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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)
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."
"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."
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."
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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:
- 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.
- 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©).
- 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.
- 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
- 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
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)
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
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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