"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, December 7, 2012

General Moly $$$; The Colonel's Gold, Silver & Copper prices for Next Week

Stars and Stripes, Eureka, Nevada
Latest Nevada Gas Prices (click this link)

The next Market Report will be December 21, 2012

My latest Kitco commentary: Copper & Gold – Fast Eddie’s Lucky Run

This morning's...
COMEX Gold price = $1,702.9/oz (February contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 98.80 (gold value is elevated with respect to key commodities oil, copper and silver)
Value Adjusted Gold Price© (VAGP) = $1,440.2/oz
COMEX - VAGP = $262.7/oz; gold is trading at a  premium to key commodities.

Morning Miners!

This will be a short report this morning as ole Colonel prepares for a road trip next week.  The next report is bright and early Friday, Dec. 21 - winter solstice for 2012 and the last day of the Mayan long calendar. Being an optimist, I don't believe the world will end on that day.

The latest news for General Moly is receipt of $100M from POS-Minerals (subsidiary of POSCO, 10% owner of Mt. Hope). Here's yesterday's press release:

General Moly Announces Receipt of $100 Million Contribution Payment from Joint Venture Member POS-Minerals to Commence Construction at the Mt. Hope Project (Press release, 12/6/2012)

I continue to believe that copper price action will continue to shed light on gold's next move as explained in my Kitco commentary, Copper & Gold – Fast Eddie’s Lucky Run.

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:

12/07/2012 (10:38AM CT)

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

Up, $1,730 per ounce target.

2.      Why?

The better-than-expected U.S. jobs report boosted both the dollar and gold this morning. Next week’s FOMC meeting is expected to give gold additional lift with an announcement of further monetary accommodation as Operation Twist draws to conclusion. Without additional catalyst, the yellow metal should bias positively above $1,715 per ounce; the range mean between the November highs and lows (Feb. contracts: $1,757.1 high, Nov. 23; $1,674.4 low, Nov. 5).

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. However, there are further signs that the Chinese economy and has bottomed which should be supportive of gold and base metals– this week both the Shanghai composite and neighboring South Korean KOSPI have rallied off their lows.

For $1,730 per ounce gold we can expect to see silver in a range of $31.4-$34.1 per ounce; and copper in a range of $3.39-$3.82 per pound. Both silver and copper are expected to have a positive bias in price above their respective range means.

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 98.80, staying below the key-100 level at and 1-month moving average of 101.03 (bullish commodities). The 2012 high was 103.73 on Nov. 13.

The ratio of gold-to-the S&P 500 (AUSP) has dropped another 0.5% this week and is 5% below its 2012 high (1.2710, Nov.15) at 1.2024. The latest price action indicates gold continues to lose value relative to the broader markets.

My Oct. 30 Kitco commentary (Ref 2) posits that copper would 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. In early November an ounce of gold bought more than 500 pounds of copper, a decidedly bearish level; the trend higher reversed which was a short-term bullish sign for the red metal (my latest commentary, Ref 3 & Ref 4). Significantly, the gold-to-copper ratio is now below its 3-month average and 6-year trend at 464.1 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. However, the 1-month correlation of gold and copper is now negative which may cap the current the rally in copper and suggest that gold remains range bound for the short term.

Background Notes:
  1. My target price of $1,730 per ounce is a positive bias above 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 3-month correlation with gold is still positive (although the 1-month is negative).
  3. My Gold Value Index© (GVI) equals 98.80 or 4.8% below the 2012 high of 103.73. Today gold value is below its 1-month moving average of 101.03; 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 464.07 pounds per ounce and below its 3-month moving average of 478.87 and 6-year trend of 482.31; trending below this trend line is a bullish indication for the red metal; trending above 500 pounds per ounce, bearish (Ref 3).  The 1-month gold-to-copper ratio stability is a borderline divergent at 2.99%. The 1-month rolling correlation is -0.46; 3-month is +0.75. 3-month relative volatility is 1.99X gold and price sensitivity (beta) is +1.48
  5. The gold-to-silver ratio (GSR) is slightly above its historical norm at 51.346; the 3-month rolling correlation is +0.87, relative volatility is 1.94X gold and price sensitivity (beta) is +1.70. The GSR is below its 3-month average of 52.312; The 1-month gold-to-silver ratio stability is a low 2.01%.
Ref 2: Copper and Gold - In the Eye of the Storm (Kitco News, 10/30/2012)
Ref 3: Copper and Gold - The Bank Shot (Kitco News, 11/19/2012)
      Ref 4: Copper & Gold – Fast Eddie’s Lucky Run (Kitco News, 12/03/2012)


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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