this area. Other activities have included McEwen Mining (formerly U.S. Gold) as shown in this map provided by Eric:



Links to these exploratory mining companies can be found in the sidebar to your right, Miner's Corner.

Hats off to Eric and Ben for their contribution!

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

Here is my input to the Kitco Weekly Gold Report:

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

$1,585 per ounce target or about where COMEX gold is trading this morning

2.      Why?

Gold will likely return to range-bound price performance between this week’s intraday high ($1,642.4 per ounce, Aug. contract) and its May 16 low ($1,526.7 per ounce, June contract) with a bias below the psychologically important $1,600-level

Mixed messages from central banks this week reversed the recent rally in gold prices above $1,600 per ounce. Rate cuts in China and Australia were supportive but noncommittal remarks by the U.S. Federal Reserve and indecision in Europe dampened any hope that broad-based accommodative policies were close at hand.

As the European crisis deepens against a backdrop of softer global growth and over-supply, base metals like copper are likely to see more downside in the near-term with a bearish expansion of gold-ratios.

We appear to be returning to gold prices falling, gold value rising (relative to key commodities oil, copper and silver). Both 1-month rolling correlations of oil and copper relative to gold turned negative this week although their 3-month correlations remain fairly high (>+0.7). Negative 1- and 3-month correlations typically signal a very bearish environment for commodity prices so these are key metrics to monitor going forward.

For $1,585 per ounce gold we can expect to see silver in a range of $27.7-$29.4 per ounce; and copper with a target price of $3.25 per pound and price floor of $3.06 per pound

Background Notes:

  1. My $1,585 per ounce target is approximately the geometric mean ($1,583.5 per ounce) of this week’s intraday high ($1,642.4) and the May low ($1,526.7, June contract) with resistance at the $1,600 per ounce level.
  2. Given the target gold price, the silver price ranges are derived from the 1-month gold ratio mean (GSR) and respective ratio stability (CRS©). Since copper is de-correlating form gold, a different technique is used to compute a target and floor for the red metal.
  3. My Gold Value Index© (GVI) equals 100.64 this morning and only 8.5% from the Oct. 4 high of 109.97; the recent peak was 102.74 set on June 1. On a 1-month basis, gold value is strongly trending higher with respect to key commodities oil, copper & silver.
  4. The gold-to-copper ratio today is 480.60 pounds per ounce and above its 3-month moving average of 445.95 pounds per ounce. Remaining above this average and trending away from the 400 pounds per ounce level is bearish for copper (1-month rolling correlation is -0.21; 3-month is +0.74). 3-month relative volatility is 2.01X gold and price sensitivity (beta) is +1.49
  5. The gold-to-silver ratio is trending above its historical norm at 56.05; 3-month rolling correlation is +0.91, relative volatility is 2.40X gold and price sensitivity (beta) is 2.18

Friday's Market Roundup


Mining Report

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

Barrick (ABX) $38.98 up 0.52%
Newmont (NEM) $50.07 down 0.54%
McEwen Mining (MUX) $2.47 down 3.89%  (formerly US Gold, UXG)
General Moly (Eureka Moly, LLC) (GMO) $2.75 down 0.72%
Thompson Creek (TC) $3.46 down 2.26%
Freeport-McMoRan (FCX) $33.29 down 0.92% (a bellwether mining stock spanning copper, gold & molybdenum)
Timberline Resources (TLR) $0.36 unchanged

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

ArcelorMittal (MT) $14.19 down 1.94% - global steel producer
POSCO (PKX) $78.82 up 0.78% - South Korean integrated steel producer

The Eureka Miner's Index© (EMI) was re-calibrated 5/24 to reflect current 200-day moving averages for benchmark miners.

The EMI is below-par at 67.86, up from last week's 56.45 and below the 1-month moving average of 58.99. The 1-month average is below the key 100-level (bearish condition)

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 $9.0/oz at $1,579.0/oz (August contract, most active)

COMEX silver is down 0.359/oz at $28.170/oz (July contract, most active)

The gold-to-silver-ratio (Au:Ag) is 56.053 oz/oz

Silver 1-month CRS© is 1.50% (bullish stability level); weak stability divergence (Ag overall indicators neutral-to-bearish with falling gold prices)

The Eureka Miner’s Gold Value Index© (GVI) is below-par at 100.64, down from last week's 102.74 and above its 1-month average of 95.65. Gold value gaped up 5/4/2012 and 6/1/2012, and is trending higher; a bearish indication for key commodities. The record high for 2010-2012 is 109.97 set on Oct. 4, 2011; the 2012 peak was 102.74 set on Junw 1, 2012.

The Value Adjusted Gold Price© (VAGP) is $1,311.0/oz which is $268.0/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 down $0.0850/lb at $3.2855/lb (July contract, most active)

The gold-to-copper ratio is 480.60 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 445.95 (Cu overall bearish conditions in a bearish Price Domain B)

Copper 1-month CRS© is 4.00% (bearish stability level); ratio divergence (overall Cu indicators remain bearish)

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

Metals Week Average:
US$13.45

As of June 11, 2012
(updated weekly)

Ryan's Notes Average:
US$13.525

As of June 5, 2012
(updated twice weekly)
European Molybdenum Oxide (Bloomberg average price, updated Wednesday & Friday):
US$13.45/lb

London metal Exchange (LME) molybdenum 3-month seller's contract:

US$13.61/lb (US$30,000/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). The next conflict could be in the Persian Gulf. Brent is below $100/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 $82.59
ICE North Sea Brent crude $97.88
Spread (ICE- NYMEX) = $15.29 (last report, $15.43)

Here are the September contracts* with a narrower spread:

NYMEX light sweet crude $83.21
ICE North Sea Brent crude $97.26
Spread (ICE- NYMEX) = $14.05 (last report, $14.50 )

* NYMEX futures contracts have rolled forward, we now show July and September

The gold-to-WTI is 19.119 bbl/oz; ratios above 18.0 bbl/oz are considered bearish for oil

NYMEX WTI 1-month CRS© is 6.19% (bearish stability level); strong stability divergence (WTI overall indicators bearish)

Prices remain high for 2012 but have pulled back dramatically, we have $95+ Brent and $80+ NYMEX in September signalling moderating oil prices this summer and early fall. A front-month spread between Brent and WTI >$20/bbl is a trouble sign; the range of $15-16 has been fairly stable.

Daily Debt Crisis Watch

July 26th 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 85.0 down from last Friday's 99.6. A level above 200 is time for serious concern - we are now well below that level. The highest level recorded since inception was 271.0 Aug. 9, 2011; the lowest level is 65.1 on Mar. 13, 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 up 8.40 points to 12,469.36; the S&P 500 is up 0.57 points at 1,315.56

The Eureka Miner's Grubstake Portfolio is down 0.70% at $1,205,367.68 (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


Friday, June 1, 2012

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

High School Rodeo 2012, Eureka, Nevada

Latest General Moly News:

General Moly receives air quality permit (Elko Daily Free Press, 5/30/2012)


Latest Nevada Gas Prices (click this link)


NEW WEEKLY SCHEDULE - The Eureka Miner takes a brief hiatus from daily reports

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: Gold Prices Falling, Gold Value Rising (5/29/2012)

This morning's...
COMEX Gold price = $1,601.3/oz (June contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 100.48 (gold value gaps up, 5/4 & 6/1; gold value strongly trending higher with respect to key commodities oil, copper & silver)
Value Adjusted Gold Price© (VAGP) = $1,331.6/oz
COMEX - VAGP = $269.7/oz; gold is trading at a high premium to key commodities; the gold-to-copper ratio remains above its 3-month average (bearish condition, Cu overall bearish)


Morning Miners!


It is 5:58 AM. Have a strong cup of Changing Winds java - there are a few dark clouds forming on the horizon following a lousy monthly jobs report this morning. But first let's toast a terrific mining journalist who is headed for blue sky country...



Adella Harding Retires

Mining Editor par excellence Adella Harding of the Elko Daily Free Press will be retiring today with the publishing of the summer edition of Mining Quarterly.

Her "boots-on-the-ground" reporting style and photography are legendary in the northern Nevada mining industry above and below ground. Adella has written daily columns for the Free Press for years and her Mining Quarterly magazines are well respected expositions on the state and progress of mining in the heart of North American gold country - a publication the ole Colonel eagerly awaits every quarter. 

Adella told me, "I am probably nuts to retire again, but plan to move to Wyoming later this summer to be near family."

This report wishes her all the best on her new adventure and she will be greatly missed in these parts and beyond. The new mining editor will be Marianne Kobak McKown, who is reachable at mining@elkodaily.com.


Please checkout the latest Mining Quarterly, pardner.



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

Here is my input to the Kitco Weekly Gold Report:

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

A. Up, $1,635 per ounce target.

Q. Why?

A. Gold will likely continue its rally into next week but pause below its May 8 intraday high ($1,639.5 per ounce, June contract).

Markets are presently trading on money flows, not fundamentals. The most striking harbinger for metals has therefore been from an outside market - the relation of crude oil to gold after the release of recent monthly U.S. jobs report.

In both instances, May 4 and today, the gold-to-WTI bearishly gaped up by more than 6%. After the May 4 release base metals retreated and the same behavior is expected this time. U.S. dollar-denominated gold price fell in first case but is now on the rise as “safe-haven” status returns to gold and de-correlation with base metals has commenced.

As the European crisis deepens against a backdrop of softer global growth and over-supply, base metals like copper are likely to see more downside in the near-term with a bearish expansion of gold-ratios. We appear to be shifting from gold prices falling, gold value rising (relative to commodities) to a period of gold prices rising, gold value rising.

If liquidations occur with an event like Greece leaving the monetary union, this trend could reverse again with a temporary resumption of falling gold prices.

For $1,635 per ounce gold we can expect to see silver in a range of $28.7-$30.5 per ounce; and copper with a target price of $3.30 per pound and price floor of $3.15 per pound

Background Notes:

  1. My $1,635 per ounce target is biased above the geometric mean ($1,597.8 per ounce) of the trading range of the May intraday high ($1,672.3) and low ($1,526.7), both June contracts. It falls short of the May 8 intraday high of $1,639.5 per ounce (June contract)
  2. Given the target gold price, the silver price ranges are derived from the 1-month gold ratio mean (GSR) and respective ratio stability (CRS©). Since copper appears to be de-correlating form gold, a different technique is used to compute a target and floor for the red metal.
  3. My Gold Value Index© (GVI) equals 100.48 this morning after gaping up and only 8.6% from the Oct. 4 high of 109.97. Gold value is strongly trending higher with respect to key commodities oil, copper & silver.
  4. The gold-to-copper ratio today is 478.29 pounds per ounce and above its 3-month moving average of 442.79 pounds per ounce. Remaining above this average and trending away from the 400 pounds per ounce level is bearish for copper (1-month rolling correlation is +0.76; 3-month is +0.83). 3-month relative volatility is 1.58X gold and price sensitivity (beta) is +1.31
  5. The gold-to-silver ratio is trending above its historical norm at 56.4; 3-month rolling correlation is +0.95, relative volatility is 2.29X gold and price sensitivity (beta) is 2.19

Friday's Market Roundup


Mining Report

This morning's mining stocks...

Barrick (ABX) $41.19 up 5.45%
Newmont (NEM) $49.66 up 5.30%
McEwen Mining (MUX) $2.52 up 6.78%  (formerly US Gold, UXG)
General Moly (Eureka Moly, LLC) (GMO) $2.60 up 4.84%
Thompson Creek (TC) $3.41 down 0.58%
Freeport-McMoRan (FCX) $32.15 up 0.34% (a bellwether mining stock spanning copper, gold & molybdenum)
Timberline Resources (TLR) $0.38 unchanged

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

ArcelorMittal (MT) $13.53 down 2.59% - global steel producer
POSCO (PKX) $75.02 down 0.94% - South Korean integrated steel producer

The Eureka Miner's Index© (EMI) was re-calibrated 5/24 to reflect current 200-day moving averages for benchmark miners.

The EMI is below-par at 58.24, down from last week's 71.49 and below the 1-month moving average of 65.14. The 1-month average is below the key 100-level (bearish condition)

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 up $37.1/oz at $1,601.3/oz (August contract, most active)

COMEX silver is up $0.618/oz at $28.375/oz (July contract, most active)

The gold-to-silver-ratio (Au:Ag) is 56.433 oz/oz

Silver 1-month CRS© is 1.55% (bullish stability level); weak stability convergence (Ag overall indicators neutral-to-bullish with rising gold prices)

The Eureka Miner’s Gold Value Index© (GVI) is below-par at 100.48, up from last week's 94.45 and above its 1-month average of 93.22. Gold value gaped up 5/4/2012 and 6/1/2012, and is strongly trending higher; a bearish indication for key commodities. The record high for 2010-2012 is 109.97 set on Oct. 4, 2011.

The Value Adjusted Gold Price© (VAGP) is $1,331.60/oz which is $269.71/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 down $0.0175/lb at $3.3480/lb (July contract, most active)

The gold-to-copper ratio is 478.29 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 442.79 (Cu overall bearish conditions in a bearish Price Domain B)

Copper 1-month CRS© is 2.61% (bullish stability level); very stable ratio; 1-month & 3-month < 3% (however, overall indicators remain bearish)

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

Metals Week Average:
US$13.55

As of June 4, 2012
(updated weekly)

Ryan's Notes Average:
US$13.65

As of May 29, 2012
(updated twice weekly)


European Molybdenum Oxide (Bloomberg average price, updated Wednesday & Friday):
US$13.50/lb

London metal Exchange (LME) molybdenum 3-month seller's contract:

US$13.56/lb (US$29,900/metric ton)

Daily 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). The next conflict could be in the Persian Gulf. Brent is below $100/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 $84.02
ICE North Sea Brent crude $99.45
Spread (ICE- NYMEX) = $15.43 (last report, $16.02)

Here are the September contracts* with a narrower spread:

NYMEX light sweet crude $84.68
ICE North Sea Brent crude $98.71
Spread (ICE- NYMEX) = $14.50 (last report, $14.42 )

* NYMEX futures contracts have rolled forward, we now show July and September

NYMEX WTI 1-month CRS© is 4.20% (bearish stability level); strong stability divergence (WTI overall indicators bearish)

Prices remain high for 2012 but have pulled back dramatically, we have $95+ Brent and $80+ NYMEX in September signalling moderating oil prices this summer and early fall. A front-month spread between Brent and WTI >$20/bbl is a trouble sign.

Daily Debt Crisis Watch

July 26th 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 92.9 up from last Friday's 86.7. A level above 200 is time for serious concern - we are now well below that level. The highest level recorded since inception was 271.0 Aug. 9, 2011; the lowest level is 65.1 on Mar. 13, 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 204.31 points to 12,189.14; the S&P 500 is down 23.81 points at 1,286.52

The Eureka Miner's Grubstake Portfolio is up 2.16% at $1,200,079.59 (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