"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, April 25, 2014

Gold Bet on Ukraine & Akshaya Tritiya; Midway Contracts; Moly Up, Liu Down

Rolling Memories, Eureka, Nevada

*** Local Mining News ***


MIDWAY FORECASTS CAPITAL REDUCTIONS PAN PROJECT (Press Release, April 24, 2014)

The Liu Han trial:

Xinhua Insight: China ends first trials of tycoon-led gang (China English News, 2014-04-19 21:28:36)

Alleged mafia leader denies all charges (Ecns.cn 2014-04-18 09:03Xinhua)

Hanlong founder Liu Han denies murder of rivals in China (SCOTT MURDOCH, THE AUSTRALIAN APRIL 18, 2014 6:23PM)

A background column was posted in the Wall Street Journal April 14th by James Areddy:

Mining Tycoon's Trial Reverberates in Central China (By JAMES T. AREDDY, April 14, 2014 11:16 a.m. ET)

Several folks in Eureka including this report were interviewed by Mr. Areddy for his 2012 column about Mt. Hope and Liu Han, In Nevada, a Chinese King of the Hill.  Defendant Liu Han and his Hanlong Group had agreed to finance a large portion of the Mt. Hope Molybdenum Project.

General Moly: 3 Different Insiders Have Purchased Shares This Month (Markus Aarnio, Seeking Alpha, 4/17/2014)


The Liberty Starter Pit Project (Press release, 4/8/2014)

Latest Nevada Gas Prices (click this link)

My latest Kitco commentary:

Gold's Wild Ride - Up and Away? (Kitco News, Apr. 14, 2014)

My latest column in the Mining Quarterly:

Major McCoy and the Rebellious Ores of Eureka (p. 83-87 online, MQ Spring Edition 2014)


Or in the Elko Daily Free Press: Major McCoy and the rebellious ores of Eureka: How one man helped a small Nevada mining town boom (March 18)

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 = $1,299.8/oz (June contract most active)
COMEX Silver = $19.735/oz (May)
COMEX Copper = $3.1175/lb (
May)



NYMEX WTI crude = $100.68/bbl (May)
ICE Brent crude = $109.86/bbl (June)



Eureka Miner’s Gold Value Index© (GVI) = 88.47 (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) = $1,227.6/oz
COMEX - VAGP = +72.22/oz; gold is trading at a premium to key commodities (bullish implication - "bottom is in for gold")


As of 9:27AM PDT (percentages are from yesterday's closing prices; parentheses are a comparison to last Friday's morning price):


Barrick Gold (ABX) = $17.57 up 0.57% (Last Friday AM $18.11)
Newmont Mining (NEM) = $26.09 up 2.35% ($23.74)
Midway Gold (MDW) = $0.8551 down 0.57% ($0.88)
General Moly (GMO) = $1.13 down 3.42% ($1.0996)
Timberline Resources (TLR) = $0.1615 up 3.86% ($0.155  )
S&P 500 = 1,867.88 down 0.57% (1,863.66)



Morning Miners!

Gold got a late-week bounce above $1,300 per ounce - will it last?

Gold price has been a slowly leaking tire since mid-March saved by bursts of pressure from escalating but sporadic tensions in the Ukraine. Physical demand form the world’s largest consumers is a mixed picture given tightening supply and rising premiums in India offset by a yuan at year-to-date highs dampening desire for the yellow metal in China [i.e. USD/CNY up => U.S. dollar strong]. In the U.S. gold has stabilized in a sideways but nonetheless bearish relation with equities. The upcoming Akshaya Tritiya festival in India and unresolved border tensions in the eastern Ukraine will likely provide enough air to keep gold inflated above the mid-point of its current trading range. Assuming a challenge of the April 16 $1,307 range high will stall; my gold target is $1,305 per ounce... (input to the weekly Kitco Gold Survey, see full report below).

Since I did my early morning analysis, Comex gold remains at about the same level, $1,299.4 per ounce and 0.4% above last Friday's close - still trapped between April Fool's $1,277.4 low and St. Paddy's $1,392.2 high. The brightest glimmer for physical demand is Akshaya Tritiya starting May 2, India's second-biggest gold buying festival. Gold premiums in India, the world's second largest consumer after China, jumped to their highest level in more than two-and-a-half months due to short supplies.



Midway Contracts

Midway Gold announced a new plan to use contract mining for its initial phase:

MIDWAY FORECASTS CAPITAL REDUCTIONS PAN PROJECT (Press Release, April 24, 2014)

CEO and President Ken Brunk says:

We are excited by our progress at Pan. Our team has worked diligently during the last few months to advance our first project through construction while also finding ways to cut our costs. We believe we can significantly reduce our borrowing needs by employing two significant scope changes to the project—the utilization of a contract miner for early years of mining,and leaching the South Pan ore body by run-of-mine methods thereby deferring the purchase and installation of a crusher plant. We are also fortunate to have had our construction contracts that have been let to date come in at or very close to our feasibility estimates. With these recent reductions in initial capital requirements and our current strong cash balance, we look forward to completing project financing within the coming weeks. We are pleased that the third party engineers that have evaluated the project on behalf of potential lenders have found no “fatal flaws” in any of these approaches or with the project.

Best of luck to the Midway team!

Moly Up, Liu Down

Moly prices are up, courting the $13-level which sure beats the sub-$10 per pound levels that haunted us for months. Metals Week has $13.00 for the monthly average (spot price as of 4/17) and the London Metals Exchange futures show $13.04 for the 3-month seller and  $13.36 for 15-months down the road (LME prices as of 4/24).

This and insider buying reported last week have moved moved General Moly (GMO) share price northward:

General Moly: 3 Different Insiders Have Purchased Shares This Month (Markus Aarnio, Seeking Alpha, 4/17/2014)

GMO is presently trading at $1.13 per share, up 38% from its April 7 low of $0.82.

The General Moly management team continues to pursue alternate financing for Mt. Hope after the collapse of the Hanlong Group loan last year. Hanlong founder Liu Han's trial has concluded as reported in the links below today's headline photo and this report's BREAKING NEWS SPECIAL last Saturday.

Please do your own research - markets can turn on you faster than a feral cat.

Best of luck to the General Moly team!

Kitco Gold Survey

Here is my input to the Weekly Kitco Gold Survey:

04/25/2014 (10:07 AM CDT)

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

A. Up. My target price is $1,305 per ounce.

Q. Why?

Gold price has been a slowly leaking tire since mid-March saved by bursts of pressure from escalating but sporadic tensions in the Ukraine. Physical demand form the world’s largest consumers is a mixed picture given tightening supply and rising premiums in India offset by a yuan at year-to-date highs dampening desire for the yellow metal in China. In the U.S. gold has stabilized in a sideways but nonetheless bearish relation with equities. The upcoming Akshaya Tritiya festival in India and unresolved border tensions in the eastern Ukraine will likely provide enough air to keep gold inflated above the mid-point of its current trading range.

Assuming a challenge of the April 16 $1,307 range high will stall; my gold target is $1,305 per ounce:

For $1,305 per ounce gold we can expect to see silver in a statistically bounded range* of $19.5-$20.2 per ounce. Silver is expected to have a neutral bias with respect to a range mean of $19.871 per ounce. Volatility in the gold-to-copper ratio has subsided considerably. Future copper price is thereby in a narrower statistical range* of $2.96-$3.15 per ounce. Copper is expected to have a positive bias with respect to a range mean of $3.0534 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 at 1,868.86 is up just 0.2% for the week in morning trading retreating from Tuesday highs that nearly breached 1,885. Comex gold is up 0.5% for the week gaining slightly more than 0.2% in value to the S&P at $1,299.8 per ounce. 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 and rising above the lower boundary of the sideways channel (blue dashed line) However, this advance has now bearishly retreated below the lower boundary into what appears a second sideways channel bearishly lower than the first. This morning’s gold price represents a loss of 45.0% of value relative to the November peak (AUSP=1.2710).

The yellow metal gained significant value to oil but lost to copper; oil fell nearly 6% 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 416.9 pounds of copper.” Percentages are deltas over one week.



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 March column, Oil, Copper & Gold Transmit a Distress Signal (Kitco news, 3/17/2014). Bearish trends have re-surfaced for the yellow metal but there is also light in the mineshaft as explained in my latest commentary, Gold's Wild Ride - Up and Away? (Kitco News, 4/14/2014).

Since November 2012, gold has experienced bearish value destruction not only in U.S. dollar terms but value relative to oil. However, its value relation with respect to copper has recovered ground in 2014.




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 88.47, below the key-100 level and the 1-month moving average of 88.92. The 2012 high was 103.73 on Nov. 13. The value adjusted price of gold is $1,227.6 per ounce or $72.22 discount to actual gold price (i.e. gold is 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
 




Saturday, April 19, 2014

BREAKING NEWS: The Liu Han Trial - The Eureka Miner's Market Report


Morning miners!

There is breaking news in China on the Liu Han trial:

Xinhua Insight: China ends first trials of tycoon-led gang (China English News, 2014-04-19 21:28:36)

Alleged mafia leader denies all charges (Ecns.cn 2014-04-18 09:03Xinhua)

And from Australia a few days earlier...

Hanlong founder Liu Han denies murder of rivals in China (SCOTT MURDOCH, THE AUSTRALIAN APRIL 18, 2014 6:23PM)

A background column was posted in the Wall Street Journal April 14th by James Areddy:

Mining Tycoon's Trial Reverberates in Central China (By JAMES T. AREDDY, April 14, 2014 11:16 a.m. ET)

Several folks in Eureka including this report were interviewed by Mr. Areddy for his 2012 column about Mt. Hope and Liu Han, In Nevada, a Chinese King of the Hill.  Defendant Liu Han and his Hanlong Group had agreed to finance a large portion of the Mt. Hope Molybdenum Project.

The Hanlong financing fell through after Liu Han's arrest last year. The Eureka Miner carried several reports on this:

General Moly (GMO) Update, Liu Han Saga Continues; The Colonel's Gold Price for Next Week (March 29. 2013, Eureka Miner)

The General Moly (GMO) team has been diligently seeking alternate financing for Mt. Hope and plans to start a smaller scale copper/molybdenum project at their Liberty mining property near Tonopah:

Gold, Copper & Miners Hang Tough; General Moly's Liberty Play (April 11, 2014, Eureka Miner)

The best of luck to the General Moly team!

Given that the Easter holiday is upon us, it is with some irony that my 2013 report began:

Happy Easter Miners!

The Mt. Hope and Liu Han saga rolled into this week with more details emerging about Mr. Liu's errant brother, an alleged triple murder and politics of doing business with China's new leaders. This would be a terrific mystery thriller if Eureka County weren't one of the set props in the unfolding drama...

The drama continues one year later...

Cheers,

Colonel

Thursday, April 17, 2014

Gold Struggles to Hold $1,300; Hansen, Pennington & Roswell Buy General Moly Stock (GMO)

Happy Easter! Eureka, Nevada

*** Local Mining News ***

General Moly: 3 Different Insiders Have Purchased Shares This Month (Markus Aarnio, Seeking Alpha, 4/17/2014)


The Liberty Starter Pit Project (Press release, 4/8/2014)
 
Midway Gold Newsletter (March/April 2014)


Latest Nevada Gas Prices (click this link)

My latest Kitco commentary:

Gold's Wild Ride - Up and Away? (Kitco News, Apr. 14, 2014)

My latest column in the Mining Quarterly:

Major McCoy and the Rebellious Ores of Eureka (p. 83-87 online, MQ Spring Edition 2014)


Or in the Elko Daily Free Press: Major McCoy and the rebellious ores of Eureka: How one man helped a small Nevada mining town boom (March 18)

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 = $1,299.4/oz (June contract most active)
COMEX Silver = $19.585/oz (May)
COMEX Copper = $3.0355/lb (
May)


NYMEX WTI crude = $104.34/bbl (May)
ICE Brent crude = $110.04/bbl (June)



Eureka Miner’s Gold Value Index© (GVI) = 88.88 (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) = $1,221.5/oz
COMEX - VAGP = +77.88/oz; gold is trading at a premium to key commodities (bullish implication - "bottom is in for gold")


As of 9:40AM PDT (percentages are from yesterday's closing prices; parentheses are a comparison to last Friday's morning price):


Barrick Gold (ABX) = $18.11 down 1.15% (Last Friday AM $18.83)
Newmont Mining (NEM) = $23.74 down 0.04% ($24.35)
Midway Gold (MDW) = $0.88 up 5.97% ($0.96)
General Moly (GMO) = $1.0996 up 3.74% ($0.92)
Timberline Resources (TLR) = $0.155 up 1.97% ($0.1599 )
S&P 500 = 1,863.66 up 0.07% (1,825.88)




Morning Miners!

Gold prices had a lousy week, plain and simple - the flip-flop of last report:

The golden eggs in this year’s Easter basket are smaller than I expected last week as building tensions in the Ukraine failed to overcome bearish technical patterns for the yellow metal. Struggling to hold ground at the $1,300-level, gold could retest April’s low of $1,277.4 per ounce before rebounding. April’s high-to-date falls short of the March’s $1,392.2 peak by more than $60 per ounce as Russian troops mass on Ukraine’s eastern border – not a resounding safe-haven endorsement for the embattled store-of-wealth.

This week Federal Reserve Chairman’s Janet Yellen reiterated a commitment to support the economy with accommodative monetary policy, blunting the tech-led selloff in equities but doing little for gold’s fortunes. However, I still remain bullish on gold prices in the near-term as explained in my latest Kitco commentary, Gold's Wild Ride - Up and Away? Although gold has lost ground to global commodities oil and copper in the last two weeks, favorable conditions remain for another boost to gold’s “commodity value” in the coming weeks.

Assuming a retest of April’s low is likely next week; my gold target is $1,280 per ounce (input to the weekly Kitco Gold Survey, see full report below).

One of the problems with gold prices is falling Asian demand, notably China, and building Comex inventories as explained by Kitco's Global Editor Debbie Carlson:

Rising Comex Gold Warehouse Stocks Underscore Soft Physical Demand  (Debbie carlson, Kitco news, April 15, 2014)

Since I did my early morning analysis, Comex gold has retreated a tad more to $1,297.8 per ounce and 1.6% below last Friday's close - caught somewhere in the middle of April Fool's $1,277.4 low and St. Paddy's $1,392.2 high. More encouraging things are happening in the General Moly Camp....




Buy, Buy, Buy GMO...from the inside

Apparently the ole Colonel wasn't the only one picking up a few shares of General Moly (GMO) stock last week. The GMO management team including CEO Bruce Hansen together with VPs Bob Pennington and Scott Roswell bought significant shares following the Liberty Starter Pit press release:

The Liberty Starter Pit Project (Press release, 4/8/2014)

Seeking Alpha's Markus Aarnio put together a comprehensive report on the insider buying and his view of General Moly's prospects going forward:

General Moly: 3 Different Insiders Have Purchased Shares This Month (Markus Aarnio, Seeking Alpha, 4/17/2014)

GMO is presently trading at $1.10 per share, up 34% from its April 7 low of $0.82.

Please do your own research - markets can turn on you faster than a feral cat.

Keep the faith, pardner!



Kitco Gold Survey

My weekly input to the Kitco Gold Survey:

04/17/2014 (10:36 AM CDT)

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

A. Down. My target price is $1,280 per ounce.

Q. Why?

The golden eggs in this year’s Easter basket are smaller than I expected last week as building tensions in the Ukraine failed to overcome bearish technical patterns for the yellow metal. Struggling to hold ground at the $1,300-level, gold could retest April’s low of $1,277.4 per ounce before rebounding. April’s high-to-date falls short of the March’s $1,392.2 peak by more than $60 per ounce as Russian troops mass on Ukraine’s eastern border – not a resounding safe-haven endorsement for the embattled store-of-wealth.

This week Federal Reserve Chairman’s Janet Yellen reiterated a commitment to support the economy with accommodative monetary policy, blunting the tech-led selloff in equities but doing little for gold’s fortunes. However, I still remain bullish on gold prices in the near-term as explained in my latest Kitco commentary, Gold's Wild Ride - Up and Away? Although gold has lost ground to global commodities oil and copper in the last two weeks, favorable conditions remain for another boost to gold’s “commodity value” in the coming weeks.

Assuming a retest of April’s low is likely next week; my gold target is $1,280 per ounce:

For $1,280 per ounce gold we can expect to see silver in a statistically bounded range* of $19.2-$19.9 per ounce. Silver is expected to have a positive bias with respect to a range mean of $19.533 per ounce. Volatility in the gold-to-copper ratio has decreased allowing a third range prediction in as many weeks for copper price. Future copper is in a wide but statistically bounded range* of $2.80-$3.09 per ounce. Copper is expected to have a positive bias with respect to a range mean of $2.9432 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 up 2.3% for the week in morning trading. Comex gold is down 1.2% for the week losing 3.4% in value to the S&P at $1,302.8 per ounce. 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 and then rose above the lower boundary of the sideways channel (blue dashed line) However, this advance has now bearishly retreated below the lower boundary. This week gold is taking another turn down (red circle); the pattern for the year-to-date may be forming a second sideways channel bearishly lower than the first. This morning’s gold price represents a loss of 44.8% of value relative to the November peak (AUSP=1.2710).

The yellow metal lost value to oil and some to copper for a second week; oil gained 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 430.1 pounds of copper.” Percentages are deltas over one week.



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 March column, Oil, Copper & Gold Transmit a Distress Signal (Kitco news, 3/17/2014). Bearish trends have re-surfaced for the yellow metal but there is also light in the mineshaft as explained in my latest commentary, Gold's Wild Ride - Up and Away? (Kitco News, 4/14/2014).

Since November 2012, gold has experienced bearish value destruction not only in U.S. dollar terms but value relative to oil. However, its value relation with respect to copper has recovered ground in 2014.




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 89.18, below the key-100 level and the 1-month moving average of 89.71. The 2012 high was 103.73 on Nov. 13. The value adjusted price of gold is $1,220.6 per ounce or $82.22 discount to actual gold price (i.e. gold is 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, April 11, 2014

Gold, Copper & Miners Hang Tough; General Moly's Liberty Play

Gold & Copper Companions by Mariana Titus


*** Local Mining News ***

The Liberty Starter Pit Project (Press release, 4/8/2014)
 
Midway Gold Newsletter (March/April 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)


Or in the Elko Daily Free Press: Major McCoy and the rebellious ores of Eureka: How one man helped a small Nevada mining town boom (March 18)

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 = $1,317.9/oz (June contract most active)
COMEX Silver = $19.990/oz (May)
COMEX Copper = $3.0670/lb (
May)


NYMEX WTI crude = $103.42/bbl (May)
ICE Brent crude = $107.35/bbl (June)



Eureka Miner’s Gold Value Index© (GVI) = 89.25 (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) = $1,233.9/oz
COMEX - VAGP = +84.03/oz; gold is trading at a premium to key commodities (bullish implication - "bottom is in for gold")


As of 9:30AM PDT (percentages are from yesterday's closing prices; parentheses are a comparison to last Friday's morning price):


Barrick Gold (ABX) = $18.83 up 0.21% (Last Friday AM $18.70)
Newmont Mining (NEM) = $24.35 down 1.77% ($24.42)
Midway Gold (MDW) = $0.96 down 2.04%% ($0.9997)
General Moly (GMO) = $0.92 up 5.75% ($0.9299)
Timberline Resources (TLR) = $0.1599 up 6.53% ($0.153 )
S&P 500 = 1,825.88 down 0.37% (1,877.75)




Morning Miners!

Gold prices had a good week, plain and simple (input to the weekly Kitco Gold Survey, full report below):

Favorable conditions re-emerged for gold price this week: safe haven status was boosted by a falling U.S. dollar, a tech-led selloff in U.S. equities and a lingering Ukraine crisis which heated up along that countries’ eastern border. Some traders also sense a hint of rising U.S. inflation from this morning’s higher-than-expected PPI number - whether this translates to next week’s CPI is, however, far from certain. China’s worse-than-expected CPI/PPI data and a Euro zone slipping toward deflation make an inflation-fueled argument for the yellow metal suspect from the global perspective. On balance, there are probably more legs to the gold rally if the tech contagion spreads to a broader and deeper sell-off in stocks. There is also at least one more charge of anxiety left in the Land of the Light Brigade. My gold target for next week is therefore up at $1,330 per ounce.

Since I did my early morning analysis, Comex gold is up a buck more at $1,318.8 per ounce and 1.2% above last Friday's close - a steady march higher from April Fool's low of $1,277.4. Gold is not the only happy camper in the Metals & Miners' camp.




Copper & Miners hang tough too...

Given the latest carnage in equity markets it is very encouraging to see copper prices holding their head proudly above the $3-level and most miners spared from deep sell-offs. Comex copper has pulled back from an early jog into $3.06 territory to trade currently at $3.041 per pound. Copper giant and mining bellwether Freeport-McMoRan (FCX) is down today but still above $32 per share with a healthy 3.8% dividend. Remember mid-March when Freeport looked like it may drop below $30? Somebody loves miners.

Moly benchmark miner Thompson Creek (TC) punched a 4-month high this morning before settling back to $2.93 - still up more than 12% for the day. Better-than-expected mine output and improving moly prices have helped lift this miner from itts $1.72 low in December. Maybe change is in the winds?

General Moly's Liberty Play

Copper plus moly appears to be in the new equation for General Moly (GMO) as presented in their latest press release:

The Liberty Starter Pit Project (Press release, 4/8/2014)

Bruce D. Hansen, Chief Executive Officer of General Moly, explains:

We believe a copper focused Liberty Starter Pit Project has the potential to generate favorable economics given its low strip ratio in shallow pits combined with relatively low initial capital requirements with the significant pre-existing infrastructure and the site’s prior open-pit operations. In addition, our preliminary view is that the Starter Pit Project can begin on our privately owned land which is expected to allow for a shorter and simpler permitting process with the state of Nevada. Taking into account the current ratio of molybdenum and copper prices today compared with our initial Liberty study in 2008 and updated results in 2011, it makes sense for the initial economics and production schedule to be largely driven by the site’s shallow blanket of secondary sulfide copper mineralization.

We anticipate completing the PEA in the summer of 2014, and believe the results will demonstrate the inherent value and flexibility that the Liberty Project provides to our shareholders, complementing the significant value and optionality of the Mt. Hope Project. Even as we initiate this PEA at Liberty we are continuing to pursue financing alternatives for the Mt. Hope Project, and recent updates to capital and operating costs, mine plans, and project economics are supporting ongoing due diligence efforts. In addition, we are pleased to see an upward trend in underlying molybdenum prices from just over $9 per pound in the summer of 2013 to the current $11.50 per pound. This represents a 14-month high for moly prices and is supported by improved demand and tighter supply. Given the cost structure of the industry along with further growth demand potential, we feel the molybdenum price has the potential to continue to improve in the coming years to a more sustainable long term level.

Now, that's not such a bad idea is it? I threw a few shares of GMO in the buckboard Monday at March 2009 prices. GMO is presently trading at $0.92 up 5.75%.

Please do your own research - markets can turn on you faster than a feral cat.

Keep the faith, pardner!



Kitco Gold Survey

My weekly input to the Kitco Gold Survey:


04/11/2014 (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 $1,330 per ounce.

Q. Why?

Favorable conditions re-emerged for gold price this week: safe haven status was boosted by a falling U.S. dollar, a tech-led selloff in U.S. equities and a lingering Ukraine crisis which heated up along that countries’ eastern border. Some traders also sense a hint of rising U.S. inflation from this morning’s higher-than-expected PPI number - whether this translates to next week’s CPI is, however, far from certain. China’s worse-than-expected CPI/PPI data and a Euro zone slipping toward deflation make an inflation-fueled argument for the yellow metal suspect from the global perspective. 

On balance, there are probably more legs to the gold rally if the tech contagion spreads to a broader and deeper sell-off in stocks. There is also at least one more charge of anxiety left in the Land of the Light Brigade. My gold target for next week is therefore up at $1,330 per ounce.

For $1,330 per ounce gold we can expect to see silver in a statistically bounded range* of $20.1-$20.7 per ounce. Silver is expected to have a negative bias with respect to a range mean of $20.393 per ounce. Volatility in the gold-to-copper ratio has decreased allowing the second range prediction in several weeks for copper price. Future copper is in a wide but statistically bounded range* of $2.79-$3.24 per ounce. Copper is expected to have a positive bias with respect to a range mean of $3.0166 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 down 1.9% for the week in morning trading and 3.6% down from the all-time intraday high set last Friday. Comex gold is up 1.1% for the week gaining 3.1% in value to the S&P at $1,317.9 per ounce. 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 and then rose above the lower boundary of the sideways channel (blue dashed line) However, this advance has now bearishly retreated below the lower boundary. This week gold is taking another run at the lower boundary (green circle); breaking it again would be bullish for gold prices. This morning’s gold price represents a loss of 43.3% of value relative to the November peak (AUSP=1.2710).

The yellow metal lost value to oil and some to copper for the week; oil gained slightly 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 429.7 pounds of copper.” Percentages are deltas over one week.



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). Bearish trends have re-surfaced for the yellow metal but thankfully gold has rallied more than 1% this week.

Since November 2012, gold has experienced bearish value destruction not only in U.S. dollar terms but value relative to oil. However, its value relation with respect to copper has recovered ground in 2014.




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 89.25, below the key-100 level and the 1-month moving average of 90.44. The 2012 high was 103.73 on Nov. 13. The value adjusted price of gold is $1,233.9 per ounce or $84.03 discount to actual gold price (i.e. gold is trading at a premium to a basket of key commodities).

Cheers,

Colonel Possum

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