*** Local Mining News ***
African Barrick seeks new name after partially splitting from Canadian parent (Mining News, March 19,2014)
Timberline and Wolfpack Gold to Merge (Press Release, March 13, 2014)
Latest Nevada Gas Prices (click this link)
My latest Kitco commentary:
Oil, Copper & Gold Transmit a Distress Signal (Kitco News, Mar. 18, 2014)
My latest column in the Mining Quarterly:
Major McCoy and the Rebellious Ores of Eureka (p. 83-87 online, MQ Spring Edition 2014)
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 early analysis:
COMEX Gold price = $1,339.3/oz (April contract most active)
COMEX Silver = $20.440/oz (May)
COMEX Copper = $2.9555/lb (May)
NYMEX WTI crude = $99.27/bbl (May)
ICE Brent crude = $107.18/bbl (May)
Eureka Miner’s Gold Value Index© (GVI) = 92.13 (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) = $1,214.7/oz
COMEX - VAGP = +124.64/oz; gold is trading at a premium to key commodities (bullish implication - "bottom is in for gold")
As of 9:26 AM (percentages are from yesterday's closing prices; parentheses are a comparison to last Friday's morning price):
Barrick Gold (ABX) = $19.325 down 0.49% (Last Friday AM $20.855)
Newmont Mining (NEM) = $24.58 (unch) % ($25.97)
Midway Gold (MDW) = $1.10 down 3.51% (unchanged) ($1.28)
General Moly (GMO) = $1.045 up 3.47% ($1.11)
Timberline Resources (TLR) = $0.1598 down 3.09%% ($0.19)
If gold's fortune has an evil twin, she was busy this week. Posting a respectable intraday high of $1392.6 per ounce was a good way to start the week but then there was triple-trouble as explained in my input to this week's Kitco Gold Survey (see below):
Last week gold enjoyed a notable bounce in U.S. dollar price and significant value gains relative to equities and key commodities. This week, the yellow metal experienced a broad reversal in fortunes after the boil came off the Ukraine crisis and Federal Reserve Chairman Yellen hinted at higher interest rate hikes sooner than later. A rapidly weakening yuan versus the U.S. dollar has also created headwinds for physical buying in China. The dollar regained some ground on the euro and yen too putting further pressure on dollarized commodities.
Recent gold price fluctuations are reminiscent of trench warfare; incremental ground lost, then recaptured only to be lost again. For example, this morning’s gold price is only a few dollars from the 50% retracement of last June’s low to last May’s high ($1,338 per ounce for the current April contract) – an area of pricing revisited many times over the last nine months. On the positive side, the trend has been mostly up for 2014 and revisiting last year’s lows is unlikely. Attempting to break the psychologically important $1,400-level remains elusive as the rally stalled this week at a Comex intraday high of $1,392.6.
As the impact of the Yellen comment fades, a few more turns in the Ukraine crisis will no doubt return some safe-haven luster. My gold target for next week is therefore $1,370 per ounce.
Chinese Yuan Devaluation
We started following the dramatic weakening of the Chinese yuan in late-February and the pace has accelerated. I asked Kitco Global Editor Debbie Carlson to explain some of the dynamics behind this change:
Eureka Miner: The Chinese yuan [USD/CNY] is up another 0.5% today; 3.0% higher than its January low. The pace of yuan devaluation is striking. Is the story that China is allowing the fall to advantage exports or is this an insight into economic weakness or both?
Carlson: That's been the debate, why they're doing it. If they're doing it to increase exports, economists are worried about that. But if they're doing it because they're wanting to do this structural shift in their economy, then it may not have greater ramifications. No one is quite sure yet.
Eureka Miner: This can't be good for gold physical demand, eh?
Carlson: Yes, a weaker yuan is bad for Chinese gold demand. I think we're seeing this pay out in the somewhat reduced volume at the SGE [Shanghai Gold Exchange] and especially the modest premium/sometimes discount SGE trades to spot. I don't necessarily buy the idea that Chinese people are flocking to gold to preserve their value. Maybe people with money are doing that, but the average Chinese person is still poor.
Eureka Miner: And that explains why their GDP can grow so high?
Carlson: Correct, and if it's a decision between buying a month's worth of dinners for the family or a 1/2 ounce of gold, what would be your choice?
Eureka Miner: Got it. Thanks, I'll share this with my readers!
Debbie Carlson did a terrific column on metals last week that looks at the yuan and other factors currently challenging prices:
Silver, Copper Could Weaken Further If Chinese Economic Data Disappoints; Copper Breaks $3/Lb (Kitco News March 11, 2014)
I included her thoughts and some further analysis in my latest Kitco commentary:
Oil, Copper & Gold Transmit a Distress Signal (Kitco News, Mar. 18, 2014)
Copper Bounce and Freeport McMoRan (FCX)
Today's bounce in copper price and the resilience of copper giant Freeport-McMoran (FCX) throughout the pullback is encouraging. Comex copper is currently trading at $2.9555 per pound up 3% from Wednesday's $2.8770 intraday low.
[PM update: FCX closed up 4.56% at $32.31 breaking out of a $30.4 to $31.8 trading range where it has been trapped since March 10. This is potentially a bullish development for the mining sector. Often considered a bellwether stock, Freeport has also diversified into oil and natural gas. The annualized dividend is a healthy 3.87% at the closing price today. Please do your own research, markets can turn on you faster than a feral cat.]
Keep the faith, pardner!
Spring 2014 Mining Quarterly
As mentioned for the last several reports, the Spring 2014 Mining Quarterly is out and can be accessed online.
MQ editor Marianne Kobak McKown has done another terrific job putting together the latest mining news and events in Northern Nevada. The ole Colonel submitted a column on Eureka's Major William Wirt McCoy - someone we can be very proud as we celebrate Nevada's Sesquicentennial:
Major McCoy and the Rebellious Ores of Eureka (p. 83-87 online)
In his 70 years, Major McCoy was a physician, cattleman, statesman and mining entrepreneur. He served with distinction in the Mexican-American War and the legislatures of three states. Most importantly for Nevada, he found an economic way to reduce the stubborn argentiferous lead ores of the Eureka mining district. His solution brought Eureka from a struggling mining camp in 1869 to become Nevada’s second largest city with a population of 10,000 and a world class lead-silver producer by 1878. Before his death in 1881, this remarkable man had contributed to the creation of Nevada through his brave actions in the Mexican-American War, served as a Senator of the “Battle Born State” and helped form Eureka town site and County.
My most sincere thanks to the many folks in Eureka that contributed to the historical and field research for this article. This included locating the sites of the McCoy waterworks, Eureka Smelting Company, brickyard south of town and quarry for the sandstone that revolutionized smelting in the Eureka mining district.
Happy reading, pardner!
Kitco Gold Survey
My input today for the Weekly Kitco Gold Survey:
03/21/2014
(10:40 AM CDT)
Q. Where
do you see gold’s price headed next week, up, down or unchanged?
A. Up. My target
price is $1,370 per ounce.
Q.
Why?
Last
week gold enjoyed a notable bounce in U.S. dollar price and significant value
gains relative to equities and key commodities. This week, the yellow metal experienced
a broad reversal in fortunes after the boil came off the Ukraine crisis and
Federal Reserve Chairman Yellen hinted at higher interest rate hikes sooner
than later. A rapidly weakening yuan versus the U.S. dollar has also created headwinds
for physical buying in China. The dollar regained some ground on the euro and
yen too putting further pressure on dollarized commodities.
Recent
gold price fluctuations are reminiscent of trench warfare; incremental ground lost,
then recaptured only to be lost again. For example, this morning’s gold price
is only a few dollars from the 50% retracement of last June’s low to last May’s
high ($1,338 per ounce for the current April contract) – an area of pricing
revisited many times over the last nine months. On the positive side, the trend
has been mostly up for 2014 and revisiting last year’s lows is unlikely. Attempting
to break the psychologically important 1,400-level remains elusive as the rally
stalled this week at a Comex intraday high of $1,392.6.
As
the impact of the Yellen comment fades, a few more turns in the Ukraine crisis
will no doubt return some safe-haven luster. My gold target for next week is therefore
$1,370 per ounce.
For
$1,370 per ounce gold we can expect to see silver in a statistically bounded
range* of $20.5-$22.7 per ounce. Silver is expected to have a negative bias
with respect to a range mean of $21.624 per ounce. There is too much volatility
in the gold-to-copper ratio to make a reliable range prediction for copper
price. It is likely that red metal prices will hover below or near the sub-$3
per pound territory until more positive data emerges from China.
(*
+/- 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)
Today
the S&P 500 set a new intraday record of 1,883.97 and is up 2.2% from
Friday’s close at 1,881.47 in morning trading. In contrast gold is down 2.9%
for the week losing 5% on the S&P. Comex April gold is presently trading at
$1,339.3. The relation between the two is illustrated by a plot of the
gold-to-S&P 500 ratio, or AUSP:
+6-5+in.jpg)
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 last week
broke the
lower boundary of the sideways channel (blue dashed line) However, this week’s ratio has
bearishly fallenl below the lower boundary (reddish-brown circle). This morning’s
gold price represents a loss of 44.0% of value relative to the November peak
(AUSP=1.2710).
The
yellow metal lost significant ground relative to oil and copper for the week; oil
gained only slightly 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 453.2 pounds of copper.” Percentages are
deltas over one week.
.jpg)
On
Jan. 14, I changed sides from bear to bull on gold price 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). However, there are some troubling signs in the ether
as explained in my latest column, Oil,
Copper & Gold Transmit a Distress Signal (Kitco news, 3/17/2014).
Since
November 2012, gold has experienced bearish value destruction not only in U.S.
dollar terms but value relative to oil. Its value relation with respect to
copper has recovered significant ground in 2014.
.jpg)
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 92.13, below the key-100 level but above the 1-month
moving average of 88.94. The 2012 high was 103.73 on Nov. 13. The value
adjusted price of gold is $1,214.7 per ounce or $124.64 discount to actual gold
price (i.e. gold is trading again at a premium to a basket of key commodities).
Colonel Possum
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Please checkout bayoutales.com for books and book orders
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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