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


The author/editor of the Eureka Miner owns common shares of local mining stocks, General Moly (GMO) 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 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:

As of June 4, 2012
(updated weekly)

Ryan's Notes Average:

As of May 29, 2012
(updated twice weekly)

European Molybdenum Oxide (Bloomberg average price, updated Wednesday & Friday):

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?).


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

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