"The history of Eureka lies in its future." - Lambert Molinelli, 1878


The author/editor of the Eureka Miner owns common shares of local mining stocks, General Moly (GMO) 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, February 20, 2015

From Roaring Tiger to Green Wooden Goat

From Roaring Tiger to Green Wooden Goat

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*** Local Mining News ***

General Moly Announces Agreement with POS-Minerals to Utilize $36 Million in Reserve Account to Fund Mt. Hope Project (Press release, 1/21/2015)

*** AM Prices ***

The early morning prices used for today's analysis (most active contracts):

Goldman Sachs Commodity Index

S&P GSCI 420.00 (381.3 52-wk low) 3/15 contract


Nymex oil (WTI) $51.28 per barrel
Comex copper $2.5880 per pound
Comex gold $1,210.7 per ounce
Comex silver $16.410 per ounce

Latest Nevada gasoline prices

Year of the Green Wooden Goat

Morning Miners!

Gong Xi Fa Cai! Chinese New Lunar New Year celebrations started this week and will continue into next - always a curious time for commodity markets as the world's biggest customer takes off to party hardy. Copper is a good example. The red metal bounced on the Comex anticipating things will be rosier in the land of the Dragon when bleary-eyed traders return to their desks from holiday. Although off its highs for the week, Comex copper is enjoying $2.6 per pound territory after dipping below $2.5 in late-January. Copper giant Freeport McMoRan (FCX) is up a full 25% from its January low - lunar forces at work....Gong Xi Fa Cai!

Of course, recent history reminds us that red metal rallies typically return to earth after the last Chinese sky rocket is lit - the commodity downcycle is not over and there will no doubt be more pain in the metal complex for 2015. It is the year of the Green Wooden Goat not the roaring 2010 Tiger of the Chinese zodiac - remember all those years when copper rarely dipped below $3 per pound?

There are, however, signs the commodity world has entered a bottoming process in much the same way as gold prices. The S&P Goldman Sachs Commodity Index (GSCI, see above) which covers everything from corn to copper is off its January lows too. Although biased heavily to energy futures, oil has seen some recent upward momentum. There are still calls for a trip to $35 per barrel or lower; for now, Nymex (WTI) crude is showing resilience at the $50-level. The currencies of oil-dependent economies like Russia are stabilizing some too. The ruble is trading in the low 60s after making a scary run at 70 earlier this month (to give this some perspective a U.S. dollar fetched 32-plus rubles at the beginning of 2014). On a sobering note, The EIA reports that oil stockpiles are the greatest in 80 years.

With China momentarily out of the picture, Europe is center stage with grave concerns that Greece may be expelled from the eurozone. Europe is the second biggest copper consumer which explains why the recent red metal rally is a bit tarnished. Concerns about sooner-than-later interest rate hikes from the U.S. Federal Reserve dropped Comex gold to $1,197.2 per ounce Wednesday but "Grexit" concerns lifted the yellow metal above $1,200 as the weekend approaches. Comex gold is currently trading at $1,210.7 per ounce.

My guess is that Europe will find some way to kick the can a little further down the road and China copper demand may not excite but will keep prices above $2.5 per pound for the time being - 2015 may well be remembered as the year of price stabilization. Gold seems to already be honoring $1,200 per ounce.

That's not so bad, pardner.

The Eureka Miner's Gold Value Index (GVI), which measures gold value against oil, copper and silver independent of currency, continues to bullishly trend higher (click for larger view):

The January 28, 2015 GVI (point C) is at high levels not seen since the dark days of early-2009. Reassuringly gold has been trending higher relative to these key commodities (i.e. real stuff, not paper money) since mid-2006.

My gold 2015 price forecasts (below) are derived from the Colonel's column on the yellow metal in the latest edition of the...

Winter 2014 Mining Quarterly

The online edition of the Winter 2014 Mining Quarterly is out and about. Elko Daily Free Press Editor Marianne Kobak McKown and her team have done an outstanding job on this publication. There are feature articles on Cortez Hills, Barrick's Turquoise Ridge and Newmont's Twin Creeks together with updates on Comstock, Pershing Gold, Veris Gold and Western Lithium. It's a dandy!

The ole Colonel wrote a gold price outlook for 2015, Gold at the Crossroads, which you can find on pages 72-77 of the online edition and 75-79 of the printed version.

This report closes with updates for the charts and numbers provided in this column - the underlying assumptions for 2015 remain unchanged.

Local & Benchmark Mining Stocks

For the most part, the Mining Sector has been moving up and away from January's doldrums. Big gold miners Newmont (NEM) and Barrick Gold (ABX) are trading at $26.11 and $13.02 (chart below, click for larger view) . Midway (MDW) is $0.74 and unchanged in morning trade. Benchmark Moly Miner Thompson Creek (TC) is up 4.25% at $1.5950. GMO is just below 50 cents per share at $0.48. Timberline Resources (TLR) is unchanged at $0.66 per share. Please checkout the latest press release from Midway at the top of this report.

Finally, benchmark miner and copper giant Freeport-McMoRan (FCX) is down 0.36 % at $21.03. Freeport has taken on oil interests to diversify so feels double-pain when red metal and oil prices are down. It is especially encouraging to see FCX at the $21-level after plumbing high-$16 depths in January.

Mining Stocks, Yahoo Finance

Gold Forecast Update

Some highlights updated through this morning's trading:

  1. Gold has fared quite well compared to other key commodities; one ounce still buys more ounces of silver, pounds of copper and barrels of oil than it did in late-December 2013. Outpacing a 0.7% gain in U.S. dollar price, glitter is up 19% over the white metal, 32% over the red and 93% over oil (chart #1, below). A 8-1/2 year uptrend in gold value relative to these commodities is intact. 
  2. Gold's relation to commodities works like the force of gravity. Without the propulsion of safe haven or monetary hedge, the yellow metal falls back in line with commodity prices and historical norms. 
  3. This relation has formed a declining value wedge since 2011 (chart #2, dashed red lines) which has proved quite accurate in predicting future price ranges. Extending the dashed lines suggests a commodity value range of $1,080 to $1,170 per ounce for this quarter (1Q2015). There is some indication that gold price has escaped the value wedge and is in transition from value compression to expansion - a bullish sign that the U.S. dollar lows may indeed be in for gold price.
  4. Gold presently carries a premium to the aggregate of key commodities in chart #2; this has been mostly true since August 2011. Although this premium is declining from the peak in January, there are now signs of price stabilization above the $1,200-level.

Chart #1 (updated from the Winter 2014 Edition of the Mining Quarterly, click for larger view):

Chart #2: 

Cheers - Colonel

Photos by Mariana Titus

1 comment:

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