"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, December 18, 2015

Gold Rebound $1,064 - Where's Santa?


Eureka Opera House
Eureka, Nevada

Latest News

What do copper & gold signal for 2016? (by Richard Baker, Elko Daily Free Press, 12/03/2015)



Mining Quarterly


The latest online version:


"Click to read" and the online version looks much like the printed magazine. My column on copper and gold prices for 2016 starts on page 85 (page 82 printed version). Press "Esc" to return to the Elko Daily Free Press. There is a handy scroll bar for page selection at the bottom of the screen. The same article appeared in the Elko Daily Free Press December 3:




***
Please checkout Mariana's Eureka, Nevada on Facebook

Numbers used for analysis (morning, 12/18/15):

Goldman Sachs Commodity Index

S&P GSCI 307.85, 01/16 contract (intraday low 304.35, on 12/18/2015)

Nymex/Comex (most active contracts)

Nymex oil (WTI) $36.39 per barrel (intraday low $35.72 on 12/18/2015)
Brent crude $ 37.07 per barrel (intraday low $36.41 on 12/18/2015)
Comex copper $2.1055 per pound (intraday low $2.0020 on 11/23/2015)
Comex gold $1,063.5 per ounce (intaday low $1,045.4 on 12/03/2015)
Comex silver $14.045 per ounce (intraday low $13.620 on 12/14/2015)

Canary in the gold mine: Fate of high yield corporate bonds (see explanation below)

iShares iBoxx $ High Yield Corporate Bond (HYG) $79.38 ($78.21 52-week low)

Trouble ahead: HYG < $82...yikes, we're there!



Jackson House
Eureka, Nevada

Gold Rebound $1,064 - Where's Santa?

Trouble indicators blinking

Macro drivers: continued concerns about China; U.S. Federal Reserve interest rate trajectory for 2016 & 2017

Wild cards: Fate of high yield bonds, Further oil price decline

Gold bet for next week: pause in $1,060 territory

Merry Christmas Miners!

The markets were so bad last Friday that I decided to delay a report until things got better - they have, a little. December usually enjoys a "Santa Rally" to close the year. Looks like we're still several reindeer short of full team on a pretty rickety sleigh.

One big hurdle is behind us - the Fed's long awaited raise of the benchmark interest rate. Now the question is how many more in the next two years and how big. Expect more volatility as our central bank tightens and others loosen to stimulate moribund economies abroad. This monetary policy divergence supports the U.S. dollar but is not a happy world for our favorite metal. As the U.S. dollar strengthens, it becomes more expensive for foreigners to buy gold in their home currency. From an investment standpoint, The Lustrous One finds itself with few friends for the holidays as money seeks greater reward elsewhere.

What about that lousy Friday?

Every market morning, I record and analyze 22 market parameters including key commodity and stock prices, major currencies and indices. There are many, many more but that's about all the ole Colonel can track without seeing double.

For each parameter, I set a threshold value to signal trouble ahead or blue skies above. Here's  a list of 9 lights that flashed red at last Friday's close:

WTI (close) = $35.62 < $40/bbl: Nymex oil at new 7-year low
BRENT (close) = $37.93 < $ 40/bbl: Global benchmark Brent crude at new low
NG = $1.990 < $2/mmBTU: Natural gas futures tumble below $2 and it's almost winter!!
GSCI (close) = 313.95 : Goldman Sachs commodity Index at new low, similar Bloomberg Commodity Index at a 16-year low
HYG = 79.53 < 82: High yield bond market in trouble (see "What's Got the Cat Worried" below)
S&P 500 (close) 2,012.37 < 2,032: U.S equity markets plunge into dangerous waters (the S&P 500 has bearishly fallen back into the "fib" box, see "Market Stats" below)
VIX = 25.35 > 20: S&P 500 Volatility Index jumps26%, often referred to as the "fear index"
USD/RUB = 70.60 > 70: Russian ruble in trouble again
USD/YEN = 120.97 < 122: Japanese yen strengthens to early-November levels (see "Chart to Watch" below)

Ouch!

This morning the "fear index" is lower but just barely under threshold at 19.27. A rally in stocks earlier in the week stalled and we are about 10 points above last Friday (2,025.42 vs 2,012.37). Nymex, Brent and natural gas have punched in lower lows and so have the broader commodity indices. Currencies have stabilized some but the U.S. dollar is trading up from last week. Finally, the fate of the high yield bond market is still keeping market participants on edge.

So what got better in a week? We heard from the Fed on Wednesday - a big uncertainty is now in the rear view mirror. I wouldn't be surprised to see markets on an uptick next week with the S&P 500 closing at 2,100 for the year. What about gold? Here's what I told Kitco News this morning (full input to the Weekly Kitco Gold Survey below):

After Wednesday's U.S. Federal Reserve rate hike, gold is fast approaching its 2013 lows in both euro & yen terms. Gold finds itself just another embattled currency caught in the divergent dynamic of U.S. monetary policy compared to that of the the ECB and Bank of Japan.

My continued fear is that gold losing value to these major devalued currencies signals more near-term downside in US dollar terms, perhaps less than $1,000 per ounce.

On the positive side, gold has now defended two recent excursions below $1,050 per ounce so the trend lower may find some relief next week. My target price is, however, slightly below this morning's price (10:55 AM EST $1,063.9 per ounce).

My vote is down. Target price $1,060 per ounce.

Nuts. Stay tuned.

What's Got the Cat Worried?

This report continues to carry this link to remind us of some potential bumps in the road ahead. Activist billionaire investor Carl Icahn explains why high yields are a scary indicator in this chilling video:


We have now crossed the worry threshold (HYG < 82). Please be mindful that Icahn is talking his own book (he is short of high yield bonds). He has also recently invested significantly in Freeport-McMoRan (FCX) which this report views as a positive.

Chart to Watch

Gold price margins from 2013 lows (euro, yen)

A disturbing aspect of gold's recent decline in USD is the concurrent collapse in euro and yen terms.

One of the few accomplishments the yellow metal can boast is staying above its 2013 lows in terms of both currencies. The percent margin above those bottoms peaked in late January and has since trended down with the divergence of US monetary policy from Europe and Japan, and the associated rise of the US dollar. (click on chart for larger image).



Since late-October, the margin's rapid decline relative to yen has been particularly troubling. I maintain that declining value of gold relative to a devalued currency is a red flag. Yesterday, gold price in yen terms was falling fast, closing only 5.2% above its 2013 low. If this margin descends to zero, an equivalent USD gold price suggests sub-$1,000 per ounce given current exchange rates.

Fortunately, this morning puts a pause in this decline.

2013 lows:

879.64 euros per ounce on 12/20/2013
122,443 yen per ounce on 6/28/2013

Friday AM (12/18):

979.82 euros per ounce (+11.4% margin)
129,129 yen per ounce (+5.5% margin)

Market Stats

Here's the scorecard on the stock market, S&P 500 is presently trading at 2,025.42 [UPDATE: Friday close 2,005.55]

Market corrections are generally defined as a 10% or greater move to the downside from the top of a key index. I like to use the S&P 500 (.SPX) because it includes a broader swath of America' best companies than the Dow Jones Industrial (.DJIA) - five hundred compared to thirty. Here is the score sheet of ups and downs on an intraday basis:

S&P 500 high: 2,134.72, 5/20/2015
S&P 500 10% correction 1,921.25
S&P 500 low: 1,867.01, on Monday 8/24/2015 down 12.5%
S&P 500 bear market begins below 20% at 1,707.78

Key "next level" to watch going down is 1,820.66 (low on 10/15/2014, down 14.7%)

For Fibonacci folks the "fib box" is:

50.0% retracement from 8/24 low = 2,000.87

61.8% retracement from 8/24 low = 2,032.45

Getting inside the "fib box" is generally considered a "bullish" move to the upside; failing the "fib box" is a bearish indication.

The S&P 500 did finally escape the fib box - now we're back in. [UPDATE: Friday close 2,005.55]. Something to monitor, my bet is a rally to 2,100 by year's end.

Kitco News Gold Survey

My (full) input to the Kitco News Weekly Gold Survey:

My vote is down. Target price $1,060 per ounce.

Discussion:

Another difficult morning for commodities with Nymex oil plunging to another 7-year low ($35.72/bbl) and commodity indices falling below last week's lows. The yellow metal remains stronger relative to key commodities oil, copper and silver but is losing more value to the euro and yen when compared to August averages (relevant because of significant August market corrections on 8/24 & 8/25).

The latter is concerning because a loss of traction with devalued currencies remains a red flag - yesterday, gold denominated in yen was now only 5.2% above its 2013 low (see graph above). Even with today's corrective rebound in USD price, gold is still below the key 1,000-euro level at 979.8 euros per ounce. Gold has been trending lower with respect to both currencies since ECB Draghi's robust stimulus announcement in late-January.

This week's scorecard. Gold is in value deficit compared to the euro and yen August averages (click on chart for larger image):


Compared to mid-October, Friday (10/16):


Cheers - Colonel

Photos by Mariana Titus

Friday, December 4, 2015

Gold Rally to $1,088; Waterton Blinks on Timberline; General Moly/AMER Update


December Sky
Antelope Valley, Eureka, Nevada

Latest News

What do copper & gold signal for 2016? (by Richard Baker, Elko Daily Free Press, 12/03/2015)






Blasts from the Past


The online version:


"Click to read" and the online version looks much like the printed magazine. My column on the Windfall Mine starts on page 62 (page 61 printed version). Press "Esc" to return to the Elko Daily Free Press. There is a handy scroll bar to the pages at the bottom of the screen. The same article appeared in the Elko Daily Free Press September 10:


***
Please checkout Mariana's Eureka, Nevada on Facebook

Numbers used for this morning's early analysis:

Goldman Sachs Commodity Index

S&P GSCI 329.9, 12/15 contract (intraday low 329.9, on 12/04/2015)

Nymex/Comex (most active contracts)

Nymex oil (WTI) $39.97 per barrel (intraday low $37.75 on 8/24/2015)
Brent crude $ 43.10 per barrel
Comex copper $2.0785 per pound (intraday low $2.0020 on 11/23/2015)
Comex gold $1,077.9 per ounce ( high today $1,088.3, intaday low $1,051.6 on 11/27/2015)
Comex silver $14.455 per ounce (intraday low $13.89 on 11/23/2015)

Canary in the gold mine: Fate of high yield corporate bonds (see explanation below)

iShares iBoxx $ High Yield Corporate Bond (HYG) $82.67 ($81.66 52-week low)

Trouble ahead: HYG < $82...so far so good



Ancient Devonian Seabeds
Devil's Gate, Eureka, Nevada

Gold Rally to $1,088

US dollar plunge, gold & euro soar

Macro drivers: continued concerns about China; timing of a U.S. Federal Reserve interest rate rise, European Central Bank stimulus outlook

Wild cards: continued terrorist events

Bearish bet for next week: return to $1,065 territory

Morning Miners!

Major currencies typically move in small steps not big leaps - not this week. On Thursday, European Central Bank's Mario Draghi disappointed global markets Thursday with a only modest move in stimulus followed by a robust U.S labor report this morning. The market reaction has been wild and crazy with a soaring euro, plunging U.S. dollar and gold rally nearly touching $1,090 per ounce in morning trading. Wells Fargo metals guru Janet Mirasola describes the response as "short term chaos" in a rare e-mail alert to her followers:

Global markets are reacting violently to headline news this week which began with Super Mario and the ECB disappointing traders who had been running very short of the euro hoping for a parity trade for Christmas. All the smart guys in the room said so!!

Oil reacted violently first to rumors of a possible agreement to cut production from this week’s OPEC meeting followed by the reality of a RAISE in the output ceiling to 31.5 million bpd from 30 million bpd. Gold has found friends as a safe haven from those other markets sending its value soaring. Other markets caught up in the short term headline trades of this week include anything priced in Greenbacks like our own base metals while equity traders continue to try to justify the moves with fundamentals factoids!! 

...understand that nothing really dramatically changed fundamentally across the globe but that investors have lost the nerve to hold positions of risk for more than a short period causing the momentum that feeds on itself clearing out the “crowded room” The best conclusion to draw is to keep short term risk at a minimum while working with fundamental analysis for longer term portfolios thereby avoiding the Chaos!

Now, tell us how you really feel Janet. Phew!

With respect to gold price, this is how I summarized the volatile market reaction in my input to today's Kitco News Weekly Gold Survey (full report below):

Between Mario Draghi's luke warm stimulus update yesterday and a better-than-expected U.S. jobs report today, global markets close the week in a state of flux. Although U.S. dollar strength has been blunted by an impressive pop in the euro Thursday, the likelihood of a first rate increase announcement from the FOMC should take some of the sizzle out of today's gold rally to nearly $1,090 per ounce.

Today's NFP scoring 211K jobs in November with an upward revision of 298K for October, will likely be enough to initiate tightening of U.S. monetary policy. Before Draghi's comments, gold found itself highly correlated with key commodities copper and oil while losing ground to both the euro and yen. The latter is concerning because a loss of traction with devalued currencies is a red flag - last Friday, gold denominated in yen was only 6% above its 2013 low. Even with today's rally, gold remains below the key 1,000-euro level at 995 euros per ounce.

After the dust settles, these booger bears will return - gold should find itself somewhere between today's highs and yesterday's low ($1,045.4), my target for next week is $1,065 per ounce.

Nuts. I hate to be the Debbie Downer on a gold rally...maybe I'm wrong. Stay tuned.


Waterton Blinks on Timberline

This report has been following the expanding footprint of Waterton Precious Metals Fund II Cayman, LP. Recently they have been picking up properties on both the east and west slopes of Prospect Mountain (see news press releases below headline photo). Yesterday, Waterton surprisingly withdrew a proposed transaction with Timberline Resources (TLR):

Timberline Provides Update on Proposed Acquisition by Waterton Precious Metals Fund II Cayman, LP (Press release, 12/03/2015)

Locally, Timberline controls the 23 square-mile Eureka project lying on the Battle Mountain-Eureka gold trend which includes a Lookout Mountain project and a drill program at the old Windfall mine.

General Moly/AMER Update

General Moly (GMO) has moved the ball a little further with their Chinese partner AMER on the Mount Hope molybdenum project. As announced Monday:

General Moly Announces Closure of $4 Million Tranche 1 Equity Investment with AMER International (Press release, 11/30/2015)

The price of moly oxide is still competing with hamburger at $4.60 per pound (Metals Weekly, 11/20/2015).
.
What's got the cat worried?

This report continues to carry this link to remind us of some potential bumps in the road ahead. Activist billionaire investor Carl Icahn explains why high yields are a scary indicator in this chilling video:


Please be mindful that Icahn is talking his own book (he is short of high yield bonds). He has also recently invested significantly in Freeport-McMoRan (FCX) which this report views as a positive.

Chart to Watch

Gold price margins from 2013 lows (euro, yen)

A disturbing aspect of gold's recent decline in USD is the concurrent collapse in euro and yen terms.

One of the few accomplishments the yellow metal can boast is staying above its 2013 lows in terms of both currencies. The percent margin above those bottoms peaked in late January and has since trended down with the divergence of US monetary policy from Europe and Japan, and the associated rise of the US dollar. (click on chart for larger image).



Since late-October, the margin's rapid decline relative to yen has been particularly troubling. I posit that declining value of gold relative to a devalued currency is a red flag. Last Friday, gold price in yen terms was falling fast closing only 6% above its 2013 low. If this margin falls to zero, an equivalent USD gold price suggests sub-$1,000 per ounce given current exchange rates.

The last two days have put a pause in this decline - let's see if there is a turnaround in gold's favor.

2013 lows:

879.64 euros per ounce on 12/20/2013
122,443 yen per ounce on 6/28/2013

Friday (11/27 close):

997.5 euros per ounce (+13.4% margin)
129,772 yen per ounce (+6.0% margin)

Market Stats

Here's the scorecard on the stock market, S&P 500 is presently trading at 2,081.73 (12:49 PM ET). 

Market corrections are generally defined as a 10% or greater move to the downside from the top of a key index. I like to use the S&P 500 (.SPX) because it includes a broader swath of America' best companies than the Dow Jones Industrial (.DJIA) - five hundred compared to thirty. Here is the score sheet of ups and downs on an intraday basis:

S&P 500 high: 2,134.72, 5/20/2015
S&P 500 10% correction 1,921.25
S&P 500 low: 1,867.01, on Monday 8/24/2015 down 12.5%
S&P 500 bear market begins below 20% at 1,707.78

Key "next level" to watch going down is 1,820.66 (low on 10/15/2014, down 14.7%)

For Fibonacci folks the "fib box" is:

50.0% retracement from 8/24 low = 2,000.87

61.8% retracement from 8/24 low = 2,032.45

Getting inside the "fib box" is generally considered a "bullish" move to the upside; failing the "fib box" is a bearish indication.

The S&P 500 did finally escape the fib box - let's stay there! 

Kitco News Gold Survey

My (full) input to the Kitco News Weekly Gold Survey:

My vote is down. Target price $1,065 per ounce.

Discussion:

Between Mario Draghi's luke warm stimulus update yesterday and a better-than-expected U.S. jobs report today, global markets close the week in a state of flux. Although U.S. dollar strength has been blunted by an impressive pop in the euro Thursday, the likelihood of a first rate increase announcement from the FOMC should take some of the sizzle out of today's gold rally to nearly $1,090 per ounce.

Today's NFP scoring 211K jobs in November with an upward revision of 298K for October, will likely be enough to initiate tightening of U.S. monetary policy. Before Draghi's comments, gold found itself highly correlated with key commodities copper and oil while losing ground to both the euro and yen. The latter is concerning because a loss of traction with a devalued currencies is a red flag - last Friday, gold denominated in yen was only 6% above its 2013 low. Even with today's rally, gold remains below the key 1,000-euro level at 995 euros per ounce.

After the dust settles, these booger bears will return - gold should find itself somewhere between today's highs and yesterday's low ($1,045.4), my target for next week is $1,065 per ounce.

This week's scorecard. Gold is in value deficit compared to the euro and yen August averages (Note 1, click on chart for larger image):


Compared to mid-October, Friday (10/16):


Notes:

(1) an August comparison is relevant given the market collapse 8/24 & 8/25

Cheers - Colonel

Photos by Mariana Titus

Friday, November 27, 2015

Gold Dips to $1,051; Euro 1.05-level; China Blue


Diamond Range before the storm
Eureka, Nevada

Latest News

What do copper & gold signal for 2016? (by Richard Baker, Elko Daily Free Press, 12/03/2015)






Blasts from the Past


The online version:


"Click to read" and the online version looks much like the printed magazine. My column on the Windfall Mine starts on page 62 (page 61 printed version). Press "Esc" to return to the Elko Daily Free Press. There is a handy scroll bar to the pages at the bottom of the screen. The same article appeared in the Elko Daily Free Press September 10:


***
Please checkout Mariana's Eureka, Nevada on Facebook

Numbers used for this morning's early analysis:

Goldman Sachs Commodity Index

S&P GSCI 343,0, 12/15 contract (intraday low 335.20 on 11/13/2015)

Nymex/Comex (most active contracts)

Nymex oil (WTI) $42.17 per barrel (intraday low $37.75 on 8/24/2015)
Brent crude $ 45.37 per barrel
Comex copper $2.0705 per pound (intraday low $2.0020 on 11/23/2015)
Comex gold $1,058.3 per ounce (intaday low $1,051.6 on 11/27/2015)
Comex silver $14.100 per ounce (intraday low $13.89 on 11/23/2015)

Canary in the gold mine: Fate of high yield corporate bonds (see explanation below)

iShares iBoxx $ High Yield Corporate Bond (HYG) $82.97 ($81.66 52-week low)

Trouble ahead: HYG < $82...so far so good



South Ranch, Eureka, Nevada

Gold dips to $1,051; Euro 1.05-level


US dollar 7-month high, Gold 5.5-year low

Macro drivers: continued concerns about China; timing of a U.S. Federal Reserve interest rate rise

Wild cards: U.S. industrial recession, continued terrorist events

Bearish bet for next week: Retest $1,050-level

Morning Miners!

I trust you enjoyed a good Thanksgiving with lots of snow on the ground in Eureka, Nevada.

Don't let a half-day of open markets in the U.S. spoil it. If you enjoy a strong U.S. dollar and resilient stock market, today's trading brings more cheer. The green back just pegged 7-month high and the S&P 500 is hanging tough just below 2,100 territory. Although the latter is pasture well trodden through much of 2015 it's presently a healthy 12% above the August 1,867 low.

Wish the ole Colonel could say the same about gold. In August, the yellow metal rallied to $1,170 per ounce as copper plunged to $2.2 per pound. Now gold now follows the commodity herd to ever lower elevations. Just as the markets opened in the U.S., Comex gold dipped to $1.051.6. Copper is faring better today but plumbed $2.002 on Monday, trading presently at $2.0705 with it's lustrous compatriot now at $1,058.3.

How I described next week's outlook to the Kitco News Weekly Gold Survey (full report may be found at near the end of this blog):

My vote is down. Target price $1,050 per ounce.

Gold finds itself with few friends on a thinly traded day following the U.S. Thanksgiving holiday. Comex gold plumbed $1,051.6 per ounce in early morning dealings falling to a new low relative to U.S. equities - more than a 60% loss in value relative to the S&P 500 since November, 2012. 

The yellow metal is also highly correlated with embattled commodities oil and copper; all three influenced negatively by a strengthening U.S. dollar. Equally troubling is gold's continuing slide compared to the Japanese yen. A loss of traction with a devalued currency is a red flag - gold denominated in yen is now only 6% above its 2013 low. Although gold fares much better relative to the euro, it slipped below the key 1,000-euro level today - even as the euro fell to 1.059 on a stronger dollar.

Even though Comex gold is presently off its morning low, I believe it will retest the key $1,050 per ounce level next week.



China Blue

More troubling news from China certainly doesn't come to the aid of metal prices. This is the latest from the land of dragons as told by Wells Fargo's metals guru Janet Mirasola:

Shanghai Shares collapsed overnight, losing 5.48% as investor confidence was shaken by probes into brokerage companies. The China Securities Regulatory Commission has launched investigations into Citic, Founder Securities, Haitong Securities and China Merchants amongst others taking their equity values on a collective 10% slide. As China wobbles the rest of the world follows with the Nikkei losing 0.30% and the MSCI Asia Pacific Index falling 1.50%. In other news from China Industrial Profits fell 4.6% in October taking the shine off yesterday’s base metals rally that was triggered by hopes that the government would step in, save the industry and buy up surplus metals… Euro bourses and other base commodities are also slipping into the red as they too follow the China effect.

Hmm. Stay tuned pardner and hold on to your greenbacks.

What's got the cat worried?

This report continues to carry this link to remind us of some potential bumps in the road ahead. Activist billionaire investor Carl Icahn explains why high yields are a scary indicator in this chilling video:


Please be mindful that Icahn is talking his own book (he is short of high yield bonds). He has also recently invested significantly in Freeport-McMoRan (FCX) which this report views as a positive.

Chart to Watch

Gold price margins from 2013 lows (euro, yen)

A disturbing aspect of gold's recent decline in USD is the concurrent collapse in euro and yen terms.

One of the few accomplishments the yellow metal can boast is staying above its 2013 lows in terms of both currencies. The percent margin above those bottoms peaked in late January and has since trended down with the divergence of US monetary policy from Europe and Japan, and the associated rise of the US dollar. (click on chart for larger image).



Since late-October, the margin's rapid decline relative to yen has been particularly troubling. I posit that declining value of gold relative to a devalued currency is a red flag. On Friday, gold price in yen terms was falling fast closing only 6% above its 2013 low. If this margin falls to zero, an equivalent USD gold price suggests $997 per ounce given current exchange rates.

2013 lows:

879.64 euros per ounce on 12/20/2013
122,443 yen per ounce on 6/28/2013

Friday (11/27 close):

997.5 euros per ounce (+13.4% margin)
129,772 yen per ounce (+6.0% margin)

Market Stats

Here's the scorecard on the stock market, S&P 500 is presently trading at 2,091.97 (12:30 PM ET). 

Market corrections are generally defined as a 10% or greater move to the downside from the top of a key index. I like to use the S&P 500 (.SPX) because it includes a broader swath of America' best companies than the Dow Jones Industrial (.DJIA) - five hundred compared to thirty. Here is the score sheet of ups and downs on an intraday basis:

S&P 500 high: 2,134.72, 5/20/2015
S&P 500 10% correction 1,921.25
S&P 500 low: 1,867.01, on Monday 8/24/2015 down 12.5%
S&P 500 bear market begins below 20% at 1,707.78

Key "next level" to watch going down is 1,820.66 (low on 10/15/2014, down 14.7%)

For Fibonacci folks the "fib box" is:

50.0% retracement from 8/24 low = 2,000.87

61.8% retracement from 8/24 low = 2,032.45

Getting inside the "fib box" is generally considered a "bullish" move to the upside; failing the "fib box" is a bearish indication.

The S&P 500 did finally escape the fib box - let's stay there! 

Kitco News Gold Survey

My (full) input to the Kitco News Weekly Gold Survey:

My vote is down. Target price $1,050 per ounce.

Discussion:

Gold finds itself with few friends on a thinly traded day following the U.S. Thanksgiving holiday. Comex gold plumbed $1,051.6 per ounce in early morning dealings falling to a new low relative to U.S. equities - more than a 60% loss in value relative to the S&P 500 since November, 2012.

The yellow metal is also highly correlated with embattled commodities oil and copper, all three influenced negatively by a strengthening U.S. dollar. Equally troubling is gold's continuing slide compared to the Japanese yen. A loss of traction with a devalued currency is a red flag - gold denominated in yen is now only 6% above its 2013 low. Although gold fares much better relative to the euro, it slipped below the key 1,000-euro level today - even as the euro fell to 1.059 on a stronger dollar.

Comex gold is presently off its morning low but I believe it will retest the key $1,050 per ounce level next week.

This week's scorecard. With the exception of copper, gold is in value deficit compared to August averages (Note 1, click on chart for larger image):


Compared to mid-October, Friday (10/16):


Notes:

(1) an August comparison is relevant given the market collapse 8/24 & 8/25

Cheers - Colonel

Photos by Mariana Titus

Friday, November 13, 2015

Gold up from $1,073; Barrick Sells, Waterton Expands Eureka Footprint


Winter Approaches
Eureka MinerNovember 2010

Latest News




Blasts from the Past


The online version is up and running!


"Click to read" and the online version looks much like the printed magazine. My column on the Windfall Mine starts on page 62 (page 61 printed version). Press "Esc" to return to the Elko Daily Free Press. There is a handy scroll bar to the pages at the bottom of the screen. The same article appeared in the Elko Daily Free Press September 10:


***
Please checkout Mariana's Eureka, Nevada on Facebook

Numbers used for this morning's early analysis:

Goldman Sachs Commodity Index

S&P GSCI 343.0, 12/15 contract (intraday low 342.4 on 8/24/2015)

Nymex/Comex (most active contracts)

Nymex oil (WTI) $40.96 per barrel (intraday low $37.75 on 8/24/2015)
Brent crude $ 44.87 per barrel
Comex copper $2.1615 per pound (intraday low $2.1510 on 11/13/2015)
Comex gold $1,081.2 per ounce (intaday low $1,073.0 on 11/12/2015)
Comex silver $14.185 per ounce (intraday low $14.155 on 11/13/2015)

Canary in the gold mine: Fate of high yield corporate bonds (see explanation below)

iShares iBoxx $ High Yield Corporate Bond (HYG) $83.14 ($81.66 52-week low)

Trouble ahead: HYG < $82...so far so good



Eureka MinerNovember 2010

Gold up from $1,073

US dollar remains strong

Macro drivers: concerns over China growth & timing of a U.S. Federal Reserve interest rate rise

Wild cards: U.S. industrial recession, oil falling to new lows

Bullish bet for next week: up, $1,090 per ounce

Morning Miners!

I'll return to Eureka next week and couldn't help but have some fond memories of November, 2010. Five years ago metals & mining were on a roll with mining stocks reaching peaks and copper fetching more than $4.5 a pound in early-2011. Gold set a new all time record by the fall of 2011 as copper prices crashed. Mining stocks have been in a steady decline since.

Nature of the business.

There are some signs that we are nearing the bottom. 2016 will likely be a year of transition as supply finds balance with lower global demand followed by sector recovery in 2017. In the meantime, there is definitely some bargain hunting going as demonstrated by the recent Barrick sale of key properties in Eureka County and elsewhere (see below).

I submitted a column to the upcoming Winter Edition of the Mining Quarterly with a copper and gold outlook for the first-half of 2016. Keep the faith.

Here is today's input to the Kitco News Weekly Gold Survey (full report may be found at near the end of this blog):

My vote is up. Target price $1,090 per ounce.

Discussion:

This has been a grim week for commodities starting with disappointing China industrial production numbers Monday to the worst-than-expected U.S. PPI and retail sales this morning. Although Comex gold dipped to $1,073 per ounce yesterday, the yellow metal has fared better on the week than oil, copper or silver - all touching new lows this morning. 

Trading presently at $1,081, I believe gold will see more relief next week with some safety trade and bargain hunting but fail resistance at this week's high of $1,094.9 per ounce. My target price is $1,090.

A currency red flag is still raised as gold continues to fall in yen terms - loss of gold value to a major devalued currency is a bearish indication. Slightly more bullish, gold has held its ground relative to the falling euro currency and U.S equities.


 Barrick Sells, Waterton Expands Eureka Footprint

This has been quite a news week with Barrick Gold Corp. (ABX) selling their share of Round Mountain, Bald Mountain, Spring Valley and Ruby Hill.

Barrick Sells Stakes In Four Nevada Assets; Kinross Among The Buyers (Kitco News, 11/12/2015)

Although Kinross Gold Corp. (KGC) picked up Barrick's 50% Round Mountain and 100% Bald Mountain interests, I found it very interesting that Waterton Precious Metals Fund II Cayman, LP bought the Ruby Hill Mine and a 70% interest in Spring Valley for $110 million in cash - what a fire sale!

Importantly, Waterton has greatly expanded their footprint in Eureka County. You may remember that Waterton came to the aid of Timberline Resources in late-September:

Timberline Resources Announces Closing of Non-Brokered Private Placement Financing with Waterton Precious Metals Fund II Cayman, LP (Press release, 9/23/2015)

Timberline controls the 23 square-mile Eureka project lying on the Battle Mountain-Eureka gold trend which includes a Lookout Mountain project and a drill program at the old Windfall mine. Add to these properties the Ruby Hill Mine and Waterton has a pretty good chunk of assets around the Eureka town site.

Finally, Barrick sold its 70% share of the Spring Valley joint venture and Waterton is apparently in negotiation for Midway Gold Corp.'s 30%.

Midway and Waterton Announce Agreement in Principle for the Sale and Acquisition of Midway’s 30% Interest in Spring Valley (Press Release, 11/12/2015)

Stay tuned.


What's got the cat worried?

This report continues to carry this link to remind us of some potential bumps in the road ahead. Activist billionaire investor Carl Icahn explains why high yields are a scary indicator in this chilling video:


Please be mindful that Icahn is talking his own book (he is short of high yield bonds). He has also recently invested significantly in Freeport-McMoRan (FCX) which this report views as a positive.

Market Stats

Here's the scorecard on the stock market, S&P 500 is presently trading at 2,037.86. 

Market corrections are generally defined as a 10% or greater move to the downside from the top of a key index. I like to use the S&P 500 (.SPX) because it includes a broader swath of America' best companies than the Dow Jones Industrial (.DJIA) - five hundred compared to thirty. Here is the score sheet of ups and downs on an intraday basis:

S&P 500 high: 2,134.72, 5/20/2015
S&P 500 10% correction 1,921.25
S&P 500 low: 1,867.01, on Monday 8/24/2015 down 12.5%
S&P 500 bear market begins below 20% at 1,707.78

Key "next level" to watch going down is 1,820.66 (low on 10/15/2014, down 14.7%)

For Fibonacci folks the "fib box" is:

50.0% retracement from 8/24 low = 2,000.87

61.8% retracement from 8/24 low = 2,032.45

Getting inside the "fib box" is generally considered a "bullish" move to the upside; failing the "fib box" is a bearish indication.

The S&P 500 did finally escape the fib box trading but is perilously near re-entering it from the topside today (bearish going forward) - let's see where the S&P closes today.

Kitco News Gold Survey

My (full) input to the Kitco News Weekly Gold Survey:

My vote is up. Target price $1,090 per ounce.

Discussion:

This has been a grim week for commodities starting with disappointing China industrial production numbers Monday to the worst-than-expected U.S. PPI and retail sales this morning. Although Comex gold dipped to $1,073 per ounce yesterday, the yellow metal has fared better on the week than oil, copper or silver - all touching new lows this morning.

Trading presently at $1,081, I believe gold will see more relief next week with some safety trade and bargain hunting but fail resistance at this week's high of $1,094.9 per ounce. My target price is $1,090.

A currency red flag is still raised as gold continues to fall in yen terms - loss of gold value to a major devalued currency is a bearish indication. Slightly more bullish, gold has held its ground relative to the falling euro currency and U.S equities.

This week's scorecard (click on chart for larger image):


Compared to a month ago, Friday (10/16):


Notes:

(1) an August comparison is relevant given the market collapse 8/24 & 8/25

Cheers - Colonel

Photos by Mariana Titus

Friday, October 23, 2015

Hurricane Patricia 200 mph CAT 5; Central Bank Surprise Season, Gold Suffers


Monster CAT 5 hurricane heads for Mexico
Another piece of the El Niño story

Latest News


*** UPDATE: Hurricane Patricia became the strongest storm ever "reliably measured" early Friday. It exceeded wind speed and low pressure hurricane records scoring 200 mph & 879 mb. To give that last number some meaning, 879mb is about 26 inches of mercury. Household barometers usually only go down to 28. Equally chilling was the fall in pressure - 100 mb in one hour (nearly 3 inches/hour on grandma's barometer) - this storm gained strength incredibly fast. The effects of Patricia will stretch from landfall north of Manzanillo to the Great Lakes. By Saturday morning, 20 million folks are on flood watch in Texas (8:09 AM, Saturday, 10/24/2015) ***

Hurricane Patricia: Strongest Storm Ever Measured to Hit Mexico (NBC News, 10/23/2015)



The online version is up and running!


"Click to read" and the online version looks much like the printed magazine. My column on the Windfall Mine starts on page 62 (page 61 printed version). Press "Esc" to return to the Elko Daily Free Press. There is a handy scroll bar to the pages at the bottom of the screen. The same article appeared in the Elko Daily Free Press September 10:


***
Memorable quotes (lately):

With respect to a pending interest rate hike “[The Federal Reserve needs to] get in front of this and to prevent speculative forces in financial markets that could lead to inappropriate risk-taking that might undermine financial stability” - Fed Chair Janet Yellen (09/24/2015)

“Heightened concerns about growth in China and recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term” - Fed Chair Janet Yellen in her comments following a decision to delay rate hikes (09/17/2015)

Please checkout Mariana's Eureka, Nevada on Facebook

Numbers used for this morning's early analysis:

Goldman Sachs Commodity Index

S&P GSCI 361.65, 11/15 contract (intraday low 342.4 on 8/24/2015)

Nymex/Comex (most active contracts)

Nymex oil (WTI) $44.63 per barrel (intraday low $37.75 on 8/24/2015)
Brent crude $ 47.66 per barrel
Comex copper $2.3505 per pound (intraday low $2.209 on 8/24/2015)
Comex gold $1,161.4 per ounce (intaday high $1,169.8 on 8/24/2015)
Comex silver $15.765 per ounce

Canary in the gold mine: Fate of high yield corporate bonds (see explanation below)

iShares iBoxx $ High Yield Corporate Bond (HYG) $85.88 ($81.66 52-week low)

Trouble ahead: HYG < $82...so far so good




Hurricane Patricia 200 mph
CAT 5 Monster Storm

Morning Miners!

It is a rare Friday morning when I wake up more interested in weather in far away places than the price of gold and copper futures. As you are aware, there is a tremendous El Niño building in the Pacific that promises to have a major impact on our coastal regions and possibly Eureka this winter. A sympton of this event are a very active hurricane seasons in the Eastern Pacific (roughly the water between Hawaii and Mexico) which started in 2014.

Only a tropical storm a few days ago, Hurricane Patricia has become a category 5 this morning with 200 mph winds. She threatens southwestern Mexico imminently. Although Patricia is expected to drop in intensity as it approaches land, this will be a devastating event. Here is what I posted on Facebook earlier today:

El Niño Diary (continued from 10/21/15)

As a follow-up to my continuing El Niño watch, Tropical Storm Patricia has unexpectedly transformed from tropical storm to a 200 mph CAT 5 monster (designated "M" by NOAA for major huricane):

PATRICIA... ...THE STRONGEST EASTERN NORTH PACIFIC HURRICANE ON RECORD... ...HEADING FOR POTENTIALLY CATASTROPHIC LANDFALL IN SOUTHWESTERN MEXICO LATER TODAY... (NOAA caps not mine, 200 mph winds, a shockingly low 880mb for hurricane propeller heads).... This is not a good day for residents of Manzanillo & Puerto Vallarta...our thoughts and prayers are with them.

To put this storm in perspective, it is telling that on August 29 there were 3 simultaneous CAT 4 hurricanes in the Pacific. I believe we have 14 hurricanes on the scoreboard for 2015 in the Eastern Pacific - Hurricane Patricia will become number 15. Last year, there were 22 named storms including another CAT 5 off Mexico (Mighty Marie). Funny, I've tracked hurricanes in the Gulf & Caribbean for years - now all the action is in the Pacific...somethin' different going on.

Following commodities, I run into a variety of opinions on this El Niño. Here's a view from a one grain trader:

"El Niño, Global Warming, Climate Change.....grain traders have heard it all before, and are so far ahead of these envirowhackjob cassandras it isn't even funny any more..."

Stay tuned, pardner. The boy scout in me says, "be prepared."

Central Bank Surprise Season, Gold Suffers

US dollar surge on Europe, China central bank moves, gold suffers

Macro drivers: concerns over China growth & timing of a U.S. Federal Reserve interest rate rise

Wild Cards: Central bank policy

Bearish bet for next week: down, $1,150 per ounce

One early victim of Hurricane Patricia was Kitco News - the ole Colonel was tardy in delivering his report, another rare event.

My input to the Kitco News Weekly Gold Survey (full report may be found at near the end of this blog):

My vote is down. Target $1,150 per ounce.

October is becoming Central Bank surprise season. Last Halloween, Japan put a supercharger on their already accomodative policy cratering gold prices. This week Mario Draghi's comments that the ECB was ready to cut interest rates and expand QE coupled with China's PBOC monetary moves today [1-year lending rate cut of 25 basis points] have propelled equity markets and the U.S. dollar. Gold is down and will probably find support at $1,150 per ounce next week, just above early-September high ($1,147.3).

Although trading presently at $1,161.4 per ounce, $30 below this month's month high at $1,191.7, gold has still made substantial gains against both euro and yen when compared to August averages. Silver has shined just slightly more; the yellow metal continues to outperform the red and is essentially on par with oil.​ The most impressive feat for gold this week is a rise in its euro value at $1,052.8 euros per ounce - a level not seen since mid-July.

Overall a near term pause in gold's fortunes, more downside ahead in U.S. dollar value.

My vote is down. Target $1,150 per ounce.

What's got the cat worried?

This report continues to carry this link to remind us that Halloween may not be the only frightening thing in our future. Activist billionaire investor Carl Icahn explains why high yields are a scary indicator in this chilling video:


Please be mindful that Icahn is talking his own book (he is short of high yield bonds). He has also recently invested significantly in Freeport-McMoRan (FCX) which this report views as a positive.

Market Stats

Here's the scorecard on the stock market, S&P 500 is presently trading at 2,071.34 

Market corrections are generally defined as a 10% or greater move to the downside from the top of a key index. I like to use the S&P 500 (.SPX) because it includes a broader swath of America' best companies than the Dow Jones Industrial (.DJIA) - five hundred compared to thirty. Here is the score sheet of ups and downs on an intraday basis:

S&P 500 high: 2,134.72, 5/20/2015
S&P 500 10% correction 1,921.25
S&P 500 low: 1,867.01, on Monday 8/24/2015 down 12.5%
S&P 500 bear market begins below 20% at 1,707.78

Key "next level" to watch going down is 1,820.66 (low on 10/15/2014, down 14.7%)

For Fibonacci folks the "fib box" is:

50.0% retracement from 8/24 low = 2,000.87

61.8% retracement from 8/24 low = 2,032.45

Getting inside the "fib box" is generally considered a "bullish" move to the upside; failing the "fib box" is a bearish indication.

There have been numerous attempts but the S&P 500 has finally blown the top of the fib box trading at 2.071.34. This is a very bullish development - let's see where the S&P closes today.

Kitco News Gold Survey

My (full) input to the Kitco News Weekly Gold Survey:

My vote is up. Target $1,150 per ounce.

October is becoming Central Bank surprise season. Last Halloween, Japan put a supercharger on their already accomodative policy cratering gold prices. This week Mario Draghi's comments that the ECB was ready to cut interest rates and expand QE coupled with China's PBOC monetary moves today have propelled equity markets and the U.S. dollar. Gold is down and will probably find support at $1,150 per ounce next week, just above early-September high ($1,147.3).

Although trading presently at $1,161.4 per ounce, $30 below this month's month high at $1,191.7, gold has still made substantial gains against both euro and yen when compared to August averages (1). Silver has shined just slightly more; the yellow metal continues to outperform the red and is essentially on par with oil. ​ ​​ The most impressive feat for gold is a rise in its euro value at $1,052.8 euros per ounce - a level not seen since mid-July. Overall a near term pause in gold's fortunes, more downside ahead in U.S. dollar value.

This week's scorecard (click on chart for larger image):


Last Friday (10/16):


Notes:

(1) an August comparison is relevant given the market collapse 8/24 & 8/25

Cheers - Colonel

Photos by Mariana Titus