"The history of Eureka lies in its future." - Lambert Molinelli, 1878


The author/editor of the Eureka Miner owns common shares of local mining stocks, General Moly (GMO) 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 9, 2012

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

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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: 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:


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)


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

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