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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)
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)
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:
- 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.
- 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.
- 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.
- 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
- 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
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
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
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:
As of June 11, 2012
Ryan's Notes Average:
As of June 5, 2012
(updated twice weekly)
European Molybdenum Oxide (Bloomberg average price, updated Wednesday & Friday):
London metal Exchange (LME) molybdenum 3-month seller's contract:
US$13.61/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?).
Write Colonel Possum at firstname.lastname@example.org for answers to your questions or to request e-mail updates on the market