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Latest Nevada Gas Prices (click this link)
My latest column in Kitco News:
Oil, Copper & Gold Reunite - What Next? (Kitco News, July 7, 2014)
My latest column in the Mining Quarterly:
What is the Commodity Value of Gold? (p. 99-1010 online, p. 94-95, MQ Summer Edition 2014)
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Mariana's fine art prints are featured in Fine Art America: Mariana Titus
Friday's AM prices used for this morning's early analysis:
COMEX Gold price = $1,308.2/oz (August contract most active)
COMEX Silver = $20.935/oz (Sept)
COMEX Copper = $3.1810/lb (Sept)
NYMEX WTI crude = $102.07/bbl (Aug)
ICE Brent crude = $108.03/bbl (Sept)
Eureka Miner’s Gold Value Index© (GVI) = 86.10 (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) = $1,269.5/oz
COMEX - VAGP = +38.67/oz; gold is trading at a declining premium to key commodities
As of 8:43 AM PDT:
Barrick Gold (ABX) = $19.02 down 0.83%
Newmont Mining (NEM) = $25.19 down 1.02%
Midway Gold (MDW) = $0.94 up 0.84%
General Moly (GMO) = $1.04 up 0.97%
Timberline Resources (TLR) = $0.14 down 5.41%
Croesus Mine, Prospect, Nevada
With another Malaysian airliner falling out of the sky and an Israeli full-scale invasion of northern Gaza underway, one has to wonder why gold isn't doing better. Yesterday prices jumped $26 to $1,325.9 per ounce on the breaking news of these two calamitous events; this morning Comex gold is trading down at $1,308.2 - down 2% from last Friday. Where are the good old $50 bounces and gold rallies counted in days and weeks, not hours?
It is not that safe-haven investors have vanished - there are still a lot of nervous folks in the world. The U.S. 10-year not dropped below a 2.5% yield on yesterday's two-fer of bad news and remains below that level this morning - lots of bond buying going on (bond prices move inversely to yields). Others are jumping into the Japanese yen which gained yesterday and today at the U.S. dollar's expense. These two safety trades are working - why not gold? Even U.S equities are in rally mode after yesterday's more than 1% pullback.
Gold is in a bear market - things haven't been much fun since mid-November 2012.
There is one bit of evidence that is puzzling the ole Colonel. On July 11, the divergence between copper and crude oil relative to gold widened to levels not seen since mid-March. This four-month period overlaps Comex gold's four-month intraday high of $1,346.80 per ounce. More ominously, the divergence spike repeats a ‘double-peak’ characteristic that preceded the Great Recession and market turmoil following Arab Spring 2011. The witches brew this time includes multi-regional conflicts -- Ukraine/Russia, Iraq/Syria, Israel/Hamas -- and re-emerging anxiety about the true economic health of Europe's peripheral countries and China. Here's the chart:
The double-peaks are shown by red circles, a larger view is possible by clicking on the graph. Here's the rub: gold records occurred following the dual divergence peaks in the former two cases as equities and commodities experienced significant corrections. Will the same happen later this year? The July 11 peak hadn't occurred when I wrote my last Kitco commentary:
Oil, Copper & Gold Reunite - What Next? (Kitco News, July 7, 2014)
I speculated in that piece that we may see a flip-flop response of falling gold prices with commodities and stocks on the rise by year-end - now I'm not so sure. For now, my weekly Kitco gold report (below) remains bearish for gold prices in the months ahead. Nuts.
Divergence may prove me wrong. Stay tuned.
07/18/2014
(10:35 AM CDT)
Q. Where
do you see gold’s price headed next week, up, down or unchanged?
A. Up. My target
price is $1,315 per ounce.
Q.
Why?
Given
the magnitude of geopolitical events this week, it is confounding that morning
trading finds Comex gold down more than 2% from last Friday’s close. Although yesterday
did see gold peak at $1,325.9 on the combination of a passenger jet being shot
down near the Russia/Ukraine border and the beginning of an Israeli ground
invasion of Gaza, the rally didn’t last. Safe haven investors preferred U.S.
Treasuries and the yen over the yellow metal. Gold is losing additional value
to the S&P 500 given the morning relief rally in U.S. equities.
Nymex
WTI oil was the real winner on worsening regional tensions, jumping 2% on the
week after a plunge below the key $100-level Tuesday. Gold did manage to marginally
outperform copper which is off 3.5% from its Monday intraday high.
For
the short term, persistent trouble in Ukraine, Israel and Iraq will likely maintain
the yellow metal above the key $1,300-level. Longer term I remain bearish on gold
forecasting $1,100 to $1,210 per ounce by year-end. Lacking geo-political lift,
gold’s fortunes are likely grim until inflation expectations materially rise.
Gold
will probably find some boost next week from escalating world tensions but have
difficulty besting yesterday’s high. My target is therefore $1,315 per ounce
for next week.
For
$1,315 gold we can expect to see silver in a statistically bounded range* of $20.6-$21.3
per ounce. Silver is expected to have a positive bias with respect to a range
mean of $20.964 per ounce. Future copper price is in a statistical range* of $3.08-$3.31
per ounce. Copper is expected to have a negative bias with respect to a range
mean of $3.1959 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 1,965.27 is down 0.1% for the week in morning
trading. Comex gold is down 2.2% and losing more value to the
S&P. 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 rose above the
lower boundary of the sideways channel (blue dashed line) However, this advance has
now retreated below the lower boundary into a second sideways channel bearishly
lower than the first. This morning’s gold price represents a loss of 47.6% of
value relative to the November peak (AUSP=1.2710).
On
the week, the yellow metal lost considerable value to oil but gained slightly
on copper; oil also gained much 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 411.3 pounds of copper.” Percentages are
deltas over one week.
.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 86.10, below the key-100 level but above the 1-month
moving average of 86.00. The 2012 high was 103.73 on Nov. 13. The commodity
price of gold is $1,269.5 per ounce or $38.67 discount to actual gold price
(i.e. gold is trading at a premium to a basket of key commodities).
Colonel Possum
.JPG)
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