"The history of Eureka lies in its future." - Lambert Molinelli, 1878

DISCLOSURE

The author/editor of the Eureka Miner owns common shares of local mining stocks, General Moly (GMO), McEwen Ming (MUX) and Newmont Mining (NEM); together with benchmark miner Freeport-McMoRan (FCX). Please do your own research, markets can turn on you faster than a feral cat.

Friday, December 19, 2014

Gold Outlook for 2015; Winter 2014 Edition Mining Quarterly

The Winter 2014 Edition is out!!

Please checkout Mariana's Eureka, Nevada on Facebook

My latest Kitco News commentary:

Is Gold Still on a Slippery Slope? (Nov. 24, 2014)

*** Local Mining News ***

Timberline Resources Commences Drilling at Eureka (Press release, 12/17/2014)

MIDWAY RECEIVES FIRST BANK FUNDS FOR PAN GOLD PROJECT (Press release, 12/1/2014)

*** AM Prices ***

The early morning prices used for today's analysis:

Goldman Sachs Commodity index (Enhanced)

S&PGSCIES 250.01 (246.84 52-wk low)

Nymex/Comex

Nymex oil (WTI) $55.89 per barrel
Comex copper $2.8765 per pound
Comex gold $1,197.5 per ounce
Comex silver $15.930 per ounce

Latest Nevada gasoline prices



Morning miners!

The online edition of the Winter 2014 Mining Quarterly is up and ready to rock n' roll. Elko Daily Free Press Editor Marianne Kobak McKown and her team have done an outstanding job on this publication. There are feature articles on Cortez Hills, Barrick's Turquoise Ridge and Newmont's Twin Creeks together with updates on Comstock, Pershing Gold, Veris Gold and Western Lithium. It's a dandy!

The ole Colonel wrote a gold price outlook for 2015, Gold at the Crossroads, which you can find on pages 72-77 of the online edition and 75-79 of the printed version. My input to the Kitco Gold Survey today (see below) updates the charts and numbers provided in this column - the underlying assumptions for 2015 remain unchanged.

Two big drivers of gold price this week were the collapse of the Russian ruble and the latest output of the Federal Reserve Open Market Committee (FOMC). The ruble has been under tremendous pressure this year; first with sanctions imposed during the Ukraine crisis and more recently with the dramatic decline of oil price. Oil sage T. Bonne Pickens joked a few days ago that all Russia exports is oil and vodka and they drink most of the latter. Presumably, a lot more potato liquor was consumed after the ruble touched 68.025 (USD/RUB) Wednesday following the Tuesday Nymex oil dip to $53.94/bbl (Western Texas Intermediate crude).

To give this some perspective, the ruble started the year at a healthy 32.5 before misadventures in the Ukraine caught the world's attention. Drastic action by Russia's central bank has since stabilized the ailing currency around 60 rubles per U.S. dollar. The ruble trades at 59.28 this morning as Nymex oil prices rebound to $55.89/bbl.

Russia has several options beyond raising interest rates to prop up the ruble - selling foreign currency reserves, selling some of their massive 1,100 metric ton gold reserve, or a combination of both. Putting a large amount of gold on the world market would have a very negative impact on gold price. Something to watch, pardner.

On the positive side, the FOMC  reaffirmed that patience is a virtue and will be slow to raise interest rates anytime soon. A dovish FOMC posture is supportive of gold prices. All in all, Comex gold is down about $25 from last Friday's close, trading at $1,197.5 per ounce.

Predictably, mining stocks are still in the doldrums although mostly recovering from the lows of the week. Big gold miners Newmont (NEM) and Barrick Gold (ABX) are trading at $19.69 and $10.98 (chart below, click for larger view) . Midway (MDW) is $0.6761 down 0.57% in morning trade. Benchmark Moly Miner Thompson Creek (TC) is up 4.14% at $1.76 recovering from a long fall down the shaft earlier this week. GMO is now below 30 cents per share at $0.2876. Timberline Resources (TLR) is down 3.45% at $0.6295 per share. Checkout the press release on TLR at the top of this post, they have Eureka in their sites (again).

Finally, benchmark miner and copper giant Freeport-McMoRan (FCX)is up 1.17% at $22.708. Freeport has recently taken on oil interests to diversify so feels double-pain when red metal and oil prices are down. Comex copper is trading presently at $2.8765 per pound.



Mining Stocks, Yahoo Finance

Here is my input to the Kitco News Weekly Gold Survey:

1. Could [economist] Nouriel Roubini’s call for $1,000 gold in 2015 be right? Yes.

2. Why?

I recently wrote a column for the Mining Quarterly (Winter 2014 Edition) that gave an outlook for gold price next year. Some of the highlights updated through this morning's trading:

  1. Year-to-date gold has fared far better in 2014 when compared to other key commodities; one ounce still buys more ounces of silver, pounds of copper and barrels of oil than it did in late-December. Outpacing a 0.4% loss in U.S. dollar price, glitter is up 21% over the white metal, 17% over the red and 75% over oil (chart #1, below). 
  2. Gold's relation to commodities works like the force of gravity. Without the propulsion of safe haven or monetary hedge, the yellow metal falls back in line with commodity prices and historical norms. 
  3. This relation has formed a declining value wedge since 2011 (chart #2, dashed red lines) which has proved quite accurate in predicting future price ranges. Extending the dashed lines suggests a commodity value range of $850 to $1,170 per ounce for next year’s first quarter (1Q2015). 
  4. Gold presently carries a premium to the aggregate of key commodities in chart #2; this has been mostly true since August 2011. Using the gravity analogy, gold needs to achieve escape velocity from the value wedge by increasing premium even more. If that premium disappears gold will follow commodities lower early next year. 

The Roubini $1,000 per ounce forecast is roughly near the midpoint of the above 1Q2015 forecast.

Chart #1 (updated from the Winter 2014 Edition of the Mining Quarterly, click for larger view):



Chart #2: 



Have a Merry Christmas and Happy New Year!!!

Cheers - Colonel

Headline photo by Mariana Titus

Friday, December 5, 2014

"Really Good" Jobs Report Clobbers Oil, Foreign Currencies; Gold Down, Still Resilient



Pancake Quarry, White Pine, Nevada (click for larger view)

My latest Kitco News commentary:

Is Gold Still on a Slippery Slope? (Nov. 24, 2014)

*** Local Mining News ***

MIDWAY RECEIVES FIRST BANK FUNDS FOR PAN GOLD PROJECT (Press release, 12/1/2014)

*** AM Prices ***

The early morning prices used for today's analysis:

Goldman Sachs Commodity index (Enhanced)

S&PGSCIES 271.57 (267.52 52-wk low)

Nymex/Comex

Nymex oil (WTI) $65.78 per barrel
Comex copper $2.9110 per pound
Comex gold $1,195.3 per ounce
Comex silver $16.335 per ounce

Gas prices are expected to move lower:

Latest Nevada gasoline prices



Morning miners!

On the release of the monthly jobs numbers a CNBC contributing economist exclaimed, "A really good jobs number!" and "...the revisions are fantastic!" One might expect such praise from the White House with 312,000 jobs added in November against 230,000 expected and notable upward revisions for the previous two months. But no, these were the comments from American Enterprise Institute Senior Fellow Kevin Hassett, former economic adviser for Mitt Romney and Senator John McCain presidential campaigns and President George W. Bush in 2004.

It was a good jobs report from any perspective (full report below).

Despite what politicians may argue, the private sector is the force behind job creation posting a healthy 314,000 new positions last month. Unemployment remains at 5.8% but hourly wages are up and the 12-month average gain of nonfarm payrolls is a very respectable 224,000.  Although, some of today's gains account for early Christmas temporary jobs, it is still a strong showing with upward revisions for September of 271,000 up from 256,000; and August, 243,000 up from 214,000.

Oil is presently looking for any excuse to drop lower and it did on the positive news returning to $65 per barrel territory. The U.S dollar surged against the euro and yen, both posting new weakness with the euro dipping to 1.2271 and the yen cresting the key 120-level at 121.68. The DOW flirted with the mercurial 18,000 and the S&P 500 made a new intraday high at 2,079.47.

On a strong dollar and expectations that the Federal Reserve may now raise interest rates "sooner than later," gold fell below $1,200 for an intraday low of $1,186.4 per ounce . However, the lustrous one demonstrated much greater resilience than other key commodities (discussion below).

Poor mining stocks got another wallop. Big gold miners Newmont (NEM) and Barrick Gold (ABX) fell to $19.05 and $11.61 (chart below) . Midway (MDW) is $0.72 down 3.08% in morning trade. Benchmark Moly miner Thompson Creek (TC) and General Moly (GMO) are both feeling pain falling 3.97% and 7.27% respectively. GMO is now below 40 cents per share at $0.38. Timberline Resources (TLR) was the only miner in the green of those tracked by this report; up 4.98% at $0.63 per share.

Finally, benchmark miner and copper giant Freeport-McMoRan (FCX) dropped 1.17%. Freeport has recently taken on oil interests to diversify so is feeling double-pain when red metal and oil prices are down.



Mining Stocks, Yahoo Finance



Overall, an American economy gaining momentum with a strong currency behind it is good news and a lot better situation than our friends across the pond. European GDP growth has just been notched down to 1% from 2% for 2015 - keep the faith, pardner.

Look for my column on gold outlook for 2015 in the upcoming Winter Edition of the Mining Quarterly.



Here is my input to the Kitco News Weekly Gold Survey :

My vote: Sideways. Next week's target price, $1,190 per ounce.

Discussion: 

On the release of the monthly jobs numbers, a CNBC contributing economist exclaimed "A really good jobs number!" and "...the revisions are fantastic!" One might expect such praise from the White House with 312,000 jobs added in November against 230,000 expected and notable upward revisions for the previous two months. But no, these were the comments from American Enterprise Institute Senior Fellow Kevin Hassett, former economic adviser for Mitt Romney and Senator John McCain presidential campaigns and President George W. Bush in 2004. It was a good jobs report from any perspective.

On the news, U.S. bond yields rose and the U.S. dollar flexed even greater muscle against both euro and yen. Expectedly, gold dropped but with much less drama than Nymex oil which slumped to $65.17 per barrel. Importantly, on ounce of Comex gold at $1,195 now buys nearly 50% more barrels than at the end of 2013. Although fractionally down for the year in U.S. dollar terms, the value of gold in morning trading is up 16% versus copper and 18% relative to silver.



The yellow metal resilience relative to commodities should keep gold closer to the upper boundary of the "value wedge" as illustrated in the second chart: my target is $1,190 per ounce for next week. If lower oil prices lead to geopolitical instability (e.g., collapsing Russian economy), gold could rally significantly. Without additional catalyst, gold could fall with commodities to a range between $950 to $1,170 per ounce in the first quarter of next year.



Have a great weekend!

Cheers - Colonel

Headline photo by Mariana Titus

Friday, November 28, 2014

OPEC Decision Plunges Oil, Metals, Mining Stocks; Gold Resilient



View from McCoy Hill, Eureka, Nevada (click for panoramic view)

My latest Kitco News commentary:

Is Gold Still on a Slippery Slope? (Nov. 24, 2014)

*** Local Mining News ***

MIDWAY RECEIVES FIRST BANK FUNDS FOR PAN GOLD PROJECT (Press release, 12/1/2014)

*** UPDATE ***

The washout in commodities continued after the morning brief (below). The Goldman Sachs Commodity Index notched a new 52-week low; oil,copper, gold & silver continued their downward descent:

Closing prices (intraday low):

S&PGSCIES 274.09 (273.50)

Nymex oil (WTI) $66.15 ($65.69) per barrel
Comex copper $2.8460 ($2.8435) per pound
Comex gold $1,175.5 ($1,163.9) per ounce
Comex silver $15.556 ($15.410) per ounce

At least gas prices are expected to go lower too!

Latest Nevada gasoline prices

Morning miners!

The OPEC decision to not cut production to counter falling oil prices has sent a shock wave through commodity markets. Nymex WTI touched $67.75 per barrel; Brent crude dropped as far as $71. The gooey declines quickly spilled over to the metal complex. Comex silver tested $15.80 per ounce and Comex copper dipped briefly to $2.8515 per pound passing easily through its March low - Ouch!

Encouragingly, the fall in gold prices was not nearly as spectacular falling no further than to $1,175 per ounce (see discussion below and Kitco News Weekly Gold Survey).

Beleaguered mining stocks got a real wallop. Big gold miners Newmont (NEM) and Barrick Gold (ABX) fell to $12.02 and $18.62 (chart below) . Midway (MDW) is just below $0.74 down 6.2% in morning trade. Benchmark Moly miner Thompson Creek (TC) and General Moly (GMO) are both feeling pain falling 3.85% and 5.07% respectively.

Most ominously, benchmark miner and copper giant Freeport-McMoRan (FCX) dropped a full 8.86%. Freeport has recently taken on oil interests to diversify so is feeling double-pain following the OPEC decision.



Mining Stocks, Yahoo Finance



Is this just the result of thin trading on a shortened post-holiday market day? We won't need to wait too long to find out, Monday is the start of a new month - keep the faith, pardner.

Look for my column on gold outlook for 2015 in the upcoming Winter Edition of the Mining Quarterly.



Here is my input to the Kitco News Weekly Gold Survey :

My vote:

Up. Next week's target price $1,190 per ounce.

Discussion:

What a contrast in markets this morning.

The S&P 500 made a new intraday high against a backdrop of an OPEC-induced collapse in oil price spilling over to declining metal complex. The bond market is reacting with lower yields and an ever-flatter yield curve as the U.S. dollar surges against both euro and yen.

Although Comex gold is being pulled lower by commodity declines and a stronger dollar, it is only down 1.6% for the year in mid-morning trading. Importantly the yellow metal is positioned ever stronger relative to silver and industrial commodities copper and oil. As shown in the first chart, gold value is up 20% compared to Comex silver, 17% versus Comex copper and nearly 40% versus Nymex oil (WTI).



This resilience may bring gold closer to the upper boundary of the "value wedge" as illustrated in the second chart: my target is $1,190 per ounce for next week. If lower oil prices lead to geopolitical instability (e.g., collapsing Russian economy), gold could rally significantly. Without additional catalyst, gold could fall with commodities to a range between $950 to $1,170 per ounce in the first quarter of next year.



Have a great Thanksgiving weekend!

Cheers - Colonel

Headline photo by Mariana Titus

Friday, November 21, 2014

News from China, Europe Lifts Gold, U.S. Dollar & Mining Stocks


That time of year again, Eureka, Nevada

My latest Kitco News commentary:

Is Gold Still on a Slippery Slope? (Nov. 24, 2014)

Morning miners!

A terrific market Friday before Thanksgiving week. Central banks come to the rescue again with news of monetary stimulus coming from China and Europe (see discussion below and Kitco News Weekly Gold Survey). Asset classes that often work in opposition are all marching in step today - the DOW and S&P 500 are setting new highs, the U.S. dollar is up and gold rallied above the key $1,200 per ounce-level.

Beleaguered mining stocks are also doing well. Although there appears to be some profit taking on the big gold miners Newmont (NEM) and Barrick Gold (ABX), both have recovered considerably from their recent bottoms - up 8.6% and 16.3% respectively. Midway (MDW) is whistling $0.79 up 1.28% in morning trade. Benchmark Moly miner Thompson Creek (TC) and General Moly (GMO) are both in the green too.


Mining Stocks, Yahoo Finance

Let's enjoy this while it lasts pardner.

Look for my column on gold outlook for 2015 in the upcoming Winter Edition of the Mining Quarterly.



Here is my input to the Kitco News Weekly Gold Survey :

My vote:

Up. Next week's target price $1,220 per ounce.

Discussion:

What a remarkable morning for markets.

On the news that China will cut interest rates and inject liquidity into their banking system and ECB's Mario Draghi is ready to apply "all means necessary" to meet inflation targets, all boats rise. The S&P 500 scores yet another record intraday high, the U.S. dollar is up, Gold is up and the base metal complex is reacting constructively.

Notably, Comex gold has recovered all its losses for the year in morning trading ($1,202.4 versus 12/31/13 close at $1,202.3). Most importantly the yellow metal is positioned very strongly relative to silver and industrial commodities copper and oil. As shown below gold value is up 18% compared to Comex silver, 11% versus Comex copper and 28% versus Nymex oil (click on chart for larger image).



This new found momentum may bring gold to the upper boundary of the "value wedge" as illustrated in this second chart: $1,220 per ounce, my target for next week. Without additional catalyst, this may be to the top of the present rally. If commodities can rally higher gold may too, breaking the curse of the declining wedge. If not, gold could fall to a range between $990 to $1,170 per ounce in the first quarter of next year.




Have a great Thanksgiving!

Cheers - Colonel

Headline photo by Mariana Titus

Friday, October 24, 2014

Gold Resilient above $1,200 - Reasons to be Bullish (Mining too?)



Exploring the Ruby Hill Fault, Eureka, Nevada

Morning miners!

An abbreviated report this morning as I continue to prepare a column for the upcoming Winter Edition 2014 of the Mining Quarterly.

Do you want to feel better about mining's future? It has been a real bruiser lately, the Eureka Miner's Index (EMI) hit single digits October 15 - levels not seen since the 2008-2009 financial crisis. By comparison, the EMI scored 817 on January 4, 2011...ouch! (EMI tracking is in the column to your right near the bottom of the blog page).

Feeling better starts with knowing the worst is in the rear view mirror. The following video with JP Morgan analyst Ann Duignan gave me confidence that better times may indeed be ahead. Ms. Duignan is one of the biggest mining bears around so it is important to hear a her (slight) change of sentiment. Here is Ms. Duignan's CNBC Business news video interview following Caterpillar's blowout quarterly report (please excuse the ad at the beginning):

CAT analyst remains neutral (CNBC Business News, 10/23/2014)

When bears stop growling it's time for the bulls to make their long trek back to green pasture.

The bottom in gold may also be in, pardner - the full story will be in the upcoming Mining Quarterly!

Stay tuned.

Here is my input to the Kitco News Weekly Gold Survey :

My vote on next week's gold price:

Up. Target $1,239 per ounce

Discussion:

Although Thursday reversed the 3-week-uptrend in U.S. dollar price, there are good reasons to remain bullish about gold. Physical demand is up in both India and China and should continue through the Lunar New Year. There is also a fairly resilient risk premium given unresolved geopolitical conflicts, Sino-Euro growth prospects and the health of Europe's banking sector.

Given a backdrop of stronger U.S. dollar, this morning's Comex trading at $1,233.3 per ounce puts the yellow metal at less than 3% above last year's closing price. However, gold has fared much better against key commodities. Relative to Comex silver and copper it is up over 14% and nearly 25% compared to Nymex oil.



Even though gold has backed away from its value peaks (above chart, click for larger image), it still carries an imposing $140 per ounce premium against an aggregate of all three commodities (chart below, click for larger image). If gold can maintain this premium it should remain above last year's $1,180 closing low even though its commodity value is now below $1,100.



If gold can escape the declining value wedge (red dashed lines, above chart), there could be upward movement to $1,300 by early 2015. On the darker side, if its current safe-haven premium vanishes, gold USD price could go to $1,070 per ounce by years-end ( lower dashed line extended through December; gold approaches its commodity value).

Have a great weekend!

Cheers - Colonel

Headline photo by Mariana Titus

Friday, October 3, 2014

Gold Tests $1,190 on "Very Good" Jobs Report; King Dollar Surges


Ruby Hill Memories, Eureka, Nevada

*** BREAKING NEWS***

Since the analysis below, Comex gold has slipped further to an intraday low of $1,190.3 per ounce - it may go lower before the close...

*** Local Mining News ***

MIDWAY ADVANCES CONSTRUCTION AND MINING BEGINS AT PAN GOLD PROJECT, NEVADA (Press release, 9/15/2014)

MIDWAY GOLD FILES TECHNICAL REPORT FOR UPDATED RESOURCE AT SPRING VALLEY PROJECT, NEVADA (Press release, 9/9/2014) 


Latest Nevada Gas Prices (click this link)

My latest column in Kitco News:

Oil, Copper & Gold on a Slippery Slope (Kitco News, August 25, 2014)


My latest column in the Fall 2014 Edition of the Mining Quarterly:

C.C. Goodwin, the Early Mines of Eureka  (Fall 2014 Edition: online pages 76-83; printed pages 70-77)

Paintings by Mariana Titus, The Three Anas & The Three Moon Anas, are presently at Lafitte Guest House & Gallery, New Orleans





Mariana's fine art prints are featured in Fine Art AmericaMariana Titus

Friday's AM prices used for this morning's early analysis (see note below): 

COMEX Gold price = $1,192.2/oz (December contract most active)
COMEX Silver = $16.830/oz (Dec)
COMEX Copper = $3.0010/lb (
Dec)




NYMEX WTI crude = $89.55/bbl (Nov)
ICE Brent crude = $91.67/bbl (Nov)



Eureka Miner’s Gold Value Index© (GVI) = 90.33 (gold value relative to a basket of commodities that include oil, copper and silver; 100 is a high gold value)
Value Adjusted Gold Price© (VAGP) = $1,102.8/oz
COMEX - VAGP = +89.4/oz; gold is trading at a premium to key commodities


As of 9:26 AM PDT:


Barrick Gold (ABX) = $14.19 down 3.47%
Newmont Mining (NEM) = $22.67 down 2.62%
Midway Gold (MDW) = $1.08 down 1.82%
General Moly (GMO) = $0.7394 down 0.08% 
Timberline Resources (TLR) = $0.07 up 2.78%

S&P 500 = 1,967.08 up 1.12% 




Morning Miners!

CNBC Business News commentator Larry Kudlow exclaimed, "Very good!" shortly after the release of this morning's jobs report. That's quite a remark from someone who has been skeptical of the U.S. economic recovery. Whether a Europe slipping into a triple-dip recession and a slowing China with Hong Kong demonstrators in the streets will change the momentum is yet to be seen - for now the U.S. is rolling with a full head of steam.

The Labor Department announced at 5:30 AM (PDT) that 238,000 nonfarm payroll jobs were added in September against economist's expectations of 215,000; previous months were revised upwardly too. Even more surprising, the headline unemployment rate fell to 5.9% - a number we haven't seen since July 2008! The increases were broad based across many sectors, even construction which added 18,000. The most inclusive and least reported measure of unemployment, called U6, dropped to 12.2% - not bad when we remember this was close to 20% during darker days (U6 includes the lazy bum son on the couch who's been living with mom and dad since college and has a $100,00 college loan to repay).

Good employment numbers pump more fuel to the racing U.S. dollar. Of course, dollarized commodities take it on the chin. Comex copper closed at $2.9985 per pound yesterday and is barely keeping its redhead above $3 in morning trading, presently $3.0010. Nymex light crude fell below $90 and is now trading at $89.68 per barrel - look for gas prices to fall further:

Latest Nevada Gas Prices (click this link)

And gold? The poor fallen hero hit the $1,200 per ounce level when I did my first analysis for Kitco News this morning. By the time that was done the yellow metal was at $1,192 - I threw all the analysis away and wrote my editor in Chicago (see full report below) with a wag at next week's gold price sans analysis - $1,185 per ounce? $1,180 is the key support level from last December's lows - will it hold?

There is a fairly simple way to view the ascendancy of the U.S. dollar and decline of gold price.

Presently, our central bank is moving in an opposite direction to those in Europe and Japan. Chairman Yellen is putting the brakes on monetary accommodation (albeit very gently) - the third phase of quantitative easing (printing money to buy bonds) ends this month and there are hints that the Fed funds rate will rise sooner than later (perhaps mid-2015). More "very good" employment reports are likely to accelerate this process.

By contrast, Europe is just beginning their peculiar approach to easing and Japan has been expanding their balance sheet at a tsunami pace for some time. In the currency world, the euro is falling dramatically (1.2514 low this morning) and the yen continues to weaken (punching through 110 this week, sitting just below that level now at 109.645). These distressed global reserve currencies propel the U.S. dollar higher.

Market anticipation of low inflation, rising interest rate environment (i.e. the Federal Reserve tightening) and soaring U.S. dollar are kryptonite to the super-metal price strength gold enjoyed in late-2011 when the Lustrous One flew over $1,900 tall buildings.

Today we find our metallic hero is back in the phone booth without a cape...

The slippery slope continues...

On August 25, I wrote a column on the dilemma gold and key commodities face:

Oil, Copper & Gold on a Slippery Slope (Kitco News, August 25, 2014)

I measure the "commodity value" of gold against a basket that includes Nymex oil, Comex copper and Comex silver as explained in this commentary and a similar piece in  the Summer 2014 Mining Quarterly (p. 99-101 online edition). On August 14, gold carried a premium of $100 per ounce compared to this basket and it has slowly drifted down to $89. If the premium continues to decline, gold will follow commodities on a downhill slope in U.S. dollar price. Here's a chart from the Mining Quarterly column updated through this morning (click on the graph for a larger image):


Today's premium is the distance between the blue and red arrows. As you can see both the price of gold (blue line) and its commodity value (red line) are still trending lower (red dashed lines) as the premium declines. This morning, the commodity value of gold scored a new low of $1,102.8 per ounce, right at the bottom of the red dashed line.

It is instructive to note that today's gold price and associated commodity value are below the levels of December 02, 2009. On that day, the Lustrous one stepped out of the booth ready to fly setting a new all-time Comex record of $1,235.1 per ounce with a commodity value of $1,152.6.

Pardner we've now come full circle. If you see our metallic hero, buy him a cup of joe at the Owl Club - he needs the caffeine. A dash of brandy might help too, be ready for some war stories.

Keep the faith!



Fall 2014 Mining Quarterly

Make sure you checkout the latest Elko Daily Free Press Mining Quarterly!

Marianne Kobak McKown and her team have done another terrific job of capturing all the latest mining news in Northern Nevada including a special series of reports on how mining affects the environment, jobs and taxes. Public perception of mining is important as Marianne reminds us that this November voters will decide if the long-standing cap on mining stays or goes.

Here is the link to the online Fall 2014 Edition togther with past issues:

http://elkodaily.com/mining/special_sections/

The ole Colonel has a column on C.C. "Charlie" Goodwin, one of the early mining pioneers of the Eureka Mining District:

C.C. Goodwin, the Early Mines of Eureka  (online pages 76-83; printed pages 70-77)

The Goodwin legacy teaches operators to match the best ores with the latest technology to maximize return on investment. He was also a trailblazer in vertical integration of mining operations from ore extraction to reduction as exemplified by his Ruby Hill Jackson Mine and Jackson Smelter in nearby Eureka.  I hope you enjoy reading about his contributions to the Silver States on this SesquicentennialHats off to Charlie Goodwin!



Kitco Gold Survey

Here is my input to the Weekly Kitco Gold Survey:

10/03/2014 (10:19 AM CDT)

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

A. Down. My target price is $1,185 per ounce.

Q. Why?

In lieu of lengthy analysis this morning this is what I emailed to Kitco Global Editor Debbie Carlson:

Morning Debbie,

I give up - did a load of analysis after the good jobs report when comex gold was $1,200.3 now its $1,192.2...threw it all away.

Big question is whether the $1,180 will hold. I'll say yes but we may bust that level before years-end.

So right now (could change in a few minutes but this is it!):

Down. Target $1,185.

No attachment - ha!

Cheers - Colonel

Photos by Mariana Titus

Please checkout bayoutales.com for books and book orders

Mariana's fine art prints are featured in Fine Art AmericaMariana Titus

Paintings by Mariana Titus, The Three Anas, are presently at Lafitte Guest House & Gallery, New Orleans

Friday, September 19, 2014

Gold Tests $1,214 on Strong Dollar & Alibaba Propelled Stocks


Barbeque time at John Brown's, Eureka, Nevada

*** BREAKING NEWS***

Since the early morning analysis below, Comex gold has slipped further to an intraday low of $1,214.6 per ounce - it may go lower before the close...

*** Local Mining News ***

MIDWAY ADVANCES CONSTRUCTION AND MINING BEGINS AT PAN GOLD PROJECT, NEVADA (Press release, 9/15/2014)

MIDWAY GOLD FILES TECHNICAL REPORT FOR UPDATED RESOURCE AT SPRING VALLEY PROJECT, NEVADA (Press release, 9/9/2014) 


Latest Nevada Gas Prices (click this link)

My latest column in Kitco News:

Oil, Copper & Gold on a Slippery Slope (Kitco News, August 25, 2014)


My latest column in the Fall 2014 Edition of the Mining Quarterly:

C.C. Goodwin, the Early Mines of Eureka  (Fall 2014 Edition: online pages 76-83; printed pages 70-77)

Paintings by Mariana Titus, The Three Anas & The Three Moon Anas, are presently at Lafitte Guest House & Gallery, New Orleans





Mariana's fine art prints are featured in Fine Art AmericaMariana Titus

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

COMEX Gold price = $1,224.6/oz (December contract most active)
COMEX Silver = $18.440/oz (Dec)
COMEX Copper = $3.0995/lb (
Dec)




NYMEX WTI crude = $92.20/bbl (Nov)
ICE Brent crude = $98.23/bbl (Nov)



Eureka Miner’s Gold Value Index© (GVI) = 87.71 (gold value relative to a basket of commodities that include oil, copper and silver; 100 is a high gold value)
Value Adjusted Gold Price© (VAGP) = $1,166.6/oz
COMEX - VAGP = +58.02/oz; gold is trading at a premium to key commodities


As of 10:00 AM PDT:


Barrick Gold (ABX) = $15.66 down 2.13%
Newmont Mining (NEM) = $24.08 down 1.67%
Midway Gold (MDW) = $0.9877 down 2.21%
General Moly (GMO) = $0.8710 down 5.33% 
Timberline Resources (TLR) = $0.0781 up 6.26%

S&P 500 = 2,009.22 down 0.11% 




Morning Miners!

Another one of those action packed Friday mornings when it is hard keep up with falling gold prices. 

The ole Colonel started the early morning analysis at $1,224 per ounce. Comex gold punched in a new intraday low of $1,214.6 as I sent that report to Kitco News. My target price at that time was $1,220 for next week. Kitco Global Editor Debbie Carlson quickly wrote me back for a sanity check noting the $10 drop. I sheepishly revised my target to $1,210 - No fun being a bear in gold country!

As summarized in my input to the Kitco News Weekly Gold Survey  (full analysis below):

This has been an exciting week for markets with new FOMC projections on interest rates, Scotland’s referendum vote to stay united and this morning’s frenzy over the Alibaba IPO – the S&P 500 reacted by setting a new intraday high in morning trading.

By contrast, commodities are marching to the dull beat of broad decline. Brent crude oil, silver, copper and corn touched multi-month lows on futures exchanges this week. Not surprisingly, gold followed the pack scoring a new low in its dollarized commodity value ($1,166.6 per ounce) when compared to an aggregate of Nymex oil, Comex copper and Comex silver (see discussion below).

The primary driver this for these declines has been a stronger U.S. dollar boosted by a rise in the median projection for the federal funds rate at the end of 2015. The U.S. on a path to tighten monetary policy while other central backs provide additional accommodation propels the dollar higher. This puts pressure on dollarized commodities and makes gold more expensive to buy in other countries...

My target for next week is $1,210 per ounce.



Is the new gold orange?

The slippery slope continues...

On August 25, I wrote a column on the dilemma gold and key commodities face:

Oil, Copper & Gold on a Slippery Slope (Kitco News, August 25, 2014)

I measure the "commodity value" of gold against a basket that includes Nymex oil, Comex copper and Comex silver as explained in this commentary and a similar piece in  the Summer 2014 Mining Quarterly (p. 99-101 online edition). On August 14, gold carried a premium of $100 per ounce compared to this basket and it has slowly drifted down to $58. If the premium continues to decline, gold will follow commodities on a downhill slope in U.S. dollar price. Here's a chart from the Mining Quarterly column updated through this morning (click on the graph for a larger image):


Today's premium is the distance between the green and red arrows. As you can see both the price of gold (blue line) and its commodity value (red line) are still trending lower (red dashed lines) as the premium declines. This morning, the commodity value of gold scored a new low of $1,166.6 per ounce - Ouch!



Fall 2014 Mining Quarterly

Make sure you checkout the latest Elko Daily Free Press Mining Quarterly!

Marianne Kobak McKown and her team have done another terrific job of capturing all the latest mining news in Northern Nevada including a special series of reports on how mining affects the environment, jobs and taxes. Public perception of mining is important as Marianne reminds us that this November voters will decide if the long-standing cap on mining stays or goes.

Here is the link to the online Fall 2014 Edition togther with past issues:

http://elkodaily.com/mining/special_sections/

The ole Colonel has a column on C.C. "Charlie" Goodwin, one of the early mining pioneers of the Eureka Mining District:

C.C. Goodwin, the Early Mines of Eureka  (online pages 76-83; printed pages 70-77)

The Goodwin legacy teaches operators to match the best ores with the latest technology to maximize return on investment. He was also a trailblazer in vertical integration of mining operations from ore extraction to reduction as exemplified by his Ruby Hill Jackson Mine and Jackson Smelter in nearby Eureka.  I hope you enjoy reading about his contributions to the Silver States on this SesquicentennialHats off to Charlie Goodwin!



Kitco Gold Survey

Here is my input to the Weekly Kitco Gold Survey:

09/19/2014 (10:43 AM CDT, revised later in the morning)

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

A. Down. My target price is $1,210 per ounce.

Q. Why?

This has been an exciting week for markets with new FOMC projections on interest rates, Scotland’s referendum vote to stay united and this morning’s frenzy over the Alibaba IPO – the S&P 500 reacted by setting a new intraday high in morning trading.

By contrast, commodities are marching to the dull beat of broad decline. Brent crude oil, silver, copper and corn touched multi-month lows on futures exchanges this week. Not surprisingly, gold followed the pack scoring a new low in its dollarized commodity value ($1,166.6 per ounce) when compared to an aggregate of Nymex oil, Comex copper and Comex silver.



On August 14, gold carried a premium of $100 per ounce compared to this basket which has slowly drifted down to $58. If the premium continues to decline, gold will follow commodities on a downhill slope in U.S. dollar price. In the above chart (click on plot for larger image), price (blue line) is converging with its commodity value (red line) as both move lower within the wedge indicated by red dashed lines.

The primary driver this for these declines has been a stronger U.S. dollar boosted by a rise in the median projection for the federal funds rate at the end of 2015. The U.S. on a path to tighten monetary policy while other central backs provide additional accommodation propels the dollar higher. This puts pressure on dollarized commodities and makes gold more expensive to buy in other countries. 

The shared pain in the commodity house is exemplified by increasing positive correlation of the yellow metal with oil and copper (1- and 3-month correlations are all positive and greater than 0.5).

My target for next week is $1,210 per ounce.

For $1,210 gold we can expect to see silver in a statistically bounded range* of $18.2-$18.4 per ounce. Silver is expected to have a neutral bias with respect to a range mean of $18.311 per ounce. Copper price is in a statistical range* of $2.95-$3.09 per ounce. Copper is expected to have a positive bias with respect to a range mean of $3.0222 per pound.

(* +/- 2-standard deviations, 1-month basis: prices that fall outside this range likely signal a market-changing event. Bias from mean infers expected market direction from a 1-month gold ratio average)

The S&P 500 is presently on its way to setting new records, up 1.7% from last Friday’s close. Gold lost 2.2% in value compared to the S&P. The relation between the two is illustrated by a plot of the gold-to-S&P 500 ratio, or AUSP (click on graph for larger image):



The ratio slid into a descending channel mid-November 2012 as money rotated away from gold assets into the U.S. stock market. This trend transitioned to a sideways channel July 5, 2013 (dashed blue lines, AUSP=0.7431). The AUSP then broke decisively below the lower boundary for a second leg of descent (dashed red lines). This channel was bullishly broken to the upside in late-January and rose above the lower boundary of the sideways channel (middle blue dashed line) However, the recent trend down in gold price has bearishly created a third leg of descent (dashed red lines in the bottom-right corner) below the lower boundary of a second sideways channel. This morning’s gold price represents a loss of 52.3% of value relative to the November peak (AUSP=1.2710).

For the week, the yellow metal lost only marginal value to oil and some to copper; oil gained fractionally on 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 395.1 pounds of copper.” Percentages are deltas over one 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 87.71, below the key-100 level and below the 1-month moving average of 88.27. The 2012 high was 103.73 on Nov. 13. The commodity price of gold sets a new low today at $1,166.6 per ounce or $58.02 discount to actual gold price (i.e. gold is still trading at a premium to a basket of key commodities).

Cheers,

Colonel Possum

Photos by Mariana Titus

Please checkout bayoutales.com for books and book orders

Mariana's fine art prints are featured in Fine Art AmericaMariana Titus

Paintings by Mariana Titus, The Three Anas, are presently at Lafitte Guest House & Gallery, New Orleans

Friday, September 12, 2014

Gold Tests $1,228; C.C. Goodwin, the Early Mines of Eureka


McCoy Hill, McCoy Ridge & Goodwin Canyon, Eureka, Nevada

*** BREAKING NEWS***

Since the early morning analysis below, Comex gold has slipped further to an intraday low of $1,228 per ounce - it may go lower before the close...

*** Local Mining News ***

MIDWAY GOLD FILES TECHNICAL REPORT FOR UPDATED RESOURCE AT SPRING VALLEY PROJECT, NEVADA (Press release, 9/9/2014)


Latest Nevada Gas Prices (click this link)

My latest column in Kitco News:

Oil, Copper & Gold on a Slippery Slope (Kitco News, August 25, 2014)


My latest column in the Fall 2014 Edition of the Mining Quarterly:

C.C. Goodwin, the Early Mines of Eureka  (Fall 2014 Edition: online pages 76-83; printed pages 70-77)

Paintings by Mariana Titus, The Three Anas & The Three Moon Anas, are presently at Lafitte Guest House & Gallery, New Orleans




Mariana's fine art prints are featured in Fine Art AmericaMariana Titus

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

COMEX Gold price = $1,235.0/oz (December contract most active)
COMEX Silver = $18.580/oz (Dec)
COMEX Copper = $3.0930/lb (
Dec)




NYMEX WTI crude = $92.62/bbl (Oct)
ICE Brent crude = $101.52/bbl (Nov)



Eureka Miner’s Gold Value Index© (GVI) = 88.15 (gold value relative to a basket of commodities that include oil, copper and silver; 100 is a high gold value)
Value Adjusted Gold Price© (VAGP) = $1,170.7/oz
COMEX - VAGP = +64.29/oz; gold is trading at a premium to key commodities


As of 10:00 AM PDT:


Barrick Gold (ABX) = $16.65 down 1.25%
Newmont Mining (NEM) = $25.26 down 1.33%
Midway Gold (MDW) = $0.9121 up 2.48%
General Moly (GMO) = $0.8999 up 2.26% 
Timberline Resources (TLR) = $0.0782 up 11.71%

S&P 500 = 1,986.94 down 0.53% 





Morning Miners!

Make sure you checkout the latest Elko Daily Free Press Mining Quarterly!

Marianne Kobak McKown and her team have done another terrific job of capturing all the latest mining news in Northern Nevada including a special series of reports on how mining affects the environment, jobs and taxes. Public perception of mining is important as Marianne reminds us that this November voters will decide if the long-standing cap on mining stays or goes.

Here is the link to the online Fall 2014 Edition togther with past issues:

http://elkodaily.com/mining/special_sections/

The ole Colonel has a column on C.C. "Charlie" Goodwin, one of the early mining pioneers of the Eureka Mining District:

C.C. Goodwin, the Early Mines of Eureka  (online pages 76-83; printed pages 70-77)

The Goodwin legacy teaches operators to match the best ores with the latest technology to maximize return on investment. He was also a trailblazer in vertical integration of mining operations from ore extraction to reduction as exemplified by his Ruby Hill Jackson Mine and Jackson Smelter in nearby Eureka.  I hope you enjoy reading about his contributions to the Silver States on this SesquicentennialHats off to Charlie Goodwin!

It was a bumpy ride for gold and metals as I summarized in my input to the Kitco News Weekly Gold Report (full analysis below): 

It has been a terrible week for gold and copper, both down more than 2% from last Friday’s close in morning trading: presently, $1,235.0 per ounce and 3.0930 per pound respectively. To put this in perspective, the mean gold and copper price since the Lehman Brothers’ bankruptcy is $1,341 per ounce and $3.33 per pound. Although well below their means, the gold-to-copper ratio is surprisingly close to its Lehman mean: 399 versus an average valuation of 403 pounds per ounce.

This suggests that gold price is following key commodities down in a broad decline. The S&P Goldman Sachs Commodity Index just plumbed a new 52-week low today. Although there are many drivers, the impressive U.S. dollar rally against the euro, yen and pound sterling coupled with weakening China demand for raw materials are major factors.

My sense is that U.S. dollar strength will weaken next week. Scotland will likely vote no to separation lifting the pound, and the yen and euro should moderate from their recent declines. This will provide needed relief to gold and the metal complex. My target for next week is $1,250 per ounce.

The slippery slope continues...

On August 25, I wrote a column on the dilemma gold and key commodities face:

Oil, Copper & Gold on a Slippery Slope (Kitco News, August 25, 2014)

I measure the "commodity value" of gold against a basket that includes Nymex oil, Comex copper and Comex silver as explained in this commentary and a similar piece in  the Summer 2014 Mining Quarterly (p. 99-101 online edition). On August 14, gold carried a premium of $100 per ounce compared to this basket and it has slowly drifted down to $65. If the premium continues to decline, gold will follow commodities on a downhill slope in U.S. dollar price. Here's a chart from the Mining Quarterly column updated through this morning (click on the graph for a larger image):


Today's premium is the distance between the green and red arrows. As you can see both the price of gold (blue line) and its commodity value (red line) are still trending lower (red dashed lines) as the premium declines. On Tursday, September 11, the commodity value of gold scored a new low of $1,168.6 per ounce - Ouch!


Kitco Gold Survey

Here is my input to the Weekly Kitco Gold Survey:

09/12/2014 (10:42 AM CDT)

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

A. Up. My target price is $1,250 per ounce.

Q. Why?

It has been a terrible week for gold and copper both down more than 2% from last Friday’s close in morning trading: presently, $1,235.0 per ounce and 3.0930 per pound respectively. To put this in perspective, the mean gold and copper price since the Lehman Brothers’ bankruptcy is $1,341 per ounce and $3.33 per pound. Although well below their means, the gold-to-copper ratio is surprisingly close to its Lehman mean: 399 versus an average valuation of 403 pounds per ounce.

This suggests that gold price is following key commodities down in a broad decline. The S&P Goldman Sachs Commodity Index just plumbed a new 52-week low today. Although there are many drivers, the impressive U.S. dollar rally against the euro, yen and pound sterling coupled with weakening China demand for raw materials are major factors.

My sense is that U.S. dollar strength will weaken next week. Scotland will likely vote no to separation lifting the pound, and the yen and euro should moderate from their recent declines. This will provide needed relief to gold and the metal complex. My target for next week is $1,250 per ounce.

For $1,250 gold we can expect to see silver in a statistically bounded range* of $18.7-$19.1 per ounce. Silver is expected to have a neutral bias with respect to a range mean of $18.898 per ounce. Copper price is in a statistical range* of $2.94-$3.21 per ounce. Copper is expected to have a neutral bias with respect to a range mean of $3.0778 per pound.

(* +/- 2-standard deviations, 1-month basis: prices that fall outside this range likely signal a market-changing event. Bias from mean infers expected market direction from a 1-month gold ratio average)

The S&P 500 is presently only 0.8% below last Friday’s close. Gold continues to be much less resilient giving up 1.8% in value compared to the S&P. The relation between the two is illustrated by a plot of the gold-to-S&P 500 ratio, or AUSP (click on the graph for larger image):



The ratio slid into a descending channel mid-November 2012 as money rotated away from gold assets into the U.S. stock market. This trend transitioned to a sideways channel July 5, 2013 (dashed blue lines, AUSP=0.7431). The AUSP then broke decisively below the lower boundary for a second leg of descent (dashed red lines). This channel was bullishly broken to the upside in late-January and rose above the lower boundary of the sideways channel (blue dashed line) However, the recent trend down in gold price has bearishly created a third leg of descent (dashed red lines in the bottom-right corner) below the lower boundary of a second sideways channel. This morning’s gold price represents a loss of 51.2% of value relative to the November peak (AUSP=1.2710).

For the week, the yellow metal lost significant value to oil and some to copper; oil gained 1.75% on 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 399.3 pounds of copper.” Percentages are deltas over one 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 88.15, below the key-100 level and below the 1-month moving average of 88.90. The 2012 high was 103.73 on Nov. 13. The commodity price of gold is $1,170.7 per ounce or $64.29 discount to actual gold price (i.e. gold is still trading at a premium to a basket of key commodities).

Cheers,

Colonel Possum

Photos by Mariana Titus

Please checkout bayoutales.com for books and book orders

Mariana's fine art prints are featured in Fine Art AmericaMariana Titus

Paintings by Mariana Titus, The Three Anas, are presently at Lafitte Guest House & Gallery, New Orleans