"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, August 31, 2012

Thompson Creek Lifts Moly Miners; The Colonel's Gold, Silver & Copper Prices for Next Week

Wally World Walking Road Art, 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: Glad of His Gold Gifts, Six-for-Six (08/31/2012)

This morning's...
COMEX Gold price = $1,672.2/oz (December contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 96.58 (gold value is elevated with respect to key commodities oil, copper and silver)
Value Adjusted Gold Price© (VAGP) = $1,446.8/oz
COMEX - VAGP = $225.4/oz; gold is trading at a high premium to key commodities; the gold-to-copper ratio remains bearishly above its 3-month average; the gold-to-silver ratio continues to bullishly compress below its average


Morning Miners!

As summer winds down, the markets are focused on what Federal Reserve Chairman Ben Bernanke said at the Economic Symposium in Jackson Hole, Wyoming. Metal prices are very sensitive to any hints of further monetary easing in the U.S. or abroad. Next week it will be President of the European Central Bank Mario Draghi's turn to comment on future policy followed by the FOMC meeting in mid-September. To add to all this eco-drama, Germany’s Constitutional Court is scheduled to rule on the legality of the country’s funding for the European Stability Mechanism on Sept. 12.

When Ben Bernanke began speaking at 10:00AM EDT, COMEX gold dropped to $1,647.1 per ounce then bounced back into the green at $1,672.2 by 10:32AM. The Chairman offered a defense of the effectiveness of the central bank's easy-money policies and left little doubt that he is looking toward doing more to give the economy a lift at the policy meeting in September. That was enough to lift gold and add $0.774 per ounce to COMEX silver now trading at $31.220; COMEX copper languished at $3.4465 per pound.

The red metal is caught between falling global demand and supply restriction making it very difficult to judge which direction new headlines will take it. However, this week BNP Paribas said copper may approach $9,000 a metric ton ($4.08 per pound) later this year, “We expect the price then to come under sustained downward pressure, although losses should be limited by still-low inventories and supportive longer-term fundamental prospects.” (Kitco Market Nuggets, August 30, 2012)

Moly prices made another move up this week on the spot and futures market suggesting September may indeed be a period of price recovery - more typical of less economically stressed times. The Western moly oxide price range trended up to $11.20-$11.75 per pound from last week's $10.88-$11.63 spread. The LME moly 3-month seller's contract is bullishly back in $12 country at $12.247 per pound ($27,000 per metric ton).

Beleaguered moly benchmark miner Thompson Creek (TC) got a much needed boost from Dahlman Rose this morning when they announced a "buy" recommendation. Their price target is $4 per share. TC is presently up a healthy 8% at $2.71; General Moly (GMO) is up 0.75% at $2.68. Moly miners have been in a world of hurt for most of this year, let's hope this signals a reversal of fortune.

Finally, gold miners are holding on to last week's gains. Gold giant Barrick (ABX) is about where it was last Friday at $37.82 per share; McEwing Mining (MUX, formerly US Gold) is just slightly down on the week at $3.81 and Timberline resources (TLR) is unchanged at $0.34.

Where do gold, silver and copper prices go from here? Checkout my latest Kitco News article, The Next Gold Record - the Quiet before the Storm, and input to the weekly Kitco gold survey below.

Have a cup of Raine's delicious Red Label TGIF and have a terrific Labor Day weekend!

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


Here is 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, $1,705 per ounce target.

Q. Why?


A. This week, COMEX gold weathered the much anticipated Ben Bernanke speech at Jackson Hole and is likely to trend higher; the June high resistance has become support at $1,646.4 per ounce. A significant high or new record is expected in the next six months. Presently gold price is on historical trajectory BM-1 which suggests a $1,705 per ounce target by next Friday. (Ref 3, Ref 4).

The last day of the month coincides with the Jackson Hole speech making for a very volatile trading day. Although COMEX gold dipped briefly to $1,647.1 per ounce as the speech commenced it recovered in positive territory as Bernanke left the door open for further monetary easing in September. Expectations of further monetary easing in the U.S, China and Europe have provided the impetus for the current gold rally. Negative market anticipation of the U.S. “fiscal cliff” or conflict escalation in Middle East could deliver significant gold highs.

The Brent-WTI spread in crude oil futures remains high at $17.7 per barrel but appears to have peaked on Aug. 13. The wide spread reflects the current tensions in the Middle East and expectations of global monetary easing. Oil markets have proved a harbinger for market direction and gold price since early May (Ref 1 ).

Gold value relative to oil, copper and silver continues to be elevated hovering just below the key-100-level (bullish for gold, Ref 2 ). Gold value relative to the S&P 500 has risen nearly 5% since mid-August, another bullish sign for the yellow metal.

For $1,705 per ounce gold we can expect to see silver in a range of $28.5-$32.3 per ounce; and copper in a range of $3.47-$3.59 per pound

Background Notes:

  1. My $1,705 per ounce target is a projection based on historical trajectories following gold/oil supper-spikes, the most recent occurring July 13. The June intraday peak becomes price support at $1,646.4 per ounce.
  2. Given the target gold price, the silver price ranges are derived from the 1-month gold ratio mean (GSR) and its respective ratio stability (CRS©). The 3-month correlation of copper & gold is positive but low so an alternative method was used to establish a range for copper price.
  3. My Gold Value Index© (GVI) equals 96.58 this morning which is 12.2% below the Oct. 4 high of 109.97 and 6.0% below the peak of 102.74 set on June 1. Today gold value is below its 1-month moving average of 96.97; 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 485.19 pounds per ounce and above its 3-month moving average of 472.47; remaining above this average and the 400 pounds per ounce level is a bearish indication for the red metal.  The 1-month gold-to-copper ratio stability remains extremely low at 0.86%. (1-month rolling correlation is +0.86; 3-month is +0.42). 3-month relative volatility is 1.00X gold and price sensitivity (beta) is +0.43
  5. The gold-to-silver ratio (GSR) is above its historical norm at 53.56; the 3-month rolling correlation is +0.92, relative volatility is 2.36X gold and price sensitivity (beta) is +2.18. The GSR has bullishly dropped below its 3-month average of 57.31. The 1-month gold-to-silver ratio stability has elevated to 3.12%
Ref 3: The $2,000 Holy Grail - Is Gold on Track? (Kitco News, 8/06/2012)

Friday's Market Roundup


Mining Report

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

Barrick (ABX) $37.82 up 1.97%
Newmont (NEM) $49.79 up 2.55%
McEwen Mining (MUX) $3.81 up 2.70%; (formerly US Gold, UXG)
General Moly (Eureka Moly, LLC) (GMO) $2.68 up 0.75%
Thompson Creek (TC) $2.71 up 7.97%
Freeport-McMoRan (FCX) $35.43 down 2.13% (a bellwether mining stock spanning copper, gold & molybdenum)
Timberline Resources (TLR) $0.34 unchanged

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

ArcelorMittal (MT) $14.73 up 1.66% - global steel producer
POSCO (PKX) $81.39 up 1.23% - South Korean integrated steel producer

The Eureka Miner's Index© (EMI) was re-calibrated 8/09 to reflect current 200-day moving averages for benchmark miners.

The EMI is below-par at 87.83, down from last week's 99.05 and above the 1-month moving average of 80.11. The 1-month average is below the key 100-level (bearish condition, look for a bullish reversal to the upside)

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 $15.1/oz at $1,672.2/oz (December contract, most active)

COMEX silver is up $0.774 at $31.220/oz (December contract, most active)

The gold-to-silver-ratio (Au:Ag) is 53.562 oz/oz

Silver 1-month CRS© is 3.12% (neutral stability level); emerging stability divergence (Ag overall bullish)

The Eureka Miner’s Gold Value Index© (GVI) is below-par at 96.58, up from last week's 96.50 and below its 1-month average of 96.97. Gold value is elevated with respect to 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 $1,446.8/oz which is $225.4/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 $0.0005/lb at $3.4465/lb (December contract, most active)

The gold-to-copper ratio is 485.19 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 472.47 (a Cu bearish indication; remains in a bearish Price Domain B)

Copper 1-month CRS© is 0.86% (bullish stability level); ratio stability weak convergence (Cu overall indicators are neutral to bearish)

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

Metals Week Average:
US$11.75
As of September 3, 2012
(updated weekly)

Ryan's Notes Average:
US$11.625
As of August 28, 2012
(updated twice weekly)

European Molybdenum Oxide (Bloomberg average price, updated Wednesday & Friday): [not available today]

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

US$12.25/lb (US$27,000/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 $110/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 $95.85
ICE North Sea Brent crude $113.57
Spread (ICE- NYMEX) = $17.72 (last report, $18.17 )

Here are the December contracts* with a narrower spread:

NYMEX light sweet crude $96.48
ICE North Sea Brent crude $112.76
Spread (ICE- NYMEX) = $16.28 (last report, $16.18 )

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

The gold-to-WTI is 17.446 bbl/oz; ratios above 18.0 bbl/oz are considered bearish for oil

NYMEX WTI 1-month CRS© is 1.95% (bullish stability level); weakstability convergence (Brent-WTI spread steadily widened through July; it has since peaked on Aug. 13)

Prices for 2012 have headed north again, we have $110+ Brent and $95+ NYMEX in December signalling higher oil prices this fall and early winter. A front-month spread between Brent and WTI >$20/bbl is a trouble sign; the present spread is falling further away from that level.

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 64.7, up from last Friday's 58.80. 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 89.59 points to 13,090.30; the S&P 500 is up 7.03 points at 1,406.51

The Eureka Miner's Grubstake Portfolio is up 1.65% at $1,277,630.03  (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, August 24, 2012

Gold & Silver Up and Away, Moly Surprise; The Colonel's Metal Prices for Next Week

Another shade of gold, 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: The Next Gold Record - The Quiet before the Storm (08/20/2012)

This morning's...
COMEX Gold price = $1,669.2/oz (December contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 96.37 (gold value is elevated with respect to key commodities oil, copper and silver)
Value Adjusted Gold Price© (VAGP) = $1,447.3/oz
COMEX - VAGP = $221.9/oz; gold is trading at a high premium to key commodities; the gold-to-copper ratio remains bearishly above its 3-month average; the gold-to-silver ratio is bullishly compressing below its average



Morning Miners!

Markets don't wait for events to occur, they anticipate. That was the story this week as investors piled into gold and silver unwilling to wait any longer for the sleeping dogs of summer to awake.

Let sleeping dogs lie? Apparently not; impending U.S. fiscal cliffs, a possible China hard landing, Middle East war drums and Europe's calamitous economic drama remind many that precious metals are still a pretty good bet when trouble comes knocking - buy now before the snoozing dogs bark at these unwanted guests. That seems to be the growing consensus as markets bet on more central bank actions to ease the pain.

Early in the week gold and silver broke away from their narrow trading range in a big way. COMEX silver led the pack Monday bouncing form a lazy $27-level to score an intraday high of $30.790 per ounce yesterday. On Tuesday COMEX gold gaped up from an intarday low of $1,620.8 per ounce to close at $1,642.9, just below the June high. The rally continued through Thursday to post an intraday high of $1,677.5 per ounce. Both metals have pulled back some with gold presently trading at $1,669.2 per ounce and silver, at $30.455.

COMEX copper had a pretty good week too - expectations of global monetary easing in response to contracting economies lifts all boats in the commodity harbor. The red metal moved from an intraday low of $3.354 per pound to a Thursday high of $3.512. Like its precious metal cousins, copper has retreated some too trading this morning at $3.4755 per pound. Much of this may be a short squeeze from traders who expected lower prices on declining global demand. Supply restriction and big miners like BHP Billiton stepping back from large mining developments will provide some floor to prices going forward.

Moly prices made some surprise moves this week too. European moly oxide moved up nearly 6% to 11.55 per pound.  The LME moly 3-month seller's contract moved up less to $11.34 per pound (see Copper & Molybdenum Report below) . September is typically the beginning of a price uptrend in less challenged years.

Finally, gold miners are faring well. Timberline (TLR) stock has rallied off its July 11 low of $0.23 to $0.34 today and a high of $0.38 on Aug. 6. McEwing Mining (formerly US Gold) has had a similar success hitting a high Aug. 23 of $4.22 from a low of $1.96 on May 23, presently trading at $3.88. Gold giant Barrick (ABX) has moved up from its July 23 intraday low of $31 to trade at $37.77 today


Where do prices go from here? Checkout my latest Kitco News article, The Next Gold Record - the Quiet before the Storm, and input to the weekly Kitco gold survey below.


Have a cup of Raine's delicious Red Label TGIF, shove some glitter under your mattress and have a great weekend!

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


Here is 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, $1,690 per ounce target. However, there could be some consolidation following this week’s run-up

Q. Why?

A. This week, COMEX gold broke out of its narrow trading range with conviction and now the June price resistance becomes support at $1,646.4 per ounce. A significant high or new record is expected in the next six months. Presently gold price is on historical trajectory BM-2 which suggests a $1,690 per ounce target by next Friday. (Ref 3, Ref 4)

Although there's another week in August, evidence of further global weakness and uncertainty about the extent and effectiveness of monetary easing in the U.S., China and Europe have shaken complacency from the summer market. Negative market anticipation of the U.S. “fiscal cliff” or conflict escalation in Middle East could deliver significant gold highs.

The Brent-WTI spread in crude oil futures remains high at $18.2 per barrel but may have peaked on Aug. 13. The wide spread reflects the current tensions in the Middle East and expectations of global monetary easing. Oil markets have proved a harbinger for market direction and gold price since early May (Ref 1 ).

Gold value relative to oil, copper and silver continues to be elevated hovering just below the key-100-level (bullish for gold, Ref 2 ). Gold value relative to the S&P 500 has risen more than 4% in the last 4-market days, another bullish sign for the yellow metal.

For $1,690 per ounce gold we can expect to see silver in a range of $28.6-$31.1 per ounce; and copper in a range of $3.45-$3.51 per pound

Background Notes:

  1. My $1,690 per ounce target is a projection based on historical trajectories following oil/gold super-spikes, the most recent occurring July 13. The June intraday peak becomes price support at $1,646.4 per ounce.
  2. Given the target gold price, the silver price ranges are derived from the 1-month gold ratio mean (GSR) and its respective ratio stability (CRS©). The 3-month correlation of copper & gold is positive but low so an alternative method was used to establish a range for copper price.
  3. My Gold Value Index© (GVI) equals 96.37 this morning which is 12.4% below the Oct. 4 high of 109.97 and 6.2% below the peak of 102.74 set on June 1. Today gold value is below its 1-month moving average of 97.48; 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 480.28 pounds per ounce and above its 3-month moving average of 472.10; remaining above this average and the 400 pounds per ounce level is a bearish indication for the red metal.  The 1-month gold-to-copper ratio stability is extremely low at 0.76%. (1-month rolling correlation is +0.83 as gold and copper re-correlate positively; 3-month is +0.26). 3-month relative volatility is 1.19X gold and price sensitivity (beta) is +0.31
  5. The gold-to-silver ratio (GSR) is above its historical norm at 54.809; the 3-month rolling correlation is +0.83, relative volatility is 1.96X gold and price sensitivity (beta) is +1.63. The GSR has bullishly dropped its 3-month average of 57.54. The 1-month gold-to-silver ratio stability is still low at 2.06%.
Ref 3: The $2,000 Holy Grail - Is Gold on Track? (Kitco News, 8/06/2012)

Friday's Market Roundup


Mining Report

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

Barrick (ABX) $37.77 down 0.71%
Newmont (NEM) $49.00 down 0.08%
McEwen Mining (MUX) $3.88 down 1.52%; (formerly US Gold, UXG)
General Moly (Eureka Moly, LLC) (GMO) $2.64 down 1.12%
Thompson Creek (TC) $2.64 down 0.38%
Freeport-McMoRan (FCX) $36.01 down 2.07% (a bellwether mining stock spanning copper, gold & molybdenum)
Timberline Resources (TLR) $0.34 down 2.86%

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

ArcelorMittal (MT) $15.20 up 2.25% - global steel producer
POSCO (PKX) $81.75 down 1.85% - South Korean integrated steel producer

The Eureka Miner's Index© (EMI) was re-calibrated 8/09 to reflect current 200-day moving averages for benchmark miners.

The EMI is below-par at 92.49, up from last week's 61.21 and above the 1-month moving average of 71.45. The 1-month average is below the key 100-level (bearish condition, look for a bullish reversal to the upside)

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 $3.6/oz at $1,669.2/oz (December contract, most active)

COMEX silver is down $0.001/oz at $30.455/oz (September contract, most active)

The gold-to-silver-ratio (Au:Ag) is 54.809 oz/oz

Silver 1-month CRS© is 2.06% (bullish stability level); emerging stability divergence (Ag overall bullish)

The Eureka Miner’s Gold Value Index© (GVI) is below-par at 96.37, down from last week's 96.23 and below its 1-month average of 97.48. Gold value is elevated with respect to 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 $1,447.3/oz which is $221.9/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 $0.0170/lb at $3.4755/lb (September contract, most active)

The gold-to-copper ratio is 480.28 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 472.10 (a Cu bearish indication; remains in a bearish Price Domain B)

Copper 1-month CRS© is 0.76% (bullish stability level); ratio stability weak convergence (Cu overall indicators are neutral to bearish)

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

Metals Week Average:
US$11.20

As of August 27, 2012
(updated weekly)

Ryan's Notes Average:
US$10.875

As of August 21, 2012
(updated twice weekly)

European Molybdenum Oxide (Bloomberg average price, updated Wednesday & Friday): US$11.55/lb

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

US$11.34/lb (US$25,000/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 $110/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 $96.51
ICE North Sea Brent crude $114.68
Spread (ICE- NYMEX) = $18.17 (last report, $18.52 )

Here are the December contracts* with a narrower spread:

NYMEX light sweet crude $97.20
ICE North Sea Brent crude $113.38
Spread (ICE- NYMEX) = $ 16.18 (last report, $17.22 )

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

The gold-to-WTI is 17.296 bbl/oz; ratios above 18.0 bbl/oz are considered bearish for oil

NYMEX WTI 1-month CRS© is 2.64% (bullish stability level); emerging stability divergence (Brent-WTI spread has steadily widened through July, it may have peaked 8/13 )

Prices for 2012 have headed north again, we have $110+ Brent and $95+ NYMEX in December signalling higher oil prices this fall and early winter. A front-month spread between Brent and WTI >$20/bbl is a trouble sign; the present spread is falling but still very close to that level.

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 60.4, up from last Friday's 54.2. 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 2.01 points to 13,055.45; the S&P 500 is down 1.44 points at 1,400.64

The Eureka Miner's Grubstake Portfolio is down 1.02% at $1,281,503.02  (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, August 17, 2012

Is Gold Ready to Bounce? The Colonel's Gold, Silver & Copper Prices for Next Week

The Sandy T, Eureka, Nevada

UPDATE ON THE FRAISER FIRE (8/16/2012)

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: The Next Gold Record - The Quiet before the Storm (08/20/2012)

This morning's...
COMEX Gold price = $1,621.0/oz (December contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 96.63 (gold value is elevated with respect to key commodities oil, copper and silver)
Value Adjusted Gold Price© (VAGP) = $1,406.1/oz
COMEX - VAGP = $214.9/oz; gold is trading at a high premium to key commodities; gold-to-copper & gold-to-silver ratios remain bearishly above their 3-month average



Morning Miners!

Gold like a cat must have nine lives. Just when you think the Lustrous One has seen his last big high something happens to remind us why gold has been revered as a store of value for more than 5,000 years. You wouldn't sense that from the latest news or market data. We learned this week from the World Gold Council that India and China which account for a 45% of global consumer demand have been consuming a whole lot less. Jewelry demand which represents a large part has seen a 15% year-on-year decline.

Fortunately, this has been offset by central bank buying which keeps gold prices from falling down the mineshaft. Recently, large hedge fund players like John Paulson and George Soros have been adding a little glitter to their portfolios too. The result of lackluster physical demand, central bank hedging and some renewed investor interest has been a U.S. dollar price that has really gone nowhere in three months. In fact, the 3-month price variability of gold is approaching a 5-year low. This is a fancy way a saying that the day-to-day change in price compared to its average is uncommonly small - today the 3-month variability is less than 1.4%; the 5-year low is 1.2%. By contrast, when the all-time COMEX record was set last September at $1,923.7 per ounce, the price variability was five times higher at 7.4%.


From U.S."fiscal cliffs", rumors of a Chinese hard landing and wobbly economies in Europe, there are certainly enough scary stuff on the horizon to push gold prices higher (see my weekly input to the Kitco gold survey below). One thing that has started to worry the ole Colonel is how hot the rhetoric is getting between Israel and Iran. Here are two headline stories from Haaretz Israeli News Service that hit the wires this week:

Ahmadinejad: Israel's existence is 'an insult to all humanity'(Haaretz, By DPA and The Associated Press, Aug.17, 2012, 1:29 PM)

Ambassador Oren: Israel's clock on Iran 'ticking faster' than Obama's
(Haaretz, By Natasha Mozgovaya, Aug.14, 2012, 1:37 AM)

This may be more than a lot of rhetoric. The persistently wide price spread between Texas light sweet crude (WTI) and global benchmark Brent crude has been signalling a pending conflict in the Middle east for some time as we have reported in the Weekly Oil Report below.

The sleeping golden cat is about to add a new life for some reason, pardner - record low price variability doesn't last forever.

Have a cup of Raine's delicious Red Label TGIF and let's forget the news for the weekend!


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

Here is 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, $1,630 per ounce target. However, watch for a break-out to the upside in the coming weeks.

Q. Why?

A. In the short-term, gold will likely remain in a narrowing range between the June high and July low ($1,646.4 and $1,559.5 per ounce) with a bias above the psychologically important $1,600-level and solid support at the low-end of the range.

Three-month COMEX gold price variability is approaching 5-year lows (1.38% today versus a 5-year low of 1.21%); symptomatic of the compressing range and suggesting a price break-out is near. A multi-month high or new record is expected in the next one to six months (Ref 3)

Although the European and U.S. Congress holiday season continues, special meetings in Europe next week and Angela Merkel’s pledge to support the euro may give gold a boost. Aggressive central bank monetary actions could provide the first impetus for gold to breakout of its compressing trading range; negative market anticipation of the U.S. “fiscal cliff” or a conflict in the Middle East may deliver new highs or even a new record.

The Brent-WTI spread in crude oil futures remains high at $18.50 per barrel but may have peaked Monday. The wide spread reflects the current tensions in the Middle East exacerbated by new concerns for an Israeli strike on Iran’s nuclear facilities. Oil markets have proved a harbinger for market direction and gold price since early May (Ref 1 ).
Gold value relative to oil, copper and silver continues to be elevated hovering just below the key-100-level (bullish for gold, Ref 2 ).

The 1- and 3-month correlations of gold and copper are near zero suggesting a de-coupling of the yellow metal from base metals.
 
For $1,630 per ounce gold we can expect to see silver in a range of $27.8-$28.6 per ounce; and copper in a range of $3.29-$3.46 per pound

Background Notes:
  1. My $1,625 per ounce target is biased above the geometric mean ($1,602.4) of the June intraday high ($1,646.4) and the July low ($1,559.5).
  2. Given the target gold price, the silver price ranges are derived from the 1-month gold ratio mean (GSR) and its respective ratio stability (CRS©). The 3-month correlation of copper & gold is near zero so an alternative method was used to establish a range for copper price.
  3. My Gold Value Index© (GVI) equals 96.63 this morning which is 12.1% below the Oct. 4 high of 109.97 and 5.9% below the peak of 102.74 set on June 1. Today gold value is below its 1-month moving average of 97.76; 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 474.18 pounds per ounce and above its 3-month moving average of 470.25; remaining above this average and the 400 pounds per ounce level is a bearish indication for the red metal.  The 1-month gold-to-copper ratio stability is low at 1.57%. (1-month rolling correlation is -0.05; 3-month is 0.00). 3-month relative volatility is 1.37X gold and price sensitivity (beta) is 0.00 (quite amazing).
  5. The gold-to-silver ratio (GSR) is above its historical norm at 57.533; the 3-month rolling correlation is +0.61, relative volatility is 1.74X gold and price sensitivity (beta) is +1.05. The GSR is right at its 3-month average of 57.53. The 1-month gold-to-silver ratio stability is exceptionally low at 0.77%.
Ref 3: The $2,000 Holy Grail - Is Gold on Track? (Kitco News, 8/06/2012)

Friday's Market Roundup


Mining Report

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

Barrick (ABX) $35.72 down 0.97%
Newmont (NEM) $47.33 down 0.55%
McEwen Mining (MUX) $3.51 up 1.15%; (formerly US Gold, UXG)
General Moly (Eureka Moly, LLC) (GMO) $2.78 down 0.71%
Thompson Creek (TC) $2.44 up 0.83%
Freeport-McMoRan (FCX) $35.51 up 0.57% (a bellwether mining stock spanning copper, gold & molybdenum)
Timberline Resources (TLR) $0.33 up 3.13%

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

ArcelorMittal (MT) $16.00 up 2.43% - global steel producer
POSCO (PKX) $84.96 down 0.13% - South Korean integrated steel producer

The Eureka Miner's Index© (EMI) was re-calibrated 8/09 to reflect current 200-day moving averages for benchmark miners.

The EMI is below-par at 85.95, down from last week's 86.71 and above the 1-month moving average of 61.06. The 1-month average is below the key 100-level (bearish condition, look for a bullish reversal to the upside)

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 $1.9/oz at $1,621.0/oz (December contract, most active)

COMEX silver is down $0.037/oz at $28.175/oz (September contract, most active)

The gold-to-silver-ratio (Au:Ag) is 57.533 oz/oz

Silver 1-month CRS© is 0.77% (bullish stability level); stability convergence (Ag overall indicators improving)

The Eureka Miner’s Gold Value Index© (GVI) is below-par at 96.63, down from last week's 97.82 and below its 1-month average of 97.76. Gold value is elevated with respect to 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 $1,406.1/oz which is $214.9/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 $0.0360/lb at $3.4185/lb (September contract, most active)

The gold-to-copper ratio is 474.18 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 470.5 (a Cu bearish indication; remains in a bearish Price Domain B)

Copper 1-month CRS© is 1.57% (bullish stability level); ratio stability weak convergence (Cu prospects for the second-half of the year should improve)

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

Metals Week Average:
US$10.90

As of August 20, 2012
(updated weekly)

Ryan's Notes Average:
US$10.90

As of August 14, 2012
(updated twice weekly)
European Molybdenum Oxide (Bloomberg average price, updated Wednesday & Friday): US$10.90/lb

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

US$11.29/lb (US$24,900/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 $110/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 $95.61
ICE North Sea Brent crude $114.13
Spread (ICE- NYMEX) = $18.52 (last report, $19.66 )

Here are the November contracts* with a narrower spread:

NYMEX light sweet crude $96.18
ICE North Sea Brent crude $113.40
Spread (ICE- NYMEX) = $17.22 (last report, $16.90 )

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

The gold-to-WTI is 16.954 bbl/oz; ratios above 18.0 bbl/oz are considered bearish for oil

NYMEX WTI 1-month CRS© is 2.33% (bullish stability level); stability convergence (Brent-WTI spread has steadily widened through July, it may have peaked 8/13 )

Prices for 2012 have headed north again, we have $110+ Brent and $95+ NYMEX in November signalling higher oil prices this summer and fall. A front-month spread between Brent and WTI >$20/bbl is a trouble sign; the present spread is still very close to that level.

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 58.0, up from last Friday's 55.4. 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 13.96 points to 13,264.07; the S&P 500 is up 0.88 points at 1,416.39

The Eureka Miner's Grubstake Portfolio is up 0.29% at $1,254,131.20  (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, August 10, 2012

POSCO, Freeport Lead the Charge; The Colonel's Gold, Silver & Copper Prices for Next Week

Alaskite Horizon, Devils' Gate, Eureka, Nevada

UPDATE ON THE FRAISER FIRE (8/16/2012)

Yubanet (major fire activity map, news)

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: The $2,000 Holy Grail - Is Gold on Track? (08/06/2012)

This morning's...
COMEX Gold price = $1,620.1/oz (December contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 98.31 (gold value is elevated with respect to key commodities oil, copper and silver)
Value Adjusted Gold Price© (VAGP) = $1,377.0/oz
COMEX - VAGP = $243.1/oz; gold is trading at a high premium to key commodities; gold-to-copper & gold-to-silver ratios remain bearishly above their 3-month average


Morning Miners!

Whoa! For the dog days of summer, there are certainly some interesting wiggles in the market data today. Following the release of lousy China data, copper giant Freeport-McMoran (FCX) and south Korean Steelmaker (PKX) are on a roll (see gold survey below). Also, the price spread between global benchmark Brent crude and Texas light sweet crude (WTI) has arrived at the front porch of scary levels this morning ($19.7/bbl vs $20/bbl threshold). And the Friday farm report says the corn yield will even be worse than was expected which already worse than many feared as drought-plagued corn prices soar.

The first chunk of news is supportive of base metals and possibly molybdenum going forward. Although import & export numbers from China are dismal, their program to stimulate the economy with infrastructure projects may put a floor under metal prices. POSCO, 20% owner of the Mt. Hope molybdenum project, had a "gap-up" in share prices yesterday with a rally continuing today while other steel producers sing the blues. POSCO has an Asian market focus and is less influenced by recessions in Europe. Watch for molybdenum futures to bottom and break above the $12 per pound doldrums this September (see Copper & Molybdenum Report below).

The growing price difference between global and domestically produced benchmarks for crude oil have been a fairly reliable barometer for tensions in the Middle East (see Weekly Oil Watch). Nearing and possibly exceeding the $20/bbl level should prove supportive of gold which remains trapped in a narrowing trading range looking for a catalyst to break-out.

Finally, the drought in the U.S., hot summer in Russia and excessive rain in Brazil are straining the global food chain and pushing up prices around the world. Although this is a potential disaster ahead for 2013, the cold calculus of gold markets suggests this may also push yellow metal prices higher. Gold is the classic hedge against inflation expectations.

Hats off again to all the Eureka folks that were on the line earlier this week fighting the Fraiser Fire (click this link for a Special 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

Here is 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, $1,625 per ounce target. However, watch for a break-out to the upside in the coming weeks.

Q. Why?

A. In the short-term, gold will likely remain in a narrowing range between the June high and July low ($1,646.4 and $1,559.5 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 one to six months (Ref 3).

With the European and U.S. Congress holiday season in full swing, the markets are looking ahead to central banks for direction starting in September with the FOMC meeting. Aggressive monetary actions could provide the first impetus for gold to breakout of its compressing trading range; negative market anticipation of the U.S. “fiscal cliff” or a conflict in the Middle East may deliver new highs or even a new record.

The Brent-WTI spread in crude oil futures is fast approaching scary levels (i.e. greater than $20 per barrel) reflecting some of the Iran-Syria concerns. The oil market has been an early harbinger for market direction and gold price since early May (Ref 1 ).

Gold value relative to oil, copper and silver continues to be elevated hovering just below the key-100-level and above the 6-year trend line (bullish for gold, Ref 2 ). The 3-month correlations of both oil and copper are now negative with respect to gold (bearish indications for commodities).

The poor economic data from China today is offset some by the recent gap-up and rally of South Korean steel producer POSCO (PKX) and a 6-market day rally of copper giant Freeport-McMoRan (FCX). This may be an early indication that stimulative infrastructure projects are putting a floor under metal prices.

For $1,625 per ounce gold we can expect to see silver in a range of $27.4-$28.1 per ounce; and copper in a range of $3.29-$3.46 per pound

Background Notes:

  1. My $1,625 per ounce target is biased above the geometric mean ($1,602.4) of the June intraday high ($1,646.4) and the July low ($1,559.5).
  2. Given the target gold price, the silver price ranges are derived from the 1-month gold ratio mean (GSR) and its respective ratio stability (CRS©). The 3-month correlation of copper & gold is now negative so an alternative method was used to establish a range for copper price.
  3. My Gold Value Index© (GVI) equals 98.31 this morning which is 10.6% below the Oct. 4 high of 109.97 and 4.3% below the peak of 102.74 set on June 1. Today gold value is above its 1-month moving average of 97.87; 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 479.06 pounds per ounce and above its 3-month moving average of 468.03; remaining above this average and the 400 pounds per ounce level is a bearish indication for the red metal.  The 1-month gold-to-copper ratio stability is low at 2.01%. (1-month rolling correlation is -0.08; 3-month is also -0.08). 3-month relative volatility is 1.32X gold and price sensitivity (beta) is -0.11.
  5. The gold-to-silver ratio is above its historical norm at 58.361; the 3-month rolling correlation is +0.54, relative volatility is 1.66X gold and price sensitivity (beta) is +0.92. Similar to copper, silver remains bearishly above its 3-month average of 57.40. The 1-month gold-to-silver ratio stability is exceptionally low at 0.66%.
Ref 3: The $2,000 Holy Grail - Is Gold on Track? (Kitco News, 8/06/2012)

Friday's Market Roundup


Mining Report

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

Barrick (ABX) $34.50 up 1.05%
Newmont (NEM) $47.56 up 0.76%
McEwen Mining (MUX) $3.34 down 6.70%; (formerly US Gold, UXG)
General Moly (Eureka Moly, LLC) (GMO) $2.87 down 1.03%
Thompson Creek (TC) $2.60 down 4.41%
Freeport-McMoRan (FCX) $36.40 up 1.11% (a bellwether mining stock spanning copper, gold & molybdenum)
Timberline Resources (TLR) $0.31 unchanged

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

ArcelorMittal (MT) $15.83 down 0.81% - global steel producer
POSCO (PKX) $84.88 up 0.70% - South Korean integrated steel producer

The Eureka Miner's Index© (EMI) was re-calibrated 8/09 to reflect current 200-day moving averages for benchmark miners.

The EMI is below-par at 84.68, up from last week's 53.85 and above the 1-month moving average of 56.07. The 1-month average is below the key 100-level (bearish condition, look for a bullish reversal to the upside)

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 $0.1/oz at $1,620.1/oz (December contract, most active)

COMEX silver is down $0.337/oz at $27.760/oz (September contract, most active)

The gold-to-silver-ratio (Au:Ag) is 58.361 oz/oz

Silver 1-month CRS© is 0.66% (bullish stability level); stability convergence (Ag overall indicators improving)

The Eureka Miner’s Gold Value Index© (GVI) is below-par at 98.31, up only slightly from last week's 98.06 and above its 1-month average of 97.87. Gold value is elevated with respect to 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 $1,377.0/oz which is $243.1/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 $0.0495/lb at $3.3375/lb (September contract, most active)

The gold-to-copper ratio is 479.06 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 468.03 (a Cu bearish indication; remains in a bearish Price Domain B)

Copper 1-month CRS© is 2.01% (bullish stability level); ratio stability weak convergence (Cu prospects for the second-half of the year should improve)

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

Metals Week Average:
US$11.60

As of August 6, 2012
(updated weekly)

Ryan's Notes Average:
US$11.20

As of August 7, 2012
(updated twice weekly)

European Molybdenum Oxide (Bloomberg average price, updated Wednesday & Friday): US$11.10/lb

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

US$11.79/lb (US$26,000/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 $92.35
ICE North Sea Brent crude $112.01
Spread (ICE- NYMEX) = $19.66 (last report, $18.09 )

Here are the November contracts* with a narrower spread:

NYMEX light sweet crude $92.88
ICE North Sea Brent crude $109.78
Spread (ICE- NYMEX) = $16.90 (last report, $15.12 )

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

The gold-to-WTI is 17.543 bbl/oz; ratios above 18.0 bbl/oz are considered bearish for oil

NYMEX WTI 1-month CRS© is 2.08% (bullish stability level); stability convergence (Brent-WTI spread has steadily widened through July )

Prices for 2012 have headed north again, we have $105+ Brent and $90+ NYMEX in November signalling higher oil prices this summer and fall. A front-month spread between Brent and WTI >$20/bbl is a trouble sign; the present spread is only pennies below that level.

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 57.0, up from last Friday's 56.4. 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 down 29.21 points to 13,135.99; the S&P 500 is down 3.38 points at 1,399.42

The Eureka Miner's Grubstake Portfolio is down 0.70% at $1,249,880.22 (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