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My latest Kitco commentary: Oil, Copper & Gold – Beware the Snake? (02/11/2013)
Friday's morning prices...
COMEX Gold price = $1,668.1/oz (April contract most active)
COMEX Silver = $31.445/oz (March)
COMEX Copper = $3.7565/lb (March)
NYMEX WTI crude = $96.31/bbl (March)
ICE Brent crude = $118.67/bbl (March)
Eureka Miner’s Gold Value Index© (GVI) = 92.74 (gold value is elevated but falling with respect to key commodities oil, copper and silver)
Value Adjusted Gold Price© (VAGP) = $1,502.9/oz
COMEX - VAGP = $165.2/oz; gold is trading at a decreasing premium to key commodities.
Morning Miners!
A mixed week for gold prices which are trading near the middle of their range while silver and copper get a boost this morning from some upbeat data from China (see Kitco Gold Survey below). China's exports surged 25% and imports climbed 29%, both well ahead of the previous month's increases. As we begin the Chinese Lunar New Year holiday next week, it is not expected that the metals will vary too much from current prices. We will see where the Year of the Snake takes us after Chinese traders return to the marketplace.
The broader markets continue to move skyward with the S&P 500 at new highs this morning presently posting 1,517.14. To give this some perspective, the S&P closing high of October 9, 2007 was 1,565.15 which then fell all the way down to a close at 676.53 on March 9, 2009 during the Great Recession. Markets are resilient, we've come a long way back, pardner.
The moly miners are struggling to regain ground lost to earlier highs this year. Moly benchmark miner Thompson Creek (TC) and General Moly (GMO) both made intraday highs on Jan. 7 but have fallen since:
Thompson Creek (TC) $4.55 (01/07) $4.02 (this morning) down 11.5%
General Moly (GMO) $4.25 (01/07) $3.52 (this morning) down 22.1%
Bellwether miner Freeport McMoran (FCX) which produces copper, gold and moly has fared much better:
Freeport McMoran (FCX) $31.10 (01/07) $35.69 (this morning) up 14.8%
One of the overhangs for pure play moly miners is the lackluster steel consumption outlook for Europe as reported by Steel Business Briefing February 5:
2013 prospects remain bleak, mild recovery in 2014, Eurofer
"European apparent steel consumption will fall again slightly in 2013,
before improving in 2014, the European steel association Eurofer said on
Tuesday.In a new report it said activity in the main steel-using sectors is expected to register a further decline this year due to the continuation of difficult operating conditions in the EU, particularly in construction and automotive. A mild rebound is forecast for 2014, in line with the expected economic recovery in the EU."
A lot rests on the U.S., China and Japan to fill the gap in steel demand. South Korean steelmaker POSCO (PKX) and 20% owner of Mt. Hope is less sensitive to Europe but has also struggled since the begining of 2013:
POSCO (PKX) $86.8 (01/07) $81.58 (this morning) down 6.0%
Molybdenum spot prices have stabilized below $12 per pound level. Here are the latest numbers compliments of Thompson Creek Metals (TC):
Metals Week Weekly Average:
US$11.545
As of February 4, 2013
(updated weekly)
Ryan's Notes Average:
US$11.50
As of February 5, 2013
(updated twice weekly)
The London Metal Exchange (LME) futures contracts also remains below $12 per pound, slightly higher than spot prices.
3-month seller's contract $25,800 per metric ton ($11.70 per pound)
15-month seller's contract $26,280 per metric ton ($11.92 per pound)
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
Last week the ole Colonel was on the road. For the record this was this was the input to the Kitco Gold Survey last week:
For
$1,665 per ounce gold we can expect to see silver in a range of $29.6-$31.8 per
ounce; and copper in a range of $3.59-$3.77 per pound. Silver and copper are
expected to have a positive bias above their range means ($30.704 & $3.6830
respectively) while gold remains in neutral position.
Here is my input to the Kitco Gold Survey this morning:
02/08/2013
(10:18AM CT)
Q. Where do you see gold’s price headed next week, up, down or unchanged?
A. Sideways,
$1,670 per ounce target.
Q. Why?
A. Gold
was whipsawed this week by comments of ECB president Mario Draghi especially
his inference that the euro’s strength could hamper an economic recovery. Since
then the euro has fallen below 1.34 after reaching a high last Friday of 1.3771
and gold has returned to its trading range mean. Upbeat China data this morning
has boosted copper and silver but has had little material effect on the yellow
metal. With next week’s break for China’s Lunar New Holiday, not much is on the
horizon to move gold higher or lower. My target of $1,670 per ounce is therefore
the range mean of the Jan. 31 high and Feb. 5 low ($1,687.0 and $1,653.2
per ounce).
Technically,
negative 3-month rolling correlations between gold and global commodities oil
and copper continue to be troubling exacerbated by weakening 1-month
correlations (Ref 6). Oil, copper and
gold do best as a group when gold behaves as a commodity (i.e. positive
correlations).
For
$1,670 per ounce gold we can expect to see silver in a range of $30.1-$31.8 per
ounce; and copper in a range of $3.63-$3.86 per pound. Silver and copper are
expected to have a positive bias above their range means ($30.970 & $3.7459
respectively) while gold remains in neutral position.
The
yellow metal has recovered some value relative to oil and copper as well as the
broader markets this week.
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 92.74, staying below the key-100 level and 1-month
moving average of 93.77 (bearish gold trend). The 2012 high was 103.73 on Nov.
13.
The
ratio of gold-to-the S&P 500 (AUSP) is now 13.5% below its 2012 high (1.2710,
Nov.15) at 1.0997. The latest price action indicates gold has lost
considerable value relative to the broader market but may be forming a bottom.
Background
Notes:
- My gold target price of $1,670 per ounce is the geometric mean of the given highs and lows
- 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 91.76 or 11.5% below the 2012 high of 103.73. Today gold value is below its 1-month moving average of 93.77; 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 444.06 pounds per ounce and below its 3-month moving average of 466.51 and 6-1/2 year trend of 486.89. 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 1.56%. The 1-month rolling correlation is -0.12; 3-month is -0.54. 3-month relative volatility is 2.67X gold and price sensitivity (beta) is -0.81
- The gold-to-silver ratio (GSR) is above its historical norm at 53.031; the 3-month rolling correlation is +0.87, relative volatility is 2.28X gold and price sensitivity (beta) is +1.98. The GSR is near its 3-month average of 53.02; the 1-month gold-to-silver ratio stability is a very low 1.33%.
Cheers,
Colonel Possum
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