"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, November 30, 2012

What's Up with POSCO? The Colonel's Gold, Silver & Copper Prices

Sweet Sage, 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: Copper and Gold - The Bank Shot (11/19/2012)


This morning's...
COMEX Gold price = $1,726.8/oz (February contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 98.88 (gold value is elevated with respect to key commodities oil, copper and silver)
Value Adjusted Gold Price© (VAGP) = $1459.2/oz
COMEX - VAGP = $267.6/oz; gold is trading at a  premium to key commodities.


Morning Miners!

A bumpy week for gold but there are emerging signs that December may see a bounce in the markets. Besides all the back-and-forth on the U.S. fiscal cliff, the recovery of China's economy under new leadership has cast much uncertainty on the metals & miners - is there a ray of light from South Korea?

Monitoring China's Shanghai Composite Index hasn't been too encouraging. It has lost more than 20% since early March - the technical definition of bear country for their stock market. However, there have lately been economic indicators that show a bottom may be in for the dragon. I prefer to track what is happening next door in South Korea because their markets are more transparent and China remains a major customer.

The South Korean stock market,or KOSPI, is on the mend and so is its steel producer POSCO (PKX). The latter is important to Eureka because POSCO owns a 20% share of the Mt. Hope molybdenum project and will be sending General Moly a chunk of funding in the next several weeks now that the permitting process is complete.

The KOSPI has bounced off its lows and fares a lot better than the Shanghai. Amazingly the South Korean iShares exchange traded fund EWY, which tracks major companies , is nearly at its 52-week high (59.73 vs 61.57). POSCO was near the lows of 2011 on Nov.21 and is now confidently marching higher (74.66 today, up 5% from the lows earlier this month). I'm betting the the Chinese economy will turn around and the South Koreans are seeing something we are missing.

Molybdenum spot and futures prices are also above the key $11 per pound mark - another positive sign (see moly report below). General Moly (GMO) share price is up 3.3% for the week at $3.75.

It has been a less stellar week for most gold mining stocks given the recent downward pressures on gold. Here's how Barrick Gold(ABX), McEwing Mining (MUX, formerly US Gold) and Timberline Resources (TLR) compare to last Friday's closing prices:

ABX $35.53 (11/23) to $34.52 (today, AM) down 2.8%
MUX $3.82 (11/23) to  $3.65 (today, AM) down 4.5%
TLR $0.315 (11/23) to  $0.30 (today, AM) down 4.8%


The mining sector overall is showing technical signs of forming a bottom. The Eureka Miner's Index© (EMI) is on the rise at 136.4 above the key 100-level and the 1-month moving average of 110.8.

Copper is up today $0.0315 per pound at $3.6370 showing considerable strength compared to gold. I continue to believe that future copper price action will shed light on gold's next move as explained in my Kitco commentary, Copper and Gold - The Bank Shot.

Where do gold, silver and copper prices go from here? Checkout my today's input to the Weekly Kitco Gold Survey below.

Enjoy another cup of Raine's delicious Red Label TGIF and have a great weekend!

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


Here is my input to the Kitco Weekly Gold Survey:

11/30/2012 (10:43 AM CT)

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

A. Down, $1,715 per ounce target.

Q. Why?

A. There were numerous bearish indications for gold this week. The yellow metal lost value to key commodities copper and oil, and the broader markets. As the month draws to a close, gold was the weakest gainer in the precious metal complex.

The price of gold remains range bound against a backdrop of compound uncertainties: the impending U.S. fiscal cliff, Europe’s sovereign debt crisis, China’s change in leadership and conflicts in the Middle East.

U.S. dollar strength had been a headwind for gold prices but has weakened nearly 2% in the past two weeks. Nonetheless, U.S. dollar-denominated gold price is expected to remain range bound for the short-term. Until a new catalyst appears, my target of $1,715 per ounce is the range mean between the November highs and lows (Feb. contract: $1,757.1 high, Nov. 23; $1,674.4 low, Nov. 5).

For $1,715 per ounce gold we can expect to see silver in a range of $31.5-$34.6 per ounce; and copper in a range of $3.46-$3.68 per pound.

As measured by the Eureka Miner’s Gold Value Index (GVI, Ref 1), the value of gold relative to global commodities copper and oil and companion metal silver is 98.88, falling below the key-100 level at and 1-month moving average of 101.86 (potentially bullish commodities). The 2012 high was 103.73 on Nov. 13.

The ratio of gold to the S&P 500 (AUSP) has dropped 2% this week and is 4% below its 2012 high (1.2710, Nov.15) at 1.2188. The latest price action indicates gold is losing value relative to the broader markets.

My Oct. 30 Kitco commentary (Ref 3) posits that copper will be the next harbinger for metal prices and the broader markets. At that time the ratio of gold-to-copper had undergone a dramatic mean reversion - expansion of the daily ratio from that state would be bearish copper; compression would be a bullish. Three weeks ago an ounce of gold bought more than 500 pounds of copper, decidedly bearish; the trend higher has now reversed – a short-term bullish sign for the red metal (my latest commentary, Ref 4). Significantly, the gold-to-copper ratio is now below its 3-month average and 6-year trend at 474.8 pounds per ounce.

Any positive movement in the current headline issues (e.g., progress on resolving the U.S. fiscal cliff) would be constructive for the red metal. This could blunt future gold rallies and be bullish for base metals and the broader markets for the remainder of 2012.

Finally, the Brent-WTI spread in crude oil futures remains elevated at $22.56 per barrel and a 25.5% premium. Continuing troubles in the Middle East keep the spread at $20+ per barrel levels although a portion of that can be attributed to over-supply in North America. This is less a driver for gold now as the 3-month oil/gold correlation is +0.5, and the 1-month is +0.6. A regional conflagration could cause a sharp rise in both crude oil prices and the WTI/Brent spread.

Background Notes:
  1. My target price of $1,715 per ounce is the geometric mean of the given trading range.
  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©). A similar technique was used to predict the price range for copper since its correlation with gold is again positive.
  3. My Gold Value Index© (GVI) equals 98.88 or 4.7% below the 2012 high of 103.73. Today gold value is below its 1-month moving average of 101.9; 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 474.8 pounds per ounce and below its 3-month moving average of 480.5 and 6-year trend of 481.3; trending below this trend line is a bullish indication for the red metal; trending above 500 pounds per ounce would be decidedly bearish (Ref 3).  The 1-month gold-to-copper ratio stability is a very low 1.51%. The 1-month rolling correlation is +0.35; 3-month is +0.85. 3-month relative volatility is 2.10X gold and price sensitivity (beta) is +1.78
  5. The gold-to-silver ratio (GSR) is below its historical norm at 50.39; the 3-month rolling correlation is +0.91, relative volatility is 2.06X gold and price sensitivity (beta) is +1.87. The GSR is below its 3-month average of 52.34; The 1-month gold-to-silver ratio stability is a low 2.31%.
Ref 2: $1,900 Gold - At the Crossroads (Kitco News, 10/15/2012)
Ref 3: Copper and Gold - In the Eye of the Storm (Kitco News, 10/30/2012)
Ref 4: Copper and Gold - The Bank Shot (Kitco News, 11/19/2012)


Friday's Market Roundup


Mining Report

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

Barrick (ABX) $34.27 down 1.81%
Newmont (NEM) $46.60 down 0.96%
McEwen Mining (MUX) $3.67 down 0.54%; (formerly US Gold, UXG)
General Moly (Eureka Moly, LLC) (GMO) $3.73 down 1.32%
Thompson Creek (TC) $2.92  up 1.32%
Freeport-McMoRan (FCX) $38.99 down 0.69% (a bellwether mining stock spanning copper, gold & molybdenum)
Timberline Resources (TLR) $0.30 down 6.25%

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

ArcelorMittal (MT) $15.29 down 0.26% - global steel producer
POSCO (PKX) $74.67 up 0.61% - 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 136.4, up from last week's 120.26 and above the 1-month moving average of 110.75. The 1-month average remains above the key 100-level and trending bullish.

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 $2.7/oz at $1,726.8/oz (February contract, most active)

COMEX silver is down $0.161/oz at $34.270/oz (March contract, most active)

The gold-to-silver-ratio (Au:Ag) is 50.388 oz/oz


The Eureka Miner’s Gold Value Index© (GVI) is above-par at 98.88, down from last week's 101.65 and above its 1-month average of 101.86. 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 103.61 set on June 25, 2012.

The Value Adjusted Gold Price© (VAGP) is $1,459.2/oz which is $267.6/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 $0.0315/lb at $3.6370/lb (March contract, most active)

The gold-to-copper ratio is 474.79 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 480.50 (Cu bullish short-term; remains in a bearish Price Domain B)


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

Metals Week Average:
US$11.15

As of December 3, 2012
(updated weekly)

Ryan's Notes Average:
US$11.10

As of November 27, 2012
(updated twice weekly)

The LME futures 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). Things are stabilizing some in MENA: the Israeli-Hamas conflict has ended in cease fire; the Iran standoff on nuclear weapon capability continues. Brent is above $110/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 $88.46
ICE North Sea Brent crude $111.02
Spread (ICE- NYMEX) = $22.56 (last report, $21.96 )

Here are the March contracts* with a narrower spread:

NYMEX light sweet crude $89.61
ICE North Sea Brent crude $109.41
Spread (ICE- NYMEX) = $19.80 (last report, $19.38)

* NYMEX futures contracts have rolled forward, we now show January and March

The gold-to-WTI is 19.521 bbl/oz; ratios above 18.0 bbl/oz are considered bearish for oil


Prices for 2012 have risen again; we have $105+ Brent and $85+ NYMEX in March signalling stubbornly high oil prices for winter and early-spring. A front-month spread between Brent and WTI >$20/bbl is a trouble sign; the present spread is above that warning level, however, some of this can be attributed to the over-supply condition in North America.


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 56.5, down from last Friday's 62.1. 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 5.36 points to 13,016.46; the S&P 500 is down 1.06 points at 1,414.89

The Eureka Miner's Grubstake Portfolio is down 1.11% at $1,338,552.50  (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

Monday, November 26, 2012

Completion of Permitting Process for the Mt. Hope Project

*** SPECIAL REPORT ***

Morning Miners!

At 5:34AM General Moly announced completion of their Mt. Hope molybdenum project permitting. Here's the press release:

General Moly Announces Completion of Permitting Process for the Mt. Hope Project with Receipt of Water Pollution Control Permit (Press Release, 11/26/2012)

I believe this will put in motion funding from South Korean steel giant POSCO (PKX) of $100M within 15 days.


Bruce D. Hansen, Chief Executive Officer of General Moly, said:

We are pleased to receive the Water Pollution Control Permit from the Nevada Division of Environmental Protection and conclude the permitting process required for the construction of the Mt. Hope Project. I want to thank our team as well as our regulatory agency partners for their long hours, hard work and commitment to getting the job done right.

and,

We will now pivot aggressively to finalizing our project financing and initiating the construction and development of the world-class Mt. Hope Project. We are moving forward toward our goal of becoming the largest pure play primary molybdenum producer in the world.

General Moly is up 2.2% at $3.71 per share in early trading; POSCO (PKX) is up 0.6% at $72.97.

Western molybdenum is hovering just below $11 per pound:

Metals Week Average:
US$10.925

As of November 19, 2012
(updated weekly)

Ryan's Notes Average:
US$10.925

As of November 20, 2012
(updated twice weekly) 

The London Metal Exchange molybdenum 3-month seller's contract is $11.33 per pound ($25,000 per metric ton)

Cheers,

Colonel Possum


Friday, November 23, 2012

Gold $1,750 Bounce; The Colonel's Gold, Silver & Copper Prices for Next Week

Scott Raine roasting coffee beans the old fashioned way in Honduras - early days of a Raine's famous Red Label!

Latest Nevada Gas Prices (click this link)


My latest Kitco commentary: Copper and Gold - The Bank Shot (11/19/2012)

Morning Miners!

This is a short report today for a short holiday trading Friday - the ole Colonel hopes you had a terrific Thanksgiving Day!

Scott Raine sent the report some great photos from his days in Honduras with the Peace Corps. The headline shot is Scott roasting coffee beans the old fashioned way - early days of Raine's famous Red Label brew.



COMEX gold got a nice bounce mid-morning to the$1,750 per ounce level. You can read about what is expected to happen next week in my the input to the Kitco Weekly Gold Survey (below) and latest commentary, Copper and Gold - The Bank Shot.

Thanks again to Scott, enjoy another cup of his delicious Red Label  and have a great weekend!

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



Here is my input to the Kitco Weekly Gold Survey:

11/23/2012 (11:03 CT)

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

A. Sideways, $1,750 per ounce target.

Q. Why?

A. The price of gold has been range bound against a backdrop of compound uncertainties: the impending U.S. fiscal cliff, Europe’s sovereign debt crisis, China’s change in leadership and conflicts in the Middle East. However, the Israel-Hamas cease fire and new signs that the Chinese economy has indeed bottomed (e.g., HSBC PMI over the key-50 level for the first time is 13 months) has given a mid-morning holiday boost to gold to the $1,750 per ounce level. This may mark a high point when higher volume returns next week.

U.S. dollar strength has been a headwind for gold prices but has weakened more that 1% from last Friday. The yellow metal continues to show strength relative to key commodities and the broader markets but has weakened some from last Friday.

U.S. dollar-denominated gold price is expected to remain range bound for the short-term with a bullish trend for the near- and long-term. Until a new catlyst appears, my target of $1,750 per ounce may be the top of a new range with early-November support above $1,700 ($1,739.4 high, Nov. 11; $1,703 low, Nov. 7).

For $1,750 per ounce gold we can expect to see silver in a range of $32.3-$34.1 per ounce; and copper in a range of $3.45-$3.60 per pound.

As measured by the Eureka Miner’s Gold Value Index (GVI, Ref 1), the value of gold relative to global commodities copper and oil and companion metal silver remains near its high for 2012 (103.73, Nov. 13) at 101.19 but has fallen below its 1-month moving average of 102.08 (potentially bullish commodities).

The ratio of gold to the S&P 500 (AUSP) is also near its 2012 high (1.2752, June 4) at 1.2376 but showing signs of weakening. The latest price action indicates gold is maintaining value relative to the broader markets. 

My Oct. 30 Kitco commentary (Ref 3) posits that copper may be the next harbinger for metal prices and the broader markets. At that time the ratio of gold-to-copper had undergone a dramatic mean reversion - expansion of the daily ratio from that state would be bearish copper; compression would be a bullish. Two weeks ago an ounce of gold bought more than 500 pounds of copper, decidedly bearish; the trend higher has stalled – a short-term bullish sign for the red metal (my latest commentary,  Ref 4).

Any positive movement in the current headline issues (e.g., progress on resolving the U.S. fiscal cliff) would be constructive for the red metal. This could blunt future gold rallies and be bullish for base metals and the broader markets for the remainder of 2012.

Finally, the Brent-WTI spread in crude oil futures remains elevated at $23.20 per barrel and a 26.5% premium. Continuing troubles in the Middle East keep the spread at $20+ per barrel levels although a portion of that can be attributed to over-supply in North America. This is less a driver for gold now as the 3-month oil/gold correlation is +0.2 and the 1-month is +0.5. A regional conflagration could cause a sharp rise in both crude oil prices and the WTI/Brent spread.

Background Notes:

  1. My target price of $1,750 per ounce may define the top of a new trading range.
  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©). A different technique was used to predict the price range for copper since its 1-month correlation with gold is near-zero.
  3. My Gold Value Index© (GVI) equals 101.48 just below a high for 2012 of 103.73. Today gold value is below its 1-month moving average of 102.08; 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 494.4 pounds per ounce and above its 3-month moving average of 480.0; trending below this average towards the 400 pounds per ounce level would be a bullish indication for the red metal; trending above 500 pounds per ounce would be decidedly bearish (Ref 3).  The 1-month gold-to-copper ratio stability is a very low 1.44% (1-month rolling correlation is +0.08; 3-month is +0.87. 3-month relative volatility is 1.89X gold and price sensitivity (beta) is +1.64
  5. The gold-to-silver ratio (GSR) is near its historical norm at 52.794; the 3-month rolling correlation is +0.96, relative volatility is 1.94X gold and price sensitivity (beta) is +1.85. The GSR is below its 3-month average of 52.57; The 1-month gold-to-silver ratio stability is a low 1.29%.

Ref 2: $1,900 Gold - At the Crossroads (Kitco News, 10/15/2012)
Ref 3: Copper and Gold - In the Eye of the Storm (Kitco News, 10/30/2012)
Ref 4: Copper and Gold - The Bank Shot (Kitco News, 11/19/2012)


Cheers,

Colonel Possum


Headline photograph by Scott Raine

Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market

Monday, November 19, 2012

General Moly Announces Receipt of RoD for Mt. Hope

** SPECIAL REPORT ***

Morning Miners,

This weekend I received a tip from a faithful reader that the Record of Decision for General Moly's Mt. hope project had been signed late Friday afternoon. Here is the link to that signed document:

MOUNT HOPE PROJECT RECORD OF DECISION, PLAN OF OPERATIONS APPROVAL,AND APPROVAL OF ISSUANCE OF RIGHT-OF-WAY GRANTS

This morning at 5:33AM(PT), General Moly (GMO) issued their press release:

General Moly Announces Receipt of the Record of Decision for the Mt. Hope Project Environmental Impact Statement (Press release, 11/19/2012)

Bruce D. Hansen, Chief Executive Officer of General Moly, said,

This is the culmination of six years of hard work and dedicated effort from our team and the BLM, with significant input from all the cooperating and commenting agencies and the general public to responsibly develop the world-class Mt. Hope Project. We along with our partners at POS-Minerals Corporation are very pleased to achieve this important permitting milestone, and want to thank our regulatory agency partners who have been so responsive and diligent in carrying out this process. We will continue working closely and collaboratively with all of our stakeholders to develop Mt. Hope in an environmentally and socially responsible manner.

With the receipt of the Record of Decision, and what we believe will be the relatively expeditious issuance of the Water Pollution Control Permit and Reclamation Permit from the State of Nevada Division of Environmental Protection, we expect to move aggressively from a successful permitting process, to finalizing our project financing, and initiating the construction and development of Mt. Hope. We anticipate that the Mt. Hope Project will become an important contributor to economic development and job opportunities in Northern Nevada for decades to come.

It's been a long, long road pardner. Congratulations to the General Moly team!

At 7:08 AM (PT), General Moly (GMO) is up a respectable 12.5% at $3.79 per share.

POSCO (PKX), 20% owner of Mt.Hope, is up 1.4% at $73.43 per share

Cheers,

Colonel Possum

Friday, November 16, 2012

All about Uncertainty; The Colonel's Gold, Silver & Copper Prices for Next Week

Hay ranch on the way to Ely, White Pine County, 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: Copper and Gold - In the Eye of the Storm (10/30/2012)


This morning's...
COMEX Gold price = $1,710.7/oz (December contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 102.19 (gold value is elevated with respect to key commodities oil, copper and silver & near the 2012 high)
Value Adjusted Gold Price© (VAGP) = $1,398.8/oz
COMEX - VAGP = $311.9/oz; gold is trading at a  premium to key commodities.


Morning Miners!

There is an old saying that markets don't like uncertainty and there is certainly enough around to explain the dramatic downdrafts since post-election; both the DOW  and the S&P 500 have dropped more than 6% on an intraday basis. The biggest booger bear is the anticipated outcome of the U.S. fiscal cliff negotiations although Europe’s sovereign debt crisis, China’s change in leadership and an escalating crisis in the Middle East given the recent Israel/Hamas conflict are all pretty scary bears in the global forest.

My input to the Weekly Kitco Gold Survey (below) explains how this backdrop has affected gold and copper prices. The survey was completed 8:34 AM (PT) before the President and Congressional leaders concluded their first high-level meeting on the fiscal cliff.  Relatively positive comments from both sides after the meeting have pushed the broader markets into the green and lifted gold and copper a tad ($1,710.7 per ounce and $3.4420 per pound respectively). This bounce does not materially change my outlook in the survey or the analysis below. I continue to be fairly positive about the broader and metal markets if some of the headline fear abates by years end.

It has been a bad week for our gold mining stocks given the conflicting pressures on gold - McEwing Mining was mauled by the bears and Timberline escaped with only a few scratches. Here's how Barrick Gold(ABX), McEwing Mining (MUX, formerly US Gold) and Timberline Resources (TLR) compare today, after the President's meeting, to last Friday's closing prices:

ABX $36.07 (11/09) to $33.34 (today AM) down 7.6%
MUX $4.43 (11/09) to  $3.44 (today AM) down 22.3%
TLR $0.32 (11/09) to  $0.31 (today AM) down 3.1%

General Moly (GMO) has been more resilient than most gold miners. Share price this morning post-meeting is $3.39 down only 2.9% from last Friday.

Moly prices continue to move mostly sideways with some optimism shown in the LME futures market. Western moly prices ranged $10.85-$10.925 per pound; the LME moly 3-month seller's contract is $11.34 per pound ($25,000 per metric ton). Presently spot and futures prices are stubbornly straddling the $11-level.

The mining sector overall is still showing technical signs for heading lower after its early August rally to mid-September high marks.

Copper fell this morning but ticked back up a bit after the President's meeting. Concerns about demand from top consumer China and the strong dollar rally are headwinds to higher prices. I continue to believe that future copper price action may shed some light on gold's next moves as expalined in my Kitco commentary, Copper and Gold - In the Eye of the Storm.

Where do gold, silver and copper prices go from here? Checkout my input to the Weekly Kitco Gold Survey below.
Enjoy another cup of Raine's delicious Red Label TGIF and have a great weekend!

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


Here is my input to the Kitco Weekly Gold Survey:

11/16/2012

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

A. Up, $1,725 per ounce target.

Q. Why?

A. The price of gold this week has been unexpectedly lackluster against a backdrop of compound uncertainties: the impending U.S. fiscal cliff, Europe’s sovereign debt crisis, China’s change in leadership and an escalating crisis in the Middle East exacerbated by the recent Israel/Hamas conflict.

A strengthening U.S. dollar near 2-month highs has been one headwind for gold prices. Nonetheless, the yellow metal continues to show impressive strength relative to key commodities and the broader markets.

U.S. dollar-denominated gold price is expected to remain range bound for the short-term with a bullish trend for the near- and long-term. My target for next week of $1,725 per ounce is a positive bias above the range mean of November’s highs and lows ($1,739.4 high, Nov. 11; $1,672.5 low, Nov. 5).

For $1,725 per ounce gold we can expect to see silver in a range of $32.1-$33.2 per ounce; and copper in a range of $3.40-$3.50 per pound.

As measured by the Eureka Miner’s Gold Value Index (GVI, Ref 1), the value of gold relative to global commodities copper and oil and companion metal silver is near its high for 2012 (103.73, Nov. 13) at 102.19; above the key 100-level and 6-year trend.

The ratio of gold to the S&P 500 (AUSP) is also near its 2012 high (1.2752, June 4) at 1.2663. The latest price action indicates gold is maintaining value relative to the broader markets, a bullish indication.

My Oct. 30 Kitco commentary (Ref 3) posits that copper may be the next harbinger for metal prices and the broader markets. At that time the ratio of gold-to-copper had undergone a dramatic mean reversion - expansion of the daily ratio from that state would be bearish copper; compression would be a bullish. Last week an ounce of gold bought more than 500 pounds of copper, decidedly bearish; this week the trend higher has stalled – a potentially bullish sign for the red metal.

Any positive movement in the current headline issues (e.g., progress on resolving the U.S. fiscal cliff) could cause a sharp reversal in copper’s bearish trend. This could blunt future gold rallies and be bullish for base metals and the broader markets for the remainder of 2012.

Finally, the Brent-WTI spread in crude oil futures remains elevated at $22.42 per barrel and a 26.0% premium. Continuing troubles in the Middle East and North Africa keep the spread at $20+ per barrel levels although a portion of that can be attributed to over-supply in North America. This is less a driver for gold now as the 3-month oil/gold correlation remains near zero although the 1-month is +0.5. Israel’s conflict with Hamas escalating to a regional conflagration could cause a sharp rise in both crude oil prices and the WTI/Brent spread.

Background Notes:

  1. My target price of $1,725 per ounce is above a range mean of $1,705.6 for the noted levels and dates (above).
  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©). A different technique was used to predict the price range for copper as it bearishly departs from gold.
  3. My Gold Value Index© (GVI) equals 102.19 just below a high for 2012 of 103.73. Today gold value is above its 1-month moving average of 101.78; 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 497.01 pounds per ounce and above its 3-month moving average of 479.08; trending below this average towards the 400 pounds per ounce level would be a bullish indication for the red metal; trending above 500 pounds per ounce would be decidedly bearish (Ref 3).  The 1-month gold-to-copper ratio stability remains low at 2.01% but is re-converging (1-month rolling correlation is +0.38; 3-month is +0.88. 3-month relative volatility is 1.68X gold and price sensitivity (beta) is +1.47
  5. The gold-to-silver ratio (GSR) is above its historical norm at 52.84; the 3-month rolling correlation is +0.97, relative volatility is 1.94X gold and price sensitivity (beta) is +1.88. The GSR is close to its 3-month average of 52.73. The 1-month gold-to-silver ratio stability is a low 0.85%.
Ref 2: $1,900 Gold - At the Crossroads (Kitco News, 10/15/2012)
Ref 3: Copper and Gold - In the Eye of the Storm (Kitco News, 10/30/2012)


Friday's Market Roundup


Mining Report

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

Barrick (ABX) $33.34 up 0.21%
Newmont (NEM) $45.48 down 0.11%
McEwen Mining (MUX) $3.44 up 0.88%; (formerly US Gold, UXG)
General Moly (Eureka Moly, LLC) (GMO) $3.39 up 2.11%
Thompson Creek (TC) $2.91  iup 1.04%
Freeport-McMoRan (FCX) $36.90 down 0.99% (a bellwether mining stock spanning copper, gold & molybdenum)
Timberline Resources (TLR) $0.31 down 6.06%

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

ArcelorMittal (MT) $14.78 up 0.14% - global steel producer
POSCO (PKX) $72.33 down 0.71% - 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 96.11, down from last week's 103.98 and below the 1-month moving average of 110.72. The 1-month average remains bullishly above the key 100-level but daily price action is trending bearish.

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 (pre-meeting) ...

COMEX gold is down $3.1/oz at $1,710.7/oz (December contract, most active)

COMEX silver is down $0.299/oz at $32.375/oz (December contract, most active)

The gold-to-silver-ratio (Au:Ag) is 52.840 oz/oz


The Eureka Miner’s Gold Value Index© (GVI) is above-par at 102.19, below last week's 103.36 and above its 1-month average of 101.78. 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 103.73 set on Nov. 13, 2012.

The Value Adjusted Gold Price© (VAGP) is $1,398.8/oz which is $311.9/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 $0.0205/lb at $3.4420/lb (December contract, most active)

The gold-to-copper ratio is 497.01 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 479.08 (Cu neutral post-election; remains in a bearish Price Domain B)


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

Metals Week Average:
US$10.925

As of November 19, 2012
(updated weekly)

Ryan's Notes Average:
US$10.85

As of November 13, 2012
(updated twice weekly)

The LME futures 3-month seller's contract:

US$11.11/lb (US$24,500/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). Things heating up again in MENA, with the latest Israeli/Hamas conflict. Brent is thankfully below $110/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 $86.35
ICE North Sea Brent crude $108.71
Spread (ICE- NYMEX) = $22.42 (last report, $21.96 )

Here are the February contracts* with a narrower spread:

NYMEX light sweet crude $87.29
ICE North Sea Brent crude $108.00
Spread (ICE- NYMEX) = $20.71 (last report, $19.38)

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

The gold-to-WTI is 19.811 bbl/oz; ratios above 18.0 bbl/oz are considered bearish for oil


Prices for 2012 are see-sawing on concerns about global demand coupled with domestic over-supply and recurrent problems in MENA; we have $105+ Brent and $85+ NYMEX in February signalling moderating 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, however, some of this can be attributed to the over-supply condition in North America.


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 71.2, down from last Friday's 74.2. 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 up 35.18 points to 12,577.56; the S&P 500 is up 4.38 points at 1,357.71

The Eureka Miner's Grubstake Portfolio is up 0.01% at $1,283,926.45  (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, November 9, 2012

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

Where trains once whistled, 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: Copper and Gold - In the Eye of the Storm (10/30/2012)

This morning's...
COMEX Gold price = $1,734.7/oz (December contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 104.27 (record high for 2012, gold value is elevated with respect to key commodities oil, copper and silver)
Value Adjusted Gold Price© (VAGP) = $1,390.1/oz
COMEX - VAGP = $344.6/oz; gold is trading at a  premium to key commodities.


Morning Miners!

This will be a short report this morning - my sweetheart Mariana has just returned from her beloved Louisiana!

It has been quite a market week and good for gold as I summarize in the input to the Weekly Kitco Gold Survey below.

The report will return to full strength next Friday. Enjoy a cup of Raine's delicious Red Label TGIF and have a great weekend!

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


Here is my input to the Kitco Weekly Gold Survey:

11/09/2012

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

Up, $1,750 per ounce target.

2.      Why?

Many indicators for gold have turned bullish this week following the U.S. election and boosted by concerns over the impending fiscal cliff, Europe’s sovereign debt crisis, China’s change in leadership and by Iran shooting at a U.S. drone in international air space.

The yellow metal is presently showing impressive strength relative to key commodities and the broader markets.

I believe the rally will continue as long as compound uncertainty exists in the markets. My target for next week of $1,750 per ounce - a key psychological level and just below the Oct. 17 intraday high of $1,755.

For $1,750 per ounce gold we can expect to see silver in a range of $32.5-$34.2 per ounce; and copper in a range of $3.38-$3.49 per pound.

Significantly, gold has rallied even as the U.S. dollar has strengthened. The value of gold relative to global commodities copper and oil and companion metal silver is at its high for 2012 this morning at 104.27; above the key 100-level and 6-year trend as measured by the Eureka Miner’s Gold Value Index (GVI, Ref 1).

The ratio of gold to the S&P 500 (AUSP) has also rallied post-election nearly 3% and over 6% from its Nov. 2 low. The AUSP is fast approaching its June 4 high for the year (1.2581 versus 1.2752) which followed the second dismal late-spring jobs report and first cries of “protracted global decline.” The latest price action indicates gold is gaining value to the broader markets, a bullish trend.

My Oct. 30 Kitco commentary (Ref 3) argued that copper may be the next harbinger for metal prices and the broader markets. At that time the ratio of gold-to-copper had undergone a dramatic mean reversion - expansion of the daily ratio from that state would be bearish copper; compression would be a bullish. Today an ounce of gold buys more than 500 pounds of copper affirming a decidedly bearish direction.

It is, however, important to note that any positive movement in the current headline issues (e.g., progress on resolving the U.S. fiscal cliff) could cause a sharp reversal in the present bearish trend for copper. This could blunt the gold rally and be bullish for base metals and the broader markets for the remainder of 2012.

Finally, the Brent-WTI spread in crude oil futures remains elevated at $20.39 per barrel and a 25.7% premium. Troubles in the Middle East and North Africa pushed the spread to $20+ per barrel levels but now a portion of that spread can be attributed to over-supply in North America. This is less a driver for gold now as the 3-month oil/gold correlation remains negative; the 1-month has, however, turned positive. Escalation of conflict with Iran could cause a sharp rise in both crude oil prices and the WTI/Brent spread.

Background Notes:

  1. My target price of $1,750 per ounce for next week just below the Oct. 17 intraday high of $1,755.
  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©). A different  technique was used to predict the price range for copper as it bearishly departs from gold..
  3. My Gold Value Index© (GVI) equals 104.27 which is a high for 2012 and just 5.1% below the Oct. 4, 2011 high of 109.97. Today gold value is above its 1-month moving average of 100.82; 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 505.74 pounds per ounce and above its 3-month moving average of 477.42; trending below this average towards the 400 pounds per ounce level would be a bullish indication for the red metal; trending above 500 pounds per ounce would be decidedly bearish (Ref 3).  The 1-month gold-to-copper ratio stability remains low at 2.04% but is bearishly diverging (1-month rolling correlation is +0. 0.80; 3-month is +0.92. 3-month relative volatility is 1.37X gold and price sensitivity (beta) is +1.26
  5. The gold-to-silver ratio (GSR) is above its historical norm at 53.163; the 3-month rolling correlation is +0.93, relative volatility is 2.05X gold and price sensitivity (beta) is +2.01. The GSR is close to its 3-month average of 53.075. The 1-month gold-to-silver ratio stability is a low 1.21%.
Ref 2: $1,900 Gold - At the Crossroads (Kitco News, 10/15/2012)
Ref 3: Copper and Gold - In the Eye of the Storm (Kitco News, 10/30/2012)


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