"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, February 21, 2014

Gold $1,350? Miners Mixed; Timberline Breather

Raines Market, Eureka, Nevada


*** Local Mining News ***

Thompson Creek to suspend output at molybdenum mine as market weak (2/21/2014)

Timberline could potentially be de-listed by the NYSE but received more time to submit a plan of compliance:

Timberline Receives Extension from NYSE MKT (2/20/2014)

 "...the NYSE MKT LLC (the "Exchange") has granted Timberline's request for a two week extension to submit a plan of compliance (the "Plan") to the Exchange. Based in part on the Company's progress to date on numerous alternatives, the previous deadline of February 20, 2014 has been extended to March 6, 2014."

Form 8-K Timberline Resources For: Feb 05

Barrick Reports Fourth Quarter and Full Year 2013 Results (Press Release, 2/13/2014)

Barrick Gold's CEO Discusses Q4 2013 Results - Earnings Call Transcript (Seeking Alpha, 2/13/2014)

Latest Nevada Gas Prices (click this link)

My latest Kitco commentary:

From Gold Bear to Gold Bull (Kitco News, Feb.18,2014)

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 early analysis: 


COMEX Gold price = $1,323.0/oz (April contract most active)
COMEX Silver = $21.755/oz (March)
COMEX Copper = $3.2865/lb (
March)
NYMEX WTI crude = $102.52/bbl (
April)
ICE Brent crude = $110.22/bbl (April)



Eureka Miner’s Gold Value Index© (GVI) = 84.70 (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) = $1,305.2/oz
COMEX - VAGP = +17.85/oz; gold is trading at a premium to key commodities (bullish implication - "bottom is in for gold")


As of 9:25 AM:


Barrick Gold (ABX) = $20.831 down 0.71% (Last Friday AM $20.20)
Newmont Mining (NEM) = $22.90 down 6.38% ($23.43)
Midway Gold (MDW) = $1.25 down 2.34% ($1.38)
General Moly (GMO) = $1.32 up 0.76% ($1.27)
Timberline Resources (TLR) = $0.1667 up 0.48% ($0.145)
S&P 500 = 1,844.74 up 0.25% ($1,834.21)




Morning Miners!

This has been a week of small but encouraging steps for miners. This morning, the S&P 500 was up about 0.3% for the week and so was Comex gold trading at $1,323.0 per ounce. Gold held its head above the $1,321.5 high of last week and is now moving in concert with U.S stocks - that's progress. The yellow metal moved in opposition to rising stocks most of 2013 so a change in direction is noteworthy (for the propeller-heads, the correlation of the gold and the S&P 500 is a surprising +0.7 on a 1-month basis).

I said is in this week's Kitco gold survey (below), "Technically, the discounting process relative to the S&P 500, oil and copper appears to have bottomed and gold is now slowly regaining value on all three fronts. The store-of-wealth has recovered some safe haven status from emerging unrest in Ukraine and Venezuela together with mixed economic reports and monetary policies in the U.S., Japan and China."

Nothing like riot police, burning buildings and confusing signals from central bankers to move gold prices on firmer timber.

Local mining stocks have been mixed this week:  Barrick (ABX) continues to trend higher north of $20, Newmont (NEM) hit a 5% pothole this morning, Midway (MDW) is off its peak but hanging tough above $1.25, General Moly (GMO) thankfully whistles a happy $1.30 tune and Timberline (TLR) received a stay of execution from the New York Stock Exchange (see press releases below today's headline photo).

Underlining the weakness in the molybdenum market, moly benchmark miner Thompson creek (TC) plans to suspend operations at its once flagship mine:

Thompson Creek to suspend output at molybdenum mine as market weak (Reuters, 2/21/2014)

Not great but overall the mining sector is steadily climbing out of the deepest shafts of last year. Here's my closing thought on the shinny metal from today's Kitco survey input:

The coming months may be more about stabilizing gold prices about long-term means than bouncing to new highs. Gold remains above its 200-day moving average but is still trading below the average gold price since the Lehman Brothers’ bankruptcy filing of $1,345 per ounce. Until gold challenges the Lehman mean, the 7-week uptrend should remain intact. Breaking above the $1,350-level would be a bullish development; retreat from the Lehman mean, bearish.

You can read more about the ole Colonel's thoughts on gold prices in my latest Kitco commentary, From Gold Bear to Gold Bull.

Hang in there, the worst is over!




Kitco Gold Survey 

Here is my input for the weekly Kitco Gold Survey:

02/21/2014 (10:27 AM CT)

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

A. Up. My target price is $1,330 per ounce.

Q. Why?

On Jan. 14, I changed sides from bear to bull on gold price going forward as explained in my Kitco commentaries, From Gold Bear to Gold Bull (Kitco News, 2/18/2014),  Gold’s Wild Ride Down May Soon Be Up (Kitco News, 1/21/2014).

This morning the April Comex contract is trading at $1,323.0 per ounce. Technically, the discounting process relative to the S&P 500, oil and copper appears to have bottomed and gold is now slowly regaining value on all three fronts. The store-of-wealth has recovered some safe haven status from emerging unrest in Ukraine and Venezuela together with mixed economic reports and monetary policies in the U.S., Japan and China.

The coming months may be more about stabilizing gold prices about long-term means than bouncing to new highs. Gold remains above its 200-day moving average but is still trading below the average gold price since the Lehman Brothers’ bankruptcy filing of $1,345 per ounce. Until gold challenges the Lehman mean, the 7-week uptrend should remain intact. Breaking above the $1,350-level would be a bullish development; retreat from the Lehman mean, bearish.

My gold target for next week is therefore $1,330 per ounce:

For $1,330 per ounce gold we can expect to see silver in a statistically bounded range* of $20.1-$22.1 per ounce; and copper in a range of $3.24-$3.53 per pound. Silver is expected to have a positive bias with respect to a range mean of $21.062 per ounce; copper, a negative bias with respect to a range mean of $3.3843 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 average)

This morning, the S&P 500 is up a 0.3% for the week about the same as gold. The relation between the two is illustrated by a plot of the gold-to-S&P 500 ratio, or AUSP:



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. This morning’s gold trading represents a loss of 43.5% of value relative to the November peak (AUSP=1.2710). Today’s ratio remains below the lower boundary of the sideways channel. A break above this boundary would be a bullish indication for the yellow metal.

This week, Comex gold is up for the week 0.3% in U.S. dollar terms and 7.7% below August’s high ($1,434.0). The yellow metal loss ground relative to copper and oil for the week; 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 402.6 pounds of copper.” Percentages are deltas over one week.



Since November 2012, 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 84.70, below the key-100 level but above the 1-month moving average of 85.17. The 2012 high was 103.73 on Nov. 13. The value adjusted price of gold is $1,305.2 per ounce or $17.85 discount to actual gold price (i.e. gold is trading again at a 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
 

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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