"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, May 8, 2015

Jobs Report OK - Gold Up, Stocks Way Up...What's Up? Mining Loses More Jobs


Diamond Mine, Prospect, Nevada

*** UPDATE for Friday, May 15, 2015 ***

*** BREAKING NEWS***

MIDWAY GOLD (NYSE:MDW) dropped below 10 cents to close at $0.0955 Friday. Quality of grade (average grade at the Pan Mine is 15% lower than expected) and total resources (in the measured and indicated category down by 36%) are plaguing the mining company together with finance challenges. Last fall (October 8, 2014) MDW traded at $1.15

My input to the Weekly Kitco Gold Survey:

"Spring Gold"

Comex gold (6/15 contract) $1,225.3 per ounce, Friday close

Since the first day of spring, Comex gold has traded in a tight $1,168-$1,224 range with the low price volatility of a currency - sandwiched between the yen and a much more bouncy euro*. That changed Wednesday when the yellow metal popped more than $25 per ounce on a flat U.S. retail sales number. A follow-through rally has pushed gold out of its spring range closing Thursday with a strong $1,225.2 per ounce. This is the first time in a long while that price has moved on disappointing economic data with significant safe haven premium ($32.8 in two-days on a closing basis).

This suggests a bullish reversal of fortune for Comex gold with late-February's $1,236 presenting the next level of resistance. I believe it is possible that gold will move at least halfway there next week. Therefore...

My vote is up with a $1,230 per ounce target. 

Cheers - Colonel  

* one a one-month basis the price volatility of gold is 1.1% compared to 0.3% for the yen and 3.1% for the euro (standard deviation divided by its mean over 1-month).


Please checkout Mariana's Eureka, Nevada on Facebook

The Colonel's latest Mining Quarterly Column:

"Major Henry G. Catlin and the Eureka-Croesus Revival" Online edition pages 60 to 74

And latest Kitco News Commentary: As Copper Goes, So Goes Gold (03/16/2015)

*** Local Mining News ***

MIDWAY GOLD PROVIDES CORPORATE UPDATE (Press release, 5/21/2015)

General Moly Announces Strategic Partnership with AMER International Group to Become a Major Shareholder (Press release, 04/17/2015)

MIDWAY RAMPS UP GOLD PRODUCTION AT PAN MINE AND PROVIDES OPERATIONS UPDATE (Press release, 04/02/2015)

***  Friday AM Prices (05/08/2015) ***

Numbers used for this morning's early analysis:

Goldman Sachs Commodity Index

S&P GSCI 443.75 (392.20 low on 03/18/2015) 5/15 contract

Nymex/Comex

Nymex oil (WTI) $58.73 per barrel
Brent crude $64.76 per barrel
Comex copper $2.9000 per pound
Comex gold $1,188.2 per ounce
Comex silver $16.420 per ounce

Latest Nevada gasoline prices


Ho-hum gold prices are good (for now)

Morning Miners!

An OK monthly jobs report  gave gold a little boost and domestic stocks a kick-in-the-pants. The Department of Labor released their monthly report at 5:30 AM Eureka time. The Comex gold high before the announcement was $1,193.0 per ounce; after, the low touched $1,180.5. As I did my morning analysis for the Kitco Weekly Gold Survey, gold  moved up a bit to trade at $1,188.2. Ho-hum.

Actually ho-hum is good news...at least from the Colonel's perspective. More on that in a moment.

The expected number for nonfarm jobs added in April was 220,000 and the actual posted 223,000 - "inline" as they say. Unemployment held steady at 5.4% and the less reported "U6" number, or everybody out of work including Uncle Lester in the camp trailer that hasn't looked for a job this century, came, down to 10.8% - the lowest since August 2008. Even Lester might start looking for meaningful employment - unfortunately, it won't be in mining. In the parlance of government statisticians:

Employment in mining fell by 15,000 in April, with most of the job loss in support activities for mining (-10,000) and in oil and gas extraction (-3,000). Since the beginning of the year, employment in mining has declined by 49,000, with losses concentrated in support activities for mining. 

Nuts.

The big benefactor so far this morning has been U.S. equity markets. The DOW is up nearly 280 points or 1.5% and the broader based S&P 500 is up a healthy 1.4% - pretty decent moves in a trading day. By comparison, gold is up a stingy 0.3% [8:56AM]. Why put your money in gold when you can ride rising stock markets into the sunset? This is  the subject of my column that will appear in the Summer Edition of the upcoming Mining Quarterly. I won't spoil the movie by telling you the ending but it comes out fairly positive for gold prices in 2015 (Hint: it has something to do with the horse, not the sunset).

This is how I described the current gold price picture to Kitco News earlier this morning (volatility is the wiggle in the day-to-day price change compared to its average):

Kitco: The market seems kind of boring and not very sexy because it’s range bound.

Eureka Miner: Yes, since shortly after the St Paddy's Day low (Comex, $1,140), gold has traded as a currency with very low price volatility. On a one month basis, the yellow metal volatility (0.84%) is sandwiched between the yen (0.38%) and a much more bouncy euro (3.27%). As such, gold has separated from its commodity brethren for the time being. For example, Comex copper is 4-times more volatile than gold; Nymex WTI crude oil, 1.5-times. Next week? I'd say up slightly, target $1,195 per ounce. Currency-like stability continues.

In short, ho-hum is good for now.

Stocks and gold have one thing in common, neither likes the prospect of a Federal Reserve interest rate hike later this year. An OK but not great Labor Report (i.e. added jobs greater than 300,000) means the economy is still moving along but not at a pace that would hurry the Fed to a June or even September decision (remember that the first quarter GDP was a measly 0.2%). If there is enough Central Bank uneasiness about the economy, rate hikes may be put off to 2016. So stocks bounce a lot and gold a little.

Stay tuned, pardner.

Mining Stocks Up

For the most part, mining stocks liked the jobs report too. Here are this report's tracking stocks (click on chart for a larger image):


Mining stocks, Yahoo Finance


Big gold miners Newmont (NEM) and Barrick Gold (ABX) are trading at $26.25 and $12.86. Midway (MDW) is $0.31, thankfully moving up from the dismal 30 cent-level. Benchmark Moly Miner Thompson Creek (TC) is the only downer at $1.20; General Moly (GMO) is happier at $0.71, up 1.5%. Timberline Resources (TLR) is trading at $0.6490. Please checkout key April press releases from General Moly and Midway at the top of this report.

Finally, benchmark miner and copper giant Freeport-McMoRan (FCX) is up 2.05% at $23.38. Freeport has been riding the wave of higher copper and oil prices lately helping us to forget the high-$16 depths in January.

Eureka Miner's Gold Value Index (GVI)

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 for the long term (dashed orange line, click for larger view):



This morning's GVI at 105.2  is down from its January peak and nearly at fair trend value (102.1, dashed orange line). Any number above 100 is considered a high value for gold compared to historical norms; the 1-month rolling average is 108.5.

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



Spring 2015 Mining Quarterly

The Spring 2015 Edition of the Mining Quarterly is accessible online. Marianne Kobak McKown has done another outstanding job of compiling Nevada's premier mining publication! It has engaging articles on Barrick Goldstrike's new way to process ore and updates on Bald Mountain, progress at Newmont's Long canyon and a terrific conversation with Dana Bennett, our new President of the Nevada Mining Association.

This issue also features a column I wrote about Major Henry G. Catlin - a mover n' a shaker in the early mining days of Eureka, Nevada. A bold futuristic mining plan, deathbed pack and surprising twist of fate combine to remind us not much has changed in the luck of miners and the importance foreign markets. The Nevada Mining Press declared in 1919, "There is no more interesting character living among old school mining engineers than Major Henry G. Catlin." Have a good read!

"Major Henry G. Catlin and the Eureka-Croesus Revival" Online edition pages 60 to 74. (scroll bar at bottom of page allows you to easily access pages)



Have a great weekend!

Cheers - Colonel

Photos by Mariana Titus