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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: $1,900 Gold - At the Crossroads (10/15/2012)
This morning's...
COMEX Gold price = $1,767.7/oz (December contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 98.68 (gold value is elevated with respect to key commodities oil, copper and silver)
Value Adjusted Gold Price© (VAGP) = $1,496.8/oz
COMEX - VAGP = $270.9/oz; gold is trading at a high premium to key commodities; the gold-to-copper ratio is above its 3-month average; the gold-to-silver ratio continues to bullishly compress below its average
Mt Hope is inching closer. No, it's not plate tectonic shift although the slow pace of the Mt. Hope molybdenum mine permitting process may remind some of geological time. The real motion is in calendar time of only a few months before General Moly is expected to start mine construction.
A faithful follower of this report e-mailed me a link that shows the process is truly drawing to a close. Here is the long awaited posting to the Federal Register:
Notice of Availability of the Final Environmental Impact Statement for the Mount Hope Project, Eureka County, NE (Federal Register, Oct. 12, 2012)
General Moly issued a press release Monday in anticipation of today's posting:
General Moly Announces That the Notice of Availability for the Mt. Hope Final Environmental Impact Statement Has Been Processed and is Scheduled for Publication in the Federal Register
(Press Release, Oct.8, 2012)
Bruce D. Hansen, Chief Executive Officer of General Moly, said, "We are pleased to announce this next important step in the Mt. Hope permitting process and appreciate the diligence of the BLM in finalizing the EIS and processing the NOA. We continue to expect receipt of a favorable Record of Decision (RoD) as well as completion of the remaining major Nevada State permits by the end of 2012, and to commence construction shortly thereafter."
Start your engines drivers!
General Moly (GMO) is one of the few mining stocks in the green today at $3.28 per share although 2.4% down from last Friday.
Moly prices continued their slow trend lower this week on the spot market but moved up in the LME futures market. Western moly slipped to $10.850-10.90 per pound from last week's $11.025-$11.20 spread. The LME moly 3-month seller's contract nudged back up to $10.89 per pound ($24,000 per metric ton). Presently spot and futures are all bearishly below the $11-level.
Gold mining stocks have softened as gold finds itself trapped in a trading range below $1,800 per ounce (see my input to the weekly Kitco Gold report below). Here's how Barrick (ABX), McEwing Mining (MUX, formerly US Gold) and Timberline Resources (TLR) compare to last Friday's share prices
ABX $41.90 (10/5) to $39.36 (today) down 6.0%
MUX $4.78 (10/5) to $4.58 (today) down 4.2%
TLR $0.450 (10/5) to $0.440 (today) down 2.2%
The mining sector overall is showing technical signs for heading lower after its early August rally to mid-September high marks.
COMEX gold is presently $1,767.7 per ounce down 0.7% from last Friday's close. COMEX silver is trading at $33.820 per ounce or down 2.2% for the week; COMEX copper is $3.7260 per pound, down 1.1% .
Where do gold, silver and copper prices go from here? Checkout my latest Kitco News article, $1,900 Gold - Though the Looking Glass, and today's input to the Kitco weekly gold survey below.
Enjoy another cup of Raine's delicious Red Label TGIF and have a great weekend!
Media Coverage of Northern Nevada Gold Mining
If you missed it last week...
Eric Pastorino sent me a terrific link to a series of stories, photos and video on Barrick and the Nevada mining industry that appeared in the Las Vegas Review-Journal Sept. 23. It has been described as by its compilers as "...the most detailed media coverage of the industry ever published in Nevada":
Media Coverage of Northern Nevada Gold Mining
The Colonel's Gold, Silver & Copper Prices for Next Week
Q. Where do you see gold’s price headed next
week, up, down or unchanged?
A. Up, $1,775 per
ounce target.
Q. Why?
A. The
gold rally that began in July is taking a pause as gold price looks for a
new reason to move higher. Monetary easing in the U.S, China
and Europe provided the initial impetus for the recent gold rally. Negative
market anticipation of the U.S. “fiscal cliff” or conflict escalation in Middle
East could deliver the next leg up to new highs.
My
target of $1,775 per ounce for next week is a small positive bias above the trading
range mean defined by the Sept. 26 intraday low ($1,738.3) and the Oct.
intraday high (1,798.1).
The
beneficial relation gold has enjoyed with oil since the oil/gold volatility
super-spike of July 13 may be running out of steam as the tracking error with historical
trajectory BM-1 (Ref 5) starts to diverge. The RMS tracking
error with respect to this trajectory is still an acceptable 1.88% but the
recent stall in gold price is producing higher error. If the tracking error exceeds 3%, all bets are
off.
For
$1,775 per ounce gold we can expect to see silver in a range of $33.4-$34.5 per
ounce; and copper in a range of $3.70-$3.81 per pound (both with a neutral bias
above their range means).
Oil markets have
proved a harbinger for market direction and gold price since early May (Ref 1 ). The early October gold high confirmed
my oil/gold volatility thesis:
In the last five
years, six-out-of-six oil/gold volatility super-spikes have coincided with the
start of rallies that resulted in gold multi-month highs or new all-time
records (Ref 7).
The
present 3-month relative price volatility oil with respect to gold has declined
below parity from a super-spike of 4.50X on July 13. The decline has slowed
significantly; if it reverses the gold highs may be in for the year. This
morning the relative volatility is 0.74X. A new impetus for higher prices could put
the yellow metal back on track to reach $1,900 per ounce by mid-November (Ref 7).
The Brent-WTI
spread in crude oil futures remains alarmingly elevated at $21.8 per barrel and
a 23.6% premium. The persistent troubles in the Middle East and North Africa has
pushed this spread to $20+ per barrel levels even though the threat of an
Israeli strike on Iran has presumably moved to 2013.
Gold value
relative to oil, copper and silver is near the key-100-level and above the
6-year trend line (bullish for new gold highs, Ref 2 ). Gold value relative to the S&P 500 is up
8.1% since mid-August, another bullish sign for the yellow metal.
3. If we write a story on gold’s price
outlook may we use your commentary? (We will contact you prior to any
publication for verification)
Yes.
Background
Notes:
- My $1,775 per ounce target is a positive bias above the geometric mean of the Sept. 26 intraday low at $1,738.30 per ounce and the Oct. 4 intraday high of $1,798.1. Primary resistance is the 2012 high of $1,800.90 per ounce.
- 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 greater than 0.5 so a similar technique is used to predict the price range for copper.
- My Gold Value Index© (GVI) equals 98.68 this morning which is 10.3% below the Oct. 4 high of 109.97 and 4.0% below the peak of 102.74 set on June 1. Today gold value is above its 1-month moving average of 98.20; a value of 100 represents a historically high-value of gold relative to key commodities oil, copper and silver.
- The gold-to-copper ratio today is 474.42 pounds per ounce and slightly above its 3-month moving average of 473.78; trending below this average towards the 400 pounds per ounce level would be a bullish indication for the red metal (Ref 6). The 1-month gold-to-copper ratio stability is an exceptionally low at 0.72%. (1-month rolling correlation is +0.66; 3-month is +0.95). 3-month relative volatility is 1.06X gold and price sensitivity (beta) is +1.01
- The gold-to-silver ratio (GSR) is above its historical norm at 52.268; the 3-month rolling correlation is +0.99, relative volatility is 2.22X gold and price sensitivity (beta) is +2.20. The GSR is bullishly below its 3-month average of 54.6. The 1-month gold-to-silver ratio stability has dropped an exceptionally low 0.81% indicating ratio convergence.
Ref 1: Does Recent Oil
Volatility Portend the Next Gold Record?
(Kitco News, 7/09/2012)
Friday's Market Roundup
Mining Report
This morning's mining stocks with % price change from yesterday's close:
Barrick (ABX) $39.36 down 1.38%
Newmont (NEM) $55.35 unchanged
McEwen Mining (MUX) $4.58 down 1.29%; (formerly US Gold, UXG)
General Moly (Eureka Moly, LLC) (GMO) $3.28 up 0.61%
Thompson Creek (TC) $2.71 down 3.21%
Freeport-McMoRan (FCX) $40.30 down 1.10% (a bellwether mining stock spanning copper, gold & molybdenum)
Timberline Resources (TLR) $0.44 down 6.38%
The Steels (a "tell" for General Moly & Thompson Creek):
ArcelorMittal (MT) $14.80 down 1.20% - global steel producer
POSCO (PKX) $79.62 down 0.40% - 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 above-par at 147.35, down from last week's 159.21 and below the 1-month moving average of 169.02. The 1-month average remains bullishly above the key 100-level.
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 $2.9/oz at $1,767.7/oz (December contract, most active)
COMEX silver is down $0.262/oz at $33.820/oz (December contract, most active)
The gold-to-silver-ratio (Au:Ag) is 52.268 oz/oz
Silver 1-month CRS© is 0.81% (convergent); stability divergence has reversed (Ag overall bullish, stable with gold)
The Eureka Miner’s Gold Value Index© (GVI) is below-par at 98.68, down from last week's 99.78 and above its 1-month average of 98.20. 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 $1,496.8/oz which is $270.9/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
COMEX copper is down $0.0255/lb at $3.7260/lb (December contract, most active)
The gold-to-copper ratio is 474.42 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 473.78 (Cu neutral-bullish after monetary easing announcements; remains in a bearish Price Domain B)
Copper 1-month CRS© is 0.72% (bullish stability level); ratio stability convergence (Cu overall indicators are neutral-to-bullish)
The latest western molybdenum oxide spot prices (courtesy of Thompson Creek Metals):
Metals Week Average:
US$10.90
As of October 15, 2012
(updated weekly)
Ryan's Notes Average:
US$10.825
As of October 9, 2012
(updated twice weekly)
The LME futures 3-month seller's contract:
US$10.89/lb (US$24,000/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 $92.45
ICE North Sea Brent crude $114.26
Spread (ICE- NYMEX) = $21.81 (last report, $21.44 )
Here are the January contracts* with a narrower spread:
NYMEX light sweet crude $93.38
ICE North Sea Brent crude $112.90
Spread (ICE- NYMEX) = $19.52 (last report, $18.88)
* NYMEX futures contracts have rolled forward, we now show November and January
The gold-to-WTI is 19.121 bbl/oz; ratios above 18.0 bbl/oz are considered bearish for oil
NYMEX WTI 1-month CRS© is 3.34% (bearish stability level); stability improving (Brent-WTI spread steadily widened through July; it has widened again and tops the Aug. 13 peak on a percentage and level basis)
Defying supply/demand fundamentals, prices for 2012 are on the rise again; we have $110+ Brent and $90+ NYMEX in January signalling higher oil prices for late fall and winter. A front-month spread between Brent and WTI >$20/bbl is a trouble sign; the present spread is above that warning level.
Daily Debt Crisis Watch
July 26, 2011 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, up from last Friday's 56.2. A level above 200 is time for serious concern - we are still 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 7.44 points to 13,318.95; the S&P 500 is down 5.04 points at 1,427.80
The Eureka Miner's Grubstake Portfolio is down 0.73% at $1,396,123.42 (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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