"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, July 27, 2012

Timberline Rocks, Barrick Not; The Colonel's Gold, Silver & Copper Prices for Next Week

A good evening for kung pao, Eureka Cafe, 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: Gold Versus Copper, Oil and Silver: The Value Trend Is Your Friend (7/23/2012)

This morning's...
COMEX Gold price = $1,618.4/oz (August contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 99.19 (gold value reversed to the upside this week and is historically high with respect to key commodities oil, copper and silver)
Value Adjusted Gold Price© (VAGP) = $1,363.4/oz
COMEX - VAGP = $255.0/oz; gold is trading at a high premium to key commodities; the gold-to-copper ratio is bearishly above its 3-month average (Cu prospects for the second-half of the year improving)


Morning Miners!

It is always good to see gold trading above $1,600 per ounce again after being in the doldrums for much of July. The broader markets are happier too with the DOW and S&P 500 on their way to challenge the highs for the month. Improving news from across the pond has been the prime mover with today's statements of support for the euro zone from German Chancellor Angela Merkel and French President Francois Hollande. The real push came Thursday when European Central Bank President Mario Draghi said the ECB is ready to do whatever it takes to preserve the common-currency union. Those words kicked off a global rally which closes the week on an uptick.

Even this mornings' report of slower growth in the U.S. for the second quarter didn't spoil the party. The GDP was 1.5%, not great but better than the consensus expectation of 1.2 to 1.3%. The higher number did pullback gold's early morning rally touching $1,628.5 per ounce since it diminishes the chances for aggressive U.S. monetary easing in the short-term. Consensus is building for another round of quantitative easing to be announced in September. COMEX gold is presently trading up $3.3 at $1,618.4 per ounce.

Several of our local gold miners are having a very good week but Barrick Gold (ABX) is not. Timberline Resources (TLR) has rallied up eight-out-of-nine market days rising 39% from its July 11 low of $0.2301. TLR is trading at $0.32 this morning. McEwing Mining (MUX formerly US Gold) has had a good run too up nearly 16% from its July low of $2.63; presently $3.04 per share.

Barrick Gold reported this week and we now may know why CEO Aaron Regent recently got the boot. As reported in the Financial Post, "Barrick Gold Corp. reported a massive capital cost over-run on Thursday as it delivered disappointing second-quarter results and lowered its long-term production outlook in a shift in strategy..." and, "The world’s biggest gold miner said that projected capital costs at Pascua-Lama, its most important development project, have jumped 50% to 60% from the top end of its prior estimate, which was US$5-billion."

Here's the the FP article:

Barrick Gold cuts production outlook, reviews projects as costs weigh (Peter Koven, Financial Post, Jul 26, 2012 – 7:56 AM ET)

Barrick Gold is down nearly 5% over the same period that TLR and MUX rallied; the giant stumbles, small gold miners rumble - ABX is plumbing $32.09 per share.

General Moly (GMO) has been pretty flat this week struggling with the $3-level, presently trading at $2.99 per share.

Euro Moly oxide fell below the key-$12 per pound level this week at $11.85. Western moly is not much better at $12.125-12.175 per pound and the LME 3-month seller rests at a more upbeat $12.70 per pound ($28,000 per tonne).

Have a relaxing cup of Raine's delicious Red Label TGIF and enjoy your weekend!


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

My Friday input to the Kitco Weekly Gold Survey:

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

A. Up slightly, $1,620 per ounce target

Q. Why?

A. In the short-term, gold will likely remain range-bound between June’s high and July’s low ($1,642.4 and $1,554.4 per ounce) with a bias above the psychologically important $1,600-level and solid support at the low-end of the range. A multi-month high or new record is expected in the next two to seven months (Ref 1 & Ref 2)

Strong comments this week by European Central Bank President Mario Draghi in support of the euro brought gold higher but the rally faded with a somewhat better than expected U.S. GDP this morning. Both actions indicate gold price is presently driven by anticipated central bank actions; the latter damping short-term expectations of aggressive quantitative easing in the U.S.

U.S. dollar-denominated gold price is still looking for a catalyst to break above the June high: lackluster physical demand and the summer doldrums have capped gold’s gains although U.S. dollar strength is now weakening. Either negative market anticipation of the U.S. “fiscal cliff” or a conflict in the Middle East could provide the catalyst for new highs or even a new record.

Gold value relative to oil, copper and silver reversed this week to the upside and is again at historically elevated levels (i.e. bearish commodities). One-month gold-to-copper and -silver ratios are exceptionally stable reducing the likelihood of significant price corrections.

For $1,620 per ounce gold we can expect to see silver in a range of $27.2-$27.9 per ounce; and copper in a range of $3.32-$3.53 per pound

Background Notes:
  1. My $1,620 per ounce target is biased above the geometric mean ($1,597.8) of the June 6 intraday high ($1,642.4) and the July 12 low ($1,554.4). Gold price is likely to fail breaking resistance at the top-end but finds solid support at the low-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 99.19 this morning which is 9.4% below the Oct. 4 high of 109.97 and 3.5% below the peak of 102.74 set on June 1. Today gold value is above its 1-month moving average of 98.55; 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 473.91 pounds per ounce and above its 3-month moving average of 461.85; moving above this average again and away from the 400 pounds per ounce level is a bearish indication for the red metal. The 1-month gold-to-copper ratio stability is exceptionally low at 1.50%. (1-month rolling correlation is +0.54; 3-month is +0.38). 3-month relative volatility is 2.18X gold and price sensitivity (beta) is +0.84
  5. The gold-to-silver ratio is above its historical norm at 58.001; the 3-month rolling correlation is +0.89, relative volatility is 2.17X gold and price sensitivity (beta) is +1.56. Similar to copper, silver remains bearishly above its 3-month average of 56.79. The 1-month gold-to-silver ratio stability is exceptionally low at 0.59%.



Friday's Market Roundup


Mining Report

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

Barrick (ABX) $32.09 down 1.96%
Newmont (NEM) $43.19 down 6.28%
McEwen Mining (MUX) $3.04 up 4.11%; (formerly US Gold, UXG)
General Moly (Eureka Moly, LLC) (GMO) $2.99 up 3.73%
Thompson Creek (TC) $2.64 up 2.33%
Freeport-McMoRan (FCX) $32.89 up 1.8% (a bellwether mining stock spanning copper, gold & molybdenum)
Timberline Resources (TLR) $0.32 up 4.92%

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

ArcelorMittal (MT) $15.541 up 4.23% - global steel producer
POSCO (PKX) $79.24 up 1.38% - 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 49.59, down from last week's 57.62 and below the 1-month moving average of 62.79. 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 $3.3/oz at $1,618.4/oz (August contract, most active)

COMEX silver is up $0.016/oz at $27.430/oz (September contract, most active)

The gold-to-silver-ratio (Au:Ag) is 58.001 oz/oz

Silver 1-month CRS© is 0.59% (bullish stability level); weak stability divergence (Ag overall indicators neutral-to-bearish)

The Eureka Miner’s Gold Value Index© (GVI) is below-par at 99.19, up from last week's 98.55 and above its 1-month average of 98.55. Gold value reversed to the upside this week and is historically high with respect to key commodities oil, copper and silver. 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 $1,363.4/oz which is $255.0/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 up $0.0215/lb at $3.4150/lb (September contract, most active)

The gold-to-copper ratio is 473.91 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 461.85 (a Cu bearish indication; remains in a bearish Price Domain B)

Copper 1-month CRS© is 1.50% (bullish stability level); ratio stability weak convergence (Cu prospects for the second-half of the year improving)

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

Metals Week Average:
US$12.175
As of July 30, 2012
(updated weekly)

Ryan's Notes Average:
US$12.125
As of July 24, 2012
(updated twice weekly)

European Molybdenum Oxide (Bloomberg average price, updated Wednesday & Friday): US$11.85/lb

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

US$12.70/lb (US$28,000/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 above $105/bbl again 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 $89.48
ICE North Sea Brent crude $105.78
Spread (ICE- NYMEX) = $16.30(last report, $14.28 )

Here are the November contracts* with a narrower spread:

NYMEX light sweet crude $90.15
ICE North Sea Brent crude $104.06
Spread (ICE- NYMEX) = $13.91 (last report, $13.23 )

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

The gold-to-WTI is 17.197 bbl/oz; ratios above 18.0 bbl/oz are considered bearish for oil

NYMEX WTI 1-month CRS© is 3.48% (neutral stability level); strengthening stability divergence (WTI overall indicators presently neutral; supply/demand does not justify the high price but geo-political situation could spike oil higher )

Prices for 2012 have headed north again, we have $105+ Brent and $85+ NYMEX in November signalling higher 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 below that level but trending up for July.

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 58.8, up from last Friday's 52.4. 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 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 up 121.96 points to 13,009.89 the S&P 500 is up 16.91 points at 1,376.93

The Eureka Miner's Grubstake Portfolio is up 0.92% at $1,198,434.36 (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, July 20, 2012

Dog Days of Summer; The Colonel's Gold, Silver & Copper Prices for Next Week

Old Glory Sky, 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: Gold Versus Copper, Oil and Silver: The Value Trend Is Your Friend (7/23/2012)

This morning's...
COMEX Gold price = $1,576.6/oz (August contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 95.92 (gold value gaps up, 5/4 & 6/1; gold value still high but now falling with respect to key commodities oil and copper)

Value Adjusted Gold Price© (VAGP) = $1,373.4/oz
COMEX - VAGP = $203.2/oz; gold is trading at a high premium to key commodities; the gold-to-copper ratio is below its 3-month average (bullish indication, Cu prospects for the second-half of the year improving)


Diēs Caniculārēs

Morning Miners!

The markets are open and the Dog Days of Summer are upon us. That name comes from the ancient belief that Sirius (aka the Dog Star), when in close proximity to the sun, was responsible for hot weather - apparently, not hot markets.

The S&P 500 actually had a pretty good week touching 1,380 yesterday, a level not seen since early May. But alas, the index of America's best 500 companies is heading south this morning presently trading down at 1,366 - not because earnings haven't been generally encouraging but Europe has again thrown a bucket of cold water on Thursday's optimism. This morning the yield on benchmark 10-year Spanish bonds rose back above the 7%-scary level for sovereigns while the U.S. Treasury's 10-year plumbed 1.47%. Obediently, the metals and miners have retreated to the dog house; gold is down, copper is down and bellwether miner Freeport-McMoran (FCX)is off 2%. The good news is that metals are not down much - the Dog Days of Summer are not that exciting.

The ole Colonel bets nothing too dramatic will happen across the pond until everyone completes their one-month summer holidays. I'm a little more worried about Syria and Iran - no time-off in the Middle East. As I say in my weekly input to the Kitco Gold Survey, oil is the commodity to watch in the coming weeks (see Weekly Oil Watch below). Moly oxide prices remain trapped in the $12 per pound never-never land (see  Copper & Molybdenum Report).


Have a cup of Raine's delicious Red Label TGIF and enjoy your weekend!


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

My Friday input to the Kitco Weekly Gold Survey:

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

A. Up, $1,590 per ounce target

Q. Why?

A. In the short-term, gold will likely remain range-bound between July’s highs and lows ($1,625.7 and $1,554.4 per ounce) with a bias below the psychologically important $1,600-level and solid support at the low-end of the range. A multi-month high or new record is expected in the next two to seven months.

U.S. dollar-denominated gold price is looking for a catalyst to break out of the current trading range: lackluster physical demand, the summer holiday period and deflationary worries put pressure on gold in a strong U.S. dollar environment; recent rate cuts in China and Europe and the possibility with further quantitative easing in the U.S. are gold supportive. Caught between these dipoles, the yellow metal will most likely wander about the center of its current trading range until a new catalyst appears on the horizon.

Either negative market anticipation of the U.S. “fiscal cliff” or a conflict in the Persian Gulf could provide the catalyst for new highs or even a new record.

Oil price volatility remains a significant harbinger among the key commodities. Trading has reacted strongly to the upside with the re-emergence of tensions in the Middle East and to the downside with the release of the April, May and June U.S. jobs reports. There is growing consensus that the bottom is in for 2012.

Gold value relative to oil, copper and silver remains historically elevated although gold has lost value to global commodities oil and copper for most of July.

For $1,590 per ounce gold we can expect to see silver in a range of $27.1-$27.8 per ounce; and copper in a range of $3.30-$3.55 per pound


Background Notes:
  1. My $1,590 per ounce target is at the geometric mean ($1,589.7) of the July 3 intraday high ($1,625.7) and the July 12 low ($1,554.4). Gold price is likely to fail breaking resistance at the top-end but finds solid support at the low-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 95.92 this morning which is 12.8% below the Oct. 4 high of 109.97 and 6.6% below the recent peak of 102.74 set on June 1. Today gold value is below its 1-month moving average of 99.40; 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 456.72 pounds per ounce and below its 3-month moving average of 459.25 pounds per ounce; it has bearishly lingered above this average since mid-May so moving below this average and towards the 400 pounds per ounce level is a bullish indication for the red metal (1-month rolling correlation is +0.63; 3-month is +0.55). 3-month relative volatility is 2.22X gold and price sensitivity (beta) is +1.23
  5. The gold-to-silver ratio is above its historical norm at 58.719; the 3-month rolling correlation is +0.0.82, relative volatility is 2.30X gold and price sensitivity (beta) is +1.88. Unlike copper, silver remains bearishly above its 3-month average of 56.37
Friday's Market Roundup


Mining Report

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

Barrick (ABX) $34.53 down 0.69%
Newmont (NEM) $44.96  down 0.42%
McEwen Mining (MUX) $3.00 unchanged  (formerly US Gold, UXG)
General Moly (Eureka Moly, LLC) (GMO) $3.01 down 2.90%
Thompson Creek (TC) $2.76 down 3.16%
Freeport-McMoRan (FCX) $33.65 down 2.24% (a bellwether mining stock spanning copper, gold & molybdenum)
Timberline Resources (TLR) $0.27 unchanged

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

ArcelorMittal (MT) $14.77 down 4.15% - global steel producer
POSCO (PKX) $78.68 down 1.43% - 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 58.88, down from last week's 63.99 and below the 1-month moving average of 69.90. 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 $3.8/oz at $1,576.6/oz (August contract, most active)

COMEX silver is down $0.0.367/oz at $26.850/oz (September contract, most active)

The gold-to-silver-ratio (Au:Ag) is 58.719 oz/oz

Silver 1-month CRS© is 0.72% (bullish stability level); weak stability divergence (Ag overall indicators neutral-to-bearish)

The Eureka Miner’s Gold Value Index© (GVI) is below-par at 95.92, down from last week's 97.69 and below its 1-month average of 99.40. Gold value gaped up 5/4/2012 and 6/1/2012, and is heading back down. 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 $1,373.4/oz which is $203.2/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 down $0.0850/lb at $3.4520/lb (September contract, most active)

The gold-to-copper ratio is 456.72 lb/oz; ratios in excess of 400 lb/oz are indicative of a bearish price domain; the ratio is below its 3-month moving average of 459.25 (a Cu bullish indication; improving conditions in a bearish Price Domain B)

Copper 1-month CRS© is 1.81% (bullish stability level); ratio stability weak divergence (Cu prospects for the second-half of the year improving)

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

Metals Week Average:
US$12.40

As of July 23, 2012
(updated weekly)

Ryan's Notes Average:
US$12.65

As of July 17, 2012
(updated twice weekly)

European Molybdenum Oxide (Bloomberg average price, updated Wednesday & Friday): US$12.32/lb

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

US$12.70/lb (US$28,000/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 above $100/bbl again 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 $91.68
ICE North Sea Brent crude $106.50
Spread (ICE- NYMEX) = $14.28 (last report, $14.14)

Here are the November contracts* with a narrower spread:

NYMEX light sweet crude $92.18
ICE North Sea Brent crude $105.41
Spread (ICE- NYMEX) = $13.23 (last report, $12.83 )

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

The gold-to-WTI is 17.197 bbl/oz; ratios above 18.0 bbl/oz are considered bearish for oil

NYMEX WTI 1-month CRS© is 4.33% (bearish stability level); strengthening stability divergence (WTI overall indicators presently neutral; supply/demand does not justify the high price but geo-political situation could spike oil higher )

Prices for 2012 have headed north again, we have $105+ Brent and $90+ NYMEX in November signalling higher 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 below that level but trending up for July.

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 52.5, a down from last Friday's 54.9. 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 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 89.08 points to 12,854.28 the S&P 500 is down 9.88 points at 1,366.63

The Eureka Miner's Grubstake Portfolio is down 1.00% at $1,191,362.27 (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, July 13, 2012

A Salute to Marge Pastorino; The Colonel's Gold, Silver & Copper Prices for Next Week

Marge Pastorino with her sons David and Eric, Christmas Day, 2009

*** Checkout the latest news on the Eureka County Commissioners' decision to appeal the recent water rights ruling in the MT.HOPE NEWS (column to your right) ***

 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: Does Recent Oil Volatility Portend the Next Gold Record? (7/9/2012)

This morning's...
COMEX Gold price = $1,580.1/oz (August contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 97.75 (gold value gaps up, 5/4 & 6/1; gold value high but stalling with respect to key commodities oil, copper & silver)
Value Adjusted Gold Price© (VAGP) = $1,350.6/oz
COMEX - VAGP = $229.5/oz; gold is trading at a high premium to key commodities; the gold-to-copper ratio is below its 3-month average (bullish indication, Cu overall bearish)


Morning Miners!

It is 5:55 AM. Markets are poised to move higher today as China reported second-quarter growth in line with expectations  reducing fears of a hard landing. Moody’s downgrade of Italy subtracts some from the China news and preceeds today’s sale of Italian debt. Concerns about China growth and the European sovereign debt crisis have been major headwinds for the metals and miners for several years. In that light, the pace of China’s economic growth declining to 7.6%, the slowest since the 2008-2009 financial crisis, registers a positive.

Before we see how today's events may affect next week's metal prices, have a hot cup of Raine's delicious Red Label TGIF brew and let's salute the passing of a very dear person and Eureka icon...

A Salute to Marge Pastorino

If you saw a red car driving down Main Street with a Nevada License "EU 1" you knew there was a very special Eureka citizen in the driver's seat. It's been several years since Marge Pastorino has been seen behind the wheel but she still remains "Number 1" in our memories - a very special person indeed.

Marge was taken to Elko hospital June 23 after complications from a fall in May. She was then transferred to Elko's Highland Manor June 26 where she could receive 24-hour care. Unfortunately, past hip and shoulder injuries compounded her deteriorating physical situation and Marjory A. Pastorino passed peacefully away Monday evening, July 9, at the grand age of ninety years. She leaves behind her two sons David and Eric, both of whom she was very proud.

Services will be July 20, 2012, 11:00 AM at the Eureka Opera House (see story below).

Eric Pastorino plans to have Father Red Sims of Ely Episcopal Church for the services. There will then be a procession to the Catholic Cemetery where she will be placed next to her husband Tom. A light lunch at the Opera House will follow.

A special thanks to Eric who supplied the Eureka Miner with the photographs, facts and stories about his amazing mother. Today's headline photo was taken by my wife Mariana when we enjoyed a fun 2009 Christmas visit with Marge and her boys.

A Wartime Bride Comes to Eureka

Marge's Eureka story starts with Dave and Eric's father Tom Pastorino who was Eureka County's Assessor for many years. He interrupted his long tenure that began in 1938 to serve in the Army overseas during World War II. Tom was stationed in England where he would soon meet his sweetheart, Marjory Lewis.

Marjory was born Christmas Eve, 1921 and grew up in Luton, England, thirty miles north of London. Tom Pastorino served as medic when he met Marjory Lewis and before long there would be plans for marriage after  the war and a Great Basin adventure far-far away from the rolling green hills of Bedfordshire.

With notable irony, Tom ran into Marge Damele's brother Joe Kelly who also served in England. The two long time friends found each other accidentally in a mess hall. Years later Marge Pastorino, Marge Damele and Marge Hammond would become affectionately known as the "Three Marges" of Eureka.

Shortly after the war, Tom and Marge were married in New Jersey August 17, 1946 and enjoyed their honeymoon in Niagra Falls before traveling west.

Stories from a Long Life in the Wild West

Eric Pastorino told me that his mother after arriving in town became very close to Kitty McKay, a German war bride. As Eric tells it, "they had quite a shock when they all arrived in the small desolate town of Eureka, Nevada."

Eric continued with more stories, "Watching the Opera House being transformed into what it is now made her happy as we once owned the building and her and Tom showed movies in the late 1950's until television came out." The thoroughly refurbished Eureka Opera House is an historical site from the 1890s and continues to be a delightful place for town meetings and entertainment.

"We obtained land on Vandal Way as a county swap for the Opera House and we began preparing lots for housing in Eureka with her oversight and  participation and with that in place we went on to develop mountain view estates where [Sheriff] Ken Jones and [District Attorney] Ted Buetel live." 


"Mom was so happy to see both of us go to college; although disappointed that we did not fully use our costly education, she was happy to have us both nearby."




Above is a picture of a proud Marge Pastorino with her son Eric in an engineer's hat. They are standing by the Eureka & Palisade locomotive that made a brief return visit to Eureka several years ago. Eric Pastorino and other dedicated Eurekans laid track at the County fairgrounds for the E&P's return.

Hats off to Marge, she will be dearly missed!

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

Here is my input to the Kitco Weekly Gold Survey:

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

A. Up, $1,605 per ounce target

Q. Why

In the short-term, gold will likely remain range-bound between June’s highs and lows ($1,642.4 and $1,547.6 per ounce) with a bias above the psychologically important $1,600-level and solid support at the low-end of the range. A multi-month high or new record is expected in the next two to seven months.

U.S. dollar-denominated gold price is looking for a catalyst to break out of the current trading range: lackluster physical demand and deflationary worries put pressure on gold in a strong U.S. dollar environment; recent rate cuts in China and Europe and the possibility of further quantitative easing in the U.S. are gold supportive. Caught between these dipoles, the yellow metal will most likely wander about the center of its current trading range until a new catalyst appears on the horizon.

Realistically, the current correlation of gold price and the euro needs to breakdown to set the stage for the next gold rally. Either negative market anticipation of the U.S. “fiscal cliff” or a re-emergence of conflict in the Persian Gulf could provide the catalyst for new highs or even a new record.

Oil price volatility remains a significant harbinger among the key commodities. Oil price has reacted strongly to the downside with the release of the April, May and June U.S. jobs reports although there is some consensus that the bottom is in for 2012.

Oil is presently greater than 4 times more volatile than oil, a “super-spike” in price variability. In the last five years there have been five such events and five-out-of-five oil/gold super-spikes have coincided with the start of gold rallies resulting in gold multi-month highs or new all-time records. This may take 2 to 7 months to play out but it bodes well for the yellow metal going forward.

An additional bullish indication is that gold value relative to oil, copper and silver remains historically elevated.

For $1,605 per ounce gold we can expect to see silver in a range of $27.3-$28.8 per ounce; and copper in a range of $3.26-$3.54 per pound 

Background Notes:

  1. My $1,605 per ounce target is biased above the geometric mean ($1,594.3 per ounce) of the June 6 intraday high ($1,642.4) and the June 28 low ($1,547.6). Gold price is likely to fail breaking resistance at the top-end but finds solid support at the low-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 97.75 this morning and 8.9% below the Oct. 4 high of 109.97 and falling away from the recent peak of 102.74 set on June 1. Today gold value is below its 1-month moving average of 100.62; a value of 100 represents a high-value of gold relative to key commodities oil, copper and silver.
  4. The gold-to-copper ratio today is 455.43 pounds per ounce breaking below its 3-month moving average of 459.13 pounds per ounce; it has bearishly lingered above this average since mid-May so this is a bullish sign. Moving below this average and towards the 400 pounds per ounce level is a bullish indication for the red metal (1-month rolling correlation is +0.0.34; 3-month is +0.59). 3-month relative volatility is 2.17X gold and price sensitivity (beta) is +1.29
  5. The gold-to-silver ratio is above its historical norm at 58.199; the 3-month rolling correlation is +0.84, relative volatility is 2.48X gold and price sensitivity (beta) is +2.08. Unlike copper, silver remains bearishly above its 3-month average of 55.87

Friday's Market Roundup


Mining Report

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

Barrick (ABX) $34.80 up 0.69%
Newmont (NEM) $46.13 up 1.47%
McEwen Mining (MUX) $3.04 up 0.33%  (formerly US Gold, UXG)
General Moly (Eureka Moly, LLC) (GMO) $3.15 up 1.94%
Thompson Creek (TC) $2.87 down 2.05%
Freeport-McMoRan (FCX) $33.07 up 2.19% (a bellwether mining stock spanning copper, gold & molybdenum)
Timberline Resources (TLR) $0.27 unchanged

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

ArcelorMittal (MT) $15.02 up 1.14% - global steel producer
POSCO (PKX) $78.93 up 0.68% - 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 65.05, down from last week's 81.75 and below the 1-month moving average of 72.93. 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 $14.8/oz at $1,580.1/oz (August contract, most active)

COMEX silver is down $0.0.011/oz at $27.150/oz (September contract, most active)

The gold-to-silver-ratio (Au:Ag) is 58.199 oz/oz

Silver 1-month CRS© is 1.31% (bullish stability level); weak stability divergence (Ag overall indicators neutral-to-bearish)

The Eureka Miner’s Gold Value Index© (GVI) is below-par at 97.75, down from last week's 99.45 and below its 1-month average of 100.62. Gold value gaped up 5/4/2012 and 6/1/2012, and has now stalled. 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 $1,350.6/oz which is $229.5/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 $0.0545/lb at $3.4695/lb (September contract, most active)

The gold-to-copper ratio is 455.43 lb/oz; ratios in excess of 400 lb/oz are indicative of a bearish price domain; the ratio is below its 3-month moving average of 459.13 (a Cu bullish indication; bearish overall conditions in a bearish Price Domain B)

Copper 1-month CRS© is 2.5% (bullish stability level); ratio weak convergence (overall Cu indicators bearish)

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

Metals Week Average:
US$12.70

As of July 16, 2012
(updated weekly)

Ryan's Notes Average:
US$12.80

As of July 10, 2012
(updated twice weekly) 

European Molybdenum Oxide (Bloomberg average price, updated Wednesday & Friday):
US$12.60/lb

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

US$12.70/lb (US$28,000/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 just at $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 $86.54
ICE North Sea Brent crude $100.68
Spread (ICE- NYMEX) = $14.14 (last report, $13.60)

Here are the October contracts* with a narrower spread:

NYMEX light sweet crude $87.27
ICE North Sea Brent crude $100.10
Spread (ICE- NYMEX) = $12.83 (last report, $12.51 )

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

The gold-to-WTI is 18.259 bbl/oz; ratios above 18.0 bbl/oz are considered bearish for oil

NYMEX WTI 1-month CRS© is 2.88% (bullish stability level); weak stability divergence (WTI overall indicators bearish)

Prices remain for 2012 but have pulled back dramatically, we have $100+ Brent and $85+ 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 relatively 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 57.1, a new low, down from last Friday's 59.0. 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 57.1 on July 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 174.98 points to 12,748.25; the S&P 500 is up 18.93 points at 1,353.69

The Eureka Miner's Grubstake Portfolio is up 1.05% at $1,204,614.18 (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, July 6, 2012

Jobs Disappoint ...Again; The Colonel's Gold, Silver & Copper Prices for Next Week

Slag Jig-Saw Puzzle, Consolidated Mill Site, Eureka, Nevada

*** SPECIAL REPORT ***

Eureka to appeal Mt. Hope water rights ruling (By MARIANNE KOBAK McKOWN, Elko Daily Free Press, 7/11/2012)


Received 11:32 AM PDT July 10, 2012 at the Eureka Miner:

EUREKA COUNTY COMMISSION APPEALS WATER RIGHTS RULING TO STATE SUPREME COURT

Appeal Does not Block Eureka Moly’s Plans to Use Kobeh Valley Water

On July 10 at a special board meeting, the Eureka County Board of Commissioners decided to appeal the district court decision on Kobeh Valley Ranch water rights for the Mt. Hope project to the Nevada Supreme Court. The ruling by District Court Judge Dan Papez denied all points of appeal by Eureka County and other appellants. The ruling, if allowed to stand, will change the way Nevada water law is interpreted and applied for first-in-time senior water rights holders and uses. The district court ruling affirms the State Water Engineer’s process of postponing a hard look at what should be done for first-in-time water users who will be prevented from accessing their water in the traditional way.

The law allows for Eureka County to request a “stay” which would stop the project until a Nevada Supreme Court decision is reached. But the Board unanimously agreed that Eureka County does not want to stop the project.

“We’ve always said we want the Mt. Hope project done right,” said Commissioner Jim Ithurralde. “We believe that identified impacts to existing senior vested water rights holders must be avoided.”

The Board is hopeful that the mandatory settlement conference required by the Nevada Supreme Court will allow the State Engineer, Eureka Moly LLC and Eureka County to discuss Eureka County’s concerns and options to resolve the dispute, so the Board may withdraw its appeal.

Commission Chairman Leonard Fiorenzi said, “If the mine had changed their proposed well field pumping away from existing users as the County repeatedly requested over the years, we wouldn’t be involved now in this litigation.”

The Board questioned how the State Engineer can allow over 75% of the available water in one valley to be pumped into another valley, and yet not provide for guaranteed protection of established and pre-existing water users as required by state water law.

The Board raised concerns that the State district court’s opinion, if not challenged, grants authority to the State Water Engineer that the State Legislature did not provide to the State Engineer. The Board believes it is necessary to receive clarification from the Nevada Supreme Court on the State Engineer’s discretion.

“The Board’s appeal does not stop the water from being pumped, and the mine can still move forward with plans to use the water resource,” said Vice-Chairman Mike Page.

However, the appeal’s purpose is to clarify why a senior first-in-time vested surface water right should be forced to accept a conflict resulting from a junior later-in-time water user.
The District Court decision is on the home page of the County’s website: www.co.eureka.nv.us.

 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: Does Recent Oil Volatility Portend the Next Gold Record? (7/9/2012)

This morning's...
COMEX Gold price = $1,589.4/oz (August contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 99.42 (gold value gaps up, 5/4 & 6/1; gold value high but stalling with respect to key commodities oil, copper & silver)
Value Adjusted Gold Price© (VAGP) = $1,335.8/oz
COMEX - VAGP = $253.6/oz; gold is trading at a high premium to key commodities; the gold-to-copper ratio is above its 3-month average (bearish condition, Cu overall bearish)


Morning Miners!

It is 5:45 AM. Have a hot cup of Raine's delicious Red Label TGIF brew. The ole Colonel just watched the release of the U.S. monthly jobs report on CNBC Business News - not pretty. The positives are meager these days; hourly wages bumped up 6 cents and lower fuel prices are on the way. Higher gold prices may be coming too as the second-half of this year unfolds but it may be a case of watch-what-you-wish-for...

Jobs Disappoint...Again

It's seems like the endless rerun of a bad movie.

U.S. job growth barely picked up in June and provides the latest indication that economic growth has slowed. The Labor Department reports nonfarm payrolls grew by only 80,000 last month and the politically charged unemployment rate was unchanged at 8.2%. The talking head "whisper number" before the announcement fell in a range of 125,000 to 150,000. Nuts.

At least talking heads and the Labor Department are enjoying full employment. Here is a startling contrast: the economy added an average of 226,000 jobs a month in the first quarter, versus only 75,000 in the second quarter. Nuts, nuts.

The reaction has been swift with 18-out-of-19 global markets in the red and the 10-year Treasury plunging into 1.5% territory again. The dollar is on a tear, the euro is tumbling (1.2278, lowest level in two years) and commodities are getting clobbered. Although gold shed 20 bucks on the news there may be some surprising upside down the road as I reported to Kitco News this morning...


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 slightly, $1,595 per ounce target.


Q. Why?

A. Gold will likely remain range-bound in price performance between June’s highs and lows ($1,642.4 and $1,547.6 per ounce) with a bias below the psychologically important $1,600-level and solid support at the low-end of the range.


Today’s disappointing jobs numbers are a pale cast on domestic growth expectations. Lately, global growth concerns are dollar supportive but recent with rate cuts in China and Europe together with more quantitative easing in the U.K. are gold friendly moves. Caught between these dipoles, the yellow metal will most likely wander about the center of its current trading range until a new catalyst appears on the horizon.

Realistically, the current correlation of gold price and the euro needs to breakdown to set the stage for the next gold rally. Either negative market anticipation of the U.S. “fiscal cliff” or a re-emergence of conflict in the Persian Gulf could provide the catalyst for new highs or even a new record.


Oil price volatility has emerged as a significant harbinger among the key commodities. It has reacted strongly to the downside with the release of the May, June and today’s U.S. jobs reports. Oil is presently 4 times more volatile than oil, a “super-spike” in price variability. In the last five years there have been five such events and five-out-of-five oil/gold super-spikes have coincided with the start of gold rallies resulting in gold multi-month highs or new all-time records. This may take 1 to 7 months to play out but it bodes well for the yellow metal going forward.


An additional bullish indication is that gold value relative to oil, copper and silver remains historically elevated.


For $1,595 per ounce gold we can expect to see silver in a range of $26.8-$29.1 per ounce; and copper in a range of $3.27-$3.53 per pound.


Background Notes:

1. My $1,595 per ounce target is at the geometric mean ($1,594.3 per ounce) of the June 6 intraday high ($1,642.4) and the June 28 low ($1,547.6). Gold price is likely to fail breaking resistance at the top-end but find solid support at the low-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 99.42 this morning and 9.6% below the Oct. 4 high of 109.97 but still near the recent peak of 102.74 set on June 1. Today gold value is below its 1-month moving average of 100.89; a value of 100 represents an historically high-value of gold relative to key commodities oil, copper and silver.
4. The gold-to-copper ratio today is 463.65 pounds per ounce and above its 3-month moving average of 458.37 pounds per ounce. Remaining above this average is bearish for copper prices (1-month rolling correlation is +0.0.50; 3-month is +0.62). 3-month relative volatility is 2.12X gold and price sensitivity (beta) is +1.31
5. The gold-to-silver ratio is above its historical norm at 58.402; the 3-month rolling correlation is +0.86, relative volatility is 2.49X gold and price sensitivity (beta) is +2.13

Friday's Market Roundup


Mining Report

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

Barrick (ABX) $37.71 down 1.02%
Newmont (NEM) $48.33 down 1.45%
McEwen Mining (MUX) $3.11 down 3.72%  (formerly US Gold, UXG)
General Moly (Eureka Moly, LLC) (GMO) $3.23 down 1.22%
Thompson Creek (TC) $3.33 down 2.35%
Freeport-McMoRan (FCX) $34.80 down 1.89% (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) $15.09 down 2.08% - global steel producer
POSCO (PKX) $81.45 down 1.26% - 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 80.28, up from last week's 79.77 and above the 1-month moving average of 74.20. 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 $20.0/oz at $1,589.4/oz (August contract, most active)

COMEX silver is down $0.457/oz at $27.215/oz (September contract, most active)

The gold-to-silver-ratio (Au:Ag) is 58.402 oz/oz

Silver 1-month CRS© is 2.03% (bullish stability level); weak stability divergence (Ag overall indicators neutral-to-bearish)

The Eureka Miner’s Gold Value Index© (GVI) is below-par at 99.42, up from last week's 99.27 and below its 1-month average of 100.89. Gold value gaped up 5/4/2012 and 6/1/2012, and has now stalled. 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 $1,335.8/oz which is $253.2/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 down $0.0650/lb at $3.4280/lb (September contract, most active)

The gold-to-copper ratio is 463.65 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 458.37 (Cu overall bearish conditions in a bearish Price Domain B)

Copper 1-month CRS© is 1.87% (bullish stability level); ratio weak convergence (overall Cu indicators bearish)

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

Metals Week Average:
US$12.85

As of July 9, 2012
(updated weekly)

Ryan's Notes Average:
US$12.95

As of July 3, 2012
(updated twice weekly)

European Molybdenum Oxide (Bloomberg average price, updated Wednesday & Friday):
US$12.75/lb

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

US$13.15/lb (US$29,000/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 $84.94
ICE North Sea Brent crude $98.86
Spread (ICE- NYMEX) = $13.60 (last report, $13.58)

Here are the October contracts* with a narrower spread:

NYMEX light sweet crude $85.66
ICE North Sea Brent crude $98.17
Spread (ICE- NYMEX) = $12.51 (last report, $12.70 )

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

The gold-to-WTI is 18.712 bbl/oz; ratios above 18.0 bbl/oz are considered bearish for oil

NYMEX WTI 1-month CRS© is 3.35% (bullish stability level); weak stability divergence (WTI overall indicators bearish)

Prices remain 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 relatively 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 63.0 down from last Friday's 63.8. 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 60.1 on July 3, 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 143.42 points to 12,735.25; the S&P 500 is down 13.65 points at 1,353.93

The Eureka Miner's Grubstake Portfolio is down 1.61% at $1,235,060.64 (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