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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.
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:
- My target price of $1,730 per ounce is a positive bias above the geometric mean of the given trading range.
- 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).
- 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.
- 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
- 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%.
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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