Jobs Up, Gold Down; Trouble at Ruby Hill; The Kobeh Mystery Solved

Stormy Weather, HWY 278, Nevada

*** Local Mining News ***

Barrick's Ruby Hill shuts down temporarily (11/05/2013, Elko Daily Free Press, Marianne McKown)
General Moly Announces Third Quarter 2013 Results (11/04/2013)

The latest General Moly briefing on the status of the Mt. Hope molybdenum project (with Webcast): General Moly - John Tumazos Very Independent Independent  Research Conference (10/16/2013)

See earlier March 22 and March 29 reports for a full chronology of the $665 million Hanlong loan suspension.

Latest Nevada Gas Prices (click this link)

My latest Kitco commentary:  Copper & Gold – The Long Ride from Lehman Brothers (Part II) (10/28/2013)
Paintings by Mariana Titus, The Three Anas & The Three Moon Anas, are presently at Lafitte Guest House & Gallery, New Orleans

Friday's AM prices used for this morning's analysis: 

COMEX Gold price = $1,285.6/oz (December contract most active)
COMEX Silver = $21.410/oz (December)
COMEX Copper = $3.2350/lb (December)
NYMEX WTI crude = $94.62/bbl (December)
ICE Brent crude = $103.88/bbl (December)


Eureka Miner’s Gold Value Index© (GVI) = 85.09 (gold value relative to a basket of commodities that include oil, copper and silver)
Value Adjusted Gold Price© (VAGP) = $1,262.4/oz
COMEX - VAGP = +$23.15/oz; gold is trading at a small premium to key commodities.

General Moly (GMO) = $1.60 up 0.63%
Barrick Gold (ABX) = $17.89 down 1.60%
Newmont Mining (NEM) = $27.06 down 1.06%
Timberline Resources (TLR) = $0.1801 down 5.21%
S&P 500 = 1,762.66 up 0.88%

Morning Miners!

Another rough week for gold which got an extra kick down the mineshaft on this morning's much better-than-expected jobs report. Surprising nearly everyone, the Labor Department announced a 204,000 rise in nonfarm payrolls for October - even with the government shutdown! This number and a U.S. GDP growth of 2.8% released earlier this week suggest the economy may have more steam in its boiler than  most economists thought. The news put the debate on the Federal Reserve's current monetary easing policy front and center - will their $85 billion per month bond buying program beginning tapering sooner than latter? Maybe December instead of March? Stay tuned.

A strengthening U.S. dollar on the jobs news got another boost from Europe where the ECB cut interest rates to counter deflationary pressures and France got a credit  downgrade for not being aggressive enough to tackle fiscal problems and promote growth. A stronger dollar coupled with a startling jump in the 10-year yield clobbered gold prices which fell to $1,280.5 per ounce on the Comex before crawling back to presently trade at $1,285.6 - Ouch!

Please checkout my input to the Weekly Kitco Gold Survey (below) and latest Kitco commentary for more details on metal prices and news for the week.

Trouble at Ruby Hill

I heard last weekend that the Barrick Ruby Hill Mine had a high wall failure at the southeast end of the pit. The pit wall collapsed at 11:35 AM Saturday and fortunately all personnel and equipment had been brought to safety before the incident.

Mining Editor Marianne McKown wrote this excellent article in the Elko Daily Free Press Tuesday:

Barrick's Ruby Hill shuts down temporarily 

The headline photo of the collapsed wall is looking south towards the historic site of the old Ruby Hill Mine. Engineers are presently determining the extent of the damage and developing a plan for when the mine can return to full operation.

The Kobeh mystery solved...

Last Friday we speculated about the location of new claims announced by Timberline Resources (TLR) in this press release:

Timberline Amends Property Agreement to Include Additional Claims in Nevada (Press release, 10/28/2013)

That column has now been brought up to date after I talked with Timberline Tuesday:

Update 11/05/2013: This report contacted Timberline Resources today and they confirmed the general Afgan-Kobeh area. Their claims are on a long lease arrangement with David Knight. The claims are 25 NW of Eureka as the "as the crow flies". Timberline said they would gladly identify the exact location when there is a future opportunity for the Eureka Miner and Timberline folks to get together.

A Journey in Space and Time

In September, we wrapped up an eight-part summer series on Mt. Hope. You can access the series with the links in the column to your right. We'll be back with a second series on Mt. Hope later this year or next. The second  road trip is longer (110 miles) and will include ranches of early settlers, a second portion of the Pony Express Trail and a challenging section of the old Eureka-Palisade Railroad.

Loop # 1 (65 miles) was a fun trip - I hope you enjoyed the Mt. Hope journey in space and time and look forward to the next trip too!

Molybdenum Prices

Spot moly oxide prices remain stabilized above the $9 per pound-level. Here are the latest numbers compliments of moly benchmark miner  Thompson Creek (TC):

Metals Week Weekly Average: US$9.66 as of Nov. 1, 2013 (updated weekly)

Ryan's Notes Average: US$9.70 as of Nov. 5, 2013 (updated twice weekly)

The London Metal Exchange (LME) futures are at the spot prices on the 3-month contract with the 15-month at nearly $10 per pound. Remember that this is a thinly traded futures market and contract prices may reflect developments in Europe more than the global spot price averages above.

3-month seller's contract $21,300 per metric ton ($9.662 per pound)

15-month seller's contract $22,040 per metric ton ($9.997 per pound)

The Colonel's Gold, Silver & Copper Prices for Next Week

11/08/2013 (10:24 AM CT)

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

A. Down. My target price is $1,288 per ounce.

Q. Why?

Gold was the big loser this week against a strengthening U.S. dollar and concerns that the Fed taper may be in December given today’s better-than-expected jobs report (204K NFP, 7.3% unemployment) and this week’s strong GDP number (2.8%). The yellow metal not only fell in dollar price but lost considerable value relative to oil and the S&P 500; the former stabilizing from its recent descent and the latter fairly flat for the week. The U.S. dollar rallied at the euro’s expense with the ECB dropping interest rates from 0.5% to 0.25% and today’s credit downgrade of France from AA+ to AA. European deflationary pressures and slower growth expectations have brought the euro down from its recent gains. The outcome of the Third Plenum meeting of Chinese leaders this weekend is an important event for commodity prices but the impact is not yet known.

As I explain in my latest commentary, Copper & Gold – The Long Ride from Lehman Brothers (Part II), “Absent future price shocks, an extended QE3 will likely be characterized by low volatility with copper and gold prices stabilized within trading ranges. As monetary accommodations fade and inflation expectations return, this trend should reverse again in gold’s favor with the return of sustainable higher prices.” This week’s events suggest a shorter duration of U.S. monetary easing than thought last week.

My gold target of $1,288 per ounce anticipates further downside next week.

For $1,288 per ounce gold we can expect to see silver in a statistically bounded range* of $21.1-$21.9 per ounce; and copper in a range of $3.08-$3.35 per pound. Silver is expected to have a negative bias with respect to a range mean of $21.539 per ounce; copper, a positive bias with respect to a range mean of $3.2141 per pound.

(* +/- 2-standard deviations, 1-month basis)

The S&P 500 has had an up and down week but is presently trading near last Friday’s close (1,762.11). Although the S&P is flat for the week, gold has given up more value. The relation between the two is illustrated by a plot of the gold-to-S&P 500 ratio, or AUSP:

The ratio had been in a descending channel beginning mid-November as money rotated away from gold assets into the U.S. stock market. This trend bottomed July 5 although a slightly lower low was set on Oct. 16 and again today (AUSP=0.7345): a loss of 42.2% of value relative to equities from the November peak (AUSP=1.2710). The relation is presently in a sideways channel (dashed lines). Breaking the lower boundary of this channel would be very bearish for gold; breaking out of the channel to the upside would improve gold’s price outlook considerably.

This week, Comex gold is down 2.1% for the week and 10.3% below August’s high ($1,434.0). The yellow metal lost significant value relative to oil and slightly to copper; oil gained value relative to the red metal. The chart below is a week-over-week valuation matrix. The first row is the current commodity price in the given currency. For all other rows, read “1 unit of row A buys X units of column B”; for example, “1 ounce of gold buys 397.4 pounds of copper.” Percentages are deltas over one week.

Since last November, gold has experienced bearish value destruction not only in U.S. dollar terms but value relative to oil and copper.

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 85.09, below the key-100 level but above 1-month moving average of 84.95. The 2012 high was 103.73 on Nov. 13. The value adjusted price of gold is $1,262.4 or a $23.15 discount to actual gold price (i.e. gold is trading at a small premium to a basket of key commodities).

Cheers,

Colonel Possum

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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