*** Local Mining News ***
MIDWAY GOLD COMPLETES PERMITTING – RECEIVES RECORD OF DECISION PAN PROJECT, NEVADA (Press Release, 12/20/2013)
General Moly Announces Updated Operating Cost Estimate and Project Economics for Mt. Hope Project (Press release, 12/05/2013)
Latest Nevada Gas Prices (click this link)
My latest Kitco commentary: Gold (Still) Trapped in a Value Wedge (12/09/2013)
My latest column in the Mining Quarterly: Copper & Gold - The Long Ride from Lehman Brothers (p. 90-91 online, p. 84-85 printed copy, MQ Winter Edition 2013)
Paintings by Mariana Titus, The Three Anas & The Three Moon Anas, are presently at Lafitte Guest House & Gallery, New Orleans
Monday's AM prices used for this morning's analysis:
COMEX Gold price = $1,204.8/oz (February contract most active)
COMEX Silver = $19.695/oz (March)
COMEX Copper = $3.3850/lb (March)
NYMEX WTI crude = $99.82/bbl (February)
ICE Brent crude = $111.37/bbl (February)
Eureka Miner’s Gold Value Index© (GVI) = 79.92 (gold value relative to a basket of commodities that include oil, copper and silver; 100 is a high value)
Value Adjusted Gold Price© (VAGP) = $1,259.6/oz
COMEX - VAGP = -54.76/oz; gold is trading at an increasing discount to key commodities (bearish trend)
General Moly (GMO) = $1.45 up 3.57%
Barrick Gold (ABX) = $17.44 down 0.11%%
Newmont Mining (NEM) = $23.315 down 1.17%
Midway Gold (MDW) = 0.8167 up 0.83%
Timberline Resources (TLR) = $0.1737 up 2.60%
S&P 500 = 1,840.24 down 0.06%
The Eureka Miner wishes a happy New Year to you and your family - thank you for following this report through a very tumultuous market year.
As 2013 draws to a close, U.S. markets are near all-time highs as gold loses more shine. MarketWatch's year in review:
The Dow is up nearly 26% year-to-date, leaving the index on track for its biggest annual percentage gain since 1996, while the S&P 500 is up around 29% over the same stretch, putting it on track for its best annual gain since 1997. (MarketWatch, New York, 12/30/2013)
This morning Comex gold is trading down $9.02 at $1,204.8 per ounce - a long way from the heady days of $1,900+ per ounce exuberance.
This report prefers to compare gold performance to November of last year when the yellow metal was experiencing a period of impressive strength relative to both stocks and key commodities. Here is the relative loss in value from Nov. 9, 2012 to this morning:
Comex gold price (U.S. dollars) down 30%
Value lost to Comex copper 29%
Value lost to Nymex oil 40%
An ounce of gold in November of last year could buy roughly 500 pounds of copper and 20 barrels of oil. This morning an ounce fetches only 350 pounds of red metal and 12 barrels of goo!
Even more startling, gold has lost nearly 49% of its value relative to the S&P 500 compared to when when it attained its peak strength November 15, 2012 - investors continue to liquidate gold positions to chase soaring equities. Asian bargain hunters and central bank buying of gold has mitigated some of the decline in U.S. dollar gold price but rallies have been short-lived and lackluster (pun intended).
So what can we expect in 2014? I've written two recent columns on gold's outlook for next year; in the Winter Edition of the Mining Quarterly and more recently, for Kitco News, Montreal:
Copper & Gold - The Long Ride from Lehman Brothers (p. 90-91 online, p. 84-85 printed copy, MQ Winter Edition 2013)
Gold (Still) Trapped in a Value Wedge (Kitco News, 12/09/2013)
By the way, if you haven't checked out the latest Mining Quarterly - do it! Elko Daily Free Press Mining Editor Marianne Kobak McKown has done a terrific job on this issue with the latest news on the mining industry in Northern Nevada.
In the MQ article, I compare the price performance of copper and gold from the fateful collapse of Lehman Brothers Sep. 15, 2008 to the present. My argument is that monetary easing programs of the U.S. Federal Reserve have trumped supply/demand fundamentals for both metals for a significant portion of this 5 year period. There have been three quantitative easing cycles (QE or the printing of money to buy bonds) resulting in metal price reflation (QE1), inflation (QE2) and price stabilization for the current program (QE3).
Current stability in the metal markets is good for a global commodity such as copper which likely maintains a $3 per pound floor for the red metal as long as QE3 provides a supply of easy money. Monetary easing is less supportive for gold which has lost value to copper during all three QE programs. Sustainable gold rallies and even new records have typically occurred near the end or after these monetary interventions (e.g., QE1 and QE2 and respective benchmark gold records that followed). Is this a ray of light in the mine shaft?
The December meeting of the Federal Reserve began the tapering of their massive bond buying program signalling that QE3 will wind down sometime in 2014. Before this cycle is complete, the MQ column submits that "...if continued easing returns [gold/copper valuations] to pre-QE2 levels of 350 pounds per ounce, a $3-to-$4 range for copper would imply a $1,050-to-$1,400 range for gold." This morning the gold/copper valuation is 356 pounds per ounce so we're right on track going into the New Year.
The Kitco article takes a broader view and includes not only copper but oil and silver for a relative value comparison. According to this analysis, gold will enter 2014 trading at a substantial discount to both copper and oil and be trapped in a range of $1,150-to-$1,375 for the first half of the year.
The MQ column concludes:
Absent future price shocks, continuation of the present QE3 program will likely mean less volatile copper and gold prices stabilized within trading ranges. As monetary accommodations fade, metals will naturally revert to the laws of supply and demand. As inflation expectations return, the market should eventually reverse in gold’s favor with a resumption of higher sustainable prices.
With tame inflation in the U.S. and the threat of deflation in Europe, we may have to wait some time to ride the up-elevator of our favorite metal. Always the optimist - let's see what the second-half of 2014 may bring!
[Note: the above analysis and conclusions are not materially changed by the gold price update below]
Kitco Gold Survey (for Friday morning 01/03/14)
Here is my input for the weekly Kitco Gold Survey:
Photos by Mariana Titus
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Paintings by Mariana Titus, The Three Anas, are presently at Lafitte Guest House & Gallery, New Orleans
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