"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.

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

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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
 




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