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My latest Kitco commentary: The 2013 Copper & Gold Conundrum (01/07/2013)
This morning's...
COMEX Gold price = $1,650.4/oz (February contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 94.84 (gold value is elevated but falling with respect to key commodities oil, copper and silver)
Value Adjusted Gold Price© (VAGP) = $1,454.0/oz
COMEX - VAGP = $196.4/oz; gold is trading at a decreasing premium to key commodities.
It has been quite a beginning to the New Year. In four market days gold nearly broke the elusive $1,700 per ounce level only to fall perilously close to $1,600 support. Thankfully we've recovered to near the middle of this range as I explain in my weekly Kitco Gold Survey input (see below).
Copper has had a terrific run this week bolting to $3.75+ per pound before retreating a bit to trade at $3.6965 per pound this morning. To give this perspective, COMEX copper prices were at in lowly $3.40 territory in mid-November before investors had more evidence that the Chinese economy was on the mend and Japan may spend more on infrastructure projects with the new Abe government and looser monetary policy.
Today the U.S. jobs report was positive adding 155,000 jobs and scoring a 7.8% unemployment rate. Although slightly below expectations (160,000 and 7.7%), the employment numbers suggest the U.S. economy continues to slowly gather steam. This and a hawkish FOMC meeting this week brought gold falling of its peak with nearly a $70 per ounce spread between intraday highs and lows.
Molybdenum prices continue to inch higher by the week passing the mid-$11 per pound level to price $11.60 per pound on the spot market. As reported by moly benchmark miner Thompson Creek (TC):
Metals Week Daily Average:
US$11.60
As of December 31, 2012
(updated weekly)
Ryan's Notes Average:
US$11.60
As of December 28, 2012
(updated twice weekly)
The uptrend appears intact as the London Metal Exchange (LME) futures contracts head north:
3-month seller's contract US$26,000 per metric ton (US$11.79 per pound)
15-month seller's contract US$26,740 per metric ton (US$12.13 per pound)
General Moly (GMO) announced more good news on the Mt. Hope molybdenum project with the approval of power lines from the Machaeck Substation:
General Moly Granted Permit to Construct Transmission Line Powering Mt. Hope Project
(Press Release, 1/02/2013)
Bob Pennington, Chief Operating Officer of General Moly, said, “This permit allows us to build the transmission infrastructure in a timely manner and provide the necessary capacity to power everything from the electric shovels we will begin to use during pre-stripping operations to the 60,000 ton per day mill which will start up when Mt. Hope begins production. Construction of the transmission line will also include upgrades to an existing substation near Eureka that will improve the reliability of electrical power to that community. We appreciate the focus and diligence the PUCN and BLM showed in expediting these approvals.”
POSCO (PKX), South Korean steelmaker and 20% owner of Mt. Hope, continues to show strength against a backdrop of improving economic conditions in Asia:
PKX today $86.08 up 19.8% from its Nov. 21 closing low
And, General Moly (GMO) has wasted no time moving higher either:
GMO today $4.24 up 27.7% from its Nov. 15 closing low
Although gold prices have been volatile, Barrick Gold (ABX) has shown resilience:
ABX today $34.19 up 3.6% from its Nov. 15 closing low
Where do gold, silver and copper prices go next week? 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.
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 weekly Kitco Gold Survey:
01/04/2012
(10:25AM CT)
1.
Where do you see gold’s price headed next week, up, down or unchanged?
Up,
$1,660 per ounce target.
2.
Why?
Gold
price volatility is typical for the start of a new year and 2013 is proving no
exception. In the first week, intraday COMEX futures have swung nearly $70 per
ounce within the key psychological levels of $1,600 (support) and $1,700 per
ounce (resistance). The recent hawkish FOMC meeting and this morning’s positive,
although slightly below expectation, U.S. jobs report finds gold trading closer
to the low side at $1,650.4 per ounce.
Importantly, a mean
of $1,660 per ounce between the January highs and lows is very near the closing
prices for gold prior to resolution of the so-called fiscal cliff (note 1). My target for next
week is therefore a neutral bias on the mean until there is more clarity on the
direction of the economy and fiscal and monetary policy for 2013.
The
yellow metal continues to bearishly lose value relative to key commodities oil
and copper as well as the broader markets. However, the underpinnings for gold
and base metals remain supportive given worldwide accommodative monetary
policies, a Chinese economy on the mend and signs of stabilization in Europe.
For
$1,660 per ounce gold we can expect to see silver in a range of $29.2-$33.2 per
ounce; and copper in a range of $3.57-$3.74 per pound. Silver is expected to
have a negative bias below its means; copper, a positive bias.
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 94.84, staying below the key-100 level and 1-month
moving average of 97.71 (bearish gold trend). The 2012 high was 103.73 on Nov.
13.
The
ratio of gold-to-the S&P 500 (AUSP) scores a new multi-month low this
morning falling below mid-August levels. It is now 11.2% below its 2012 high (1.2710,
Nov.15) at 1.1285. The ratio with respect to S&P 500 futures (AUSPF, March
contract) fares only slightly better at 1.1345. The latest price action
indicates gold continues to lose considerable value relative to the broader
market.
Yes.
Background
Notes:
- My target price of $1,660 per ounce is a neutral bias from the geometric mean of the given highs and lows for January to date.
- 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.
- My Gold Value Index© (GVI) equals 94.84 or 8.6% below the 2012 high of 103.73. Today gold value is below its 1-month moving average of 97.71; 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 446.48 pounds per ounce and below its 3-month moving average of 476.24 and 6-year trend of 484.53. Falling below the long-term 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 very low 1.14%. The 1-month rolling correlation is +0.72; 3-month is +0.15. 3-month relative volatility is 1.49X gold and price sensitivity (beta) is +0.22
- The gold-to-silver ratio (GSR) is above its historical norm at 55.160; the 3-month rolling correlation is +0.87, relative volatility is 2.11X gold and price sensitivity (beta) is +1.84. The GSR is above its 3-month average of 53.0; the 1-month gold-to-silver ratio stability is 3.16%.
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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