"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, September 25, 2015

$1,156 Home Run for Gold; Updates: General Moly (GMO) & Timberline (TLR)


Oxidized Windfall ores are soft, friable
and easy to recover by cyanide leaching

Windfall Mine, Eureka, Nevada


Latest News

Comments on both the releases are given below in the updates...

Timberline Resources Announces Closing of Non-Brokered Private Placement Financing with Waterton Precious Metals Fund II Cayman, LP (Press release, 09/23/2015)

General Moly Receives Ruling on Mt. Hope Water Rights (Press release, 9/21/2015)

Blasts from the Past

The online version is up and running!

Fall 2015 Mining Quarterly

"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:

Eureka’s Windfall – Birth of a modern gold district with community spirit

***
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) 

"Gold has no sponsor" - Jeff Currie, Goldman Sachs Commodity Guru on CNBC Business News, 8/26/2015, Currie reiterates $1,050 per ounce gold target

On the misgivings of lower oil... 

 “The problem is when people think of consumers saving a few pennies at the pump, they’re not going to take that money and buy a new house or a new car or send their child to college. They’re probably going to buy extra socks and potatoes...” (Walter Zimmermann Jr, vice president and chief technical analyst at United-ICAP, see Guardian article below)

Debbie Carlson of the Guardian explains the recent plunge in oil prices: US crude oil prices hit lowest since 2009, eliminating thousands of jobs (8/21/2015, The Guardian)
  

Please checkout Mariana's Eureka, Nevada on Facebook

Numbers used for this morning's early analysis:

Goldman Sachs Commodity Index

S&P GSCI 361.0, 10/15 contract (intaday low 339.40 on 8/24/2015)

Nymex/Comex (most active contracts)

Nymex oil (WTI) $46.07 per barrel (intraday low $37.75 on 8/24/2015)
Brent crude $48.85 per barrel
Comex copper $2.2865 per pound (intraday low $2.209 on 8/24/2015)
Comex gold $1,146.5 per ounce (intaday high $1,169.8 on 8/24/2015)
Comex silver $15.165 per ounce

Latest Nevada gasoline prices


Fossil evidence in Dunderberg shale
from late-Cambrian (500+ million years ago) 
Windfall Mine, Eureka, Nevada

$1,156 Home Run for Gold in a Late Season Game

Gold regains value on metals and currencies

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

Wild Card: possible U.S. government shutdown

Bullish bet for next week: up, $1,160 per ounce.

Morning Miners!

What a news week! The Pope visits Washington and New York in a Fiat, Fed Chair Yellen gives new hints on a pending rate hike yesterday, China's President Xi Jinping arrives at the White House this morning, and Putin talks to President Obama Monday....Oh, and John Boehner just announced that he is resigning from the Senate the end of October with a possible government shutdown in the cards next week.

So what's the future price of gold?

My comments to Kitco News this morning for their Weekly Gold Survey (complete input with charts below):

I must admit gold hit a home run yesterday in a late-season game advancing against not only its US dollar value but showing a respectable step up in value compared to other metals, the euro and the yen.

Although it made a new high for September ($1,156.4) it unfortunately failed to take out its August peak ($1,169.8). With an upward revision to U.S. second quarter GDP and "get in front of this.." comments from Fed Chair Yellen, it is likely the August high will remain unchallenged next week [full quote below headline photo].

Today's wild card is the unexpected resignation of House leader Boehner and what that portends for a possible government shutdown next week. Gold may still have a chance at making the playoffs this month, I'll take the outside bet...

My vote is (an unexpected) up. Target $1,160 per ounce.

I summed up my thoughts on the macro situation for mining and metals for a faithful reader of this report. This is in a partial response to a Wednesday question about General Moly:

Thank you for checking in. I'm not sure anyone has seen this market in recent memory relative to commodities & miners.

There is an interesting contrast with the 2008-2009 Financial Crisis. Benchmark miner Freeport-McMoran (FCX) put in its low in December 2008 but was well on its way up when the S&P 500 made its low in March 2009. For that period, BRICs [Brazil, Russia, India, China] were on the rise with China demand broadly fueling recoveries. This time around FCX fell just below its 2008 low (on a split-adjusted basis, 8/26) and has compounded problems by now having an oil component. The BRICs are in disarray with the exception of India which has been lifted by low oil prices & new government. A real flip-side. 

Everything commodities turns on China and I believe the jury is still out. Dismal PMI today [Wednesday, 9/23. PMI =47.0 versus 47.5 expected; a PMI less than 50 indicates contraction] isn't encouraging. We need to see a bottom in copper & oil...

The remainder of my response and thoughts on General Moly is continued in the update below...



Hematite slickensides show evidence of internal faulting
and oxidation of the ore body
Windfall Mine, Eureka, Nevada


Update on General Moly (GMO)

This morning General Moly stock (GMO) stock opened at $0.29 per share and is presently trading at $0.3150 (0838 PDT) down 36% from last Friday's close ($0.490). The downturn this week was caused by Monday's press release:

General Moly Receives Ruling on Mt. Hope Water Rights (Press release, 9/21/2015)

Bruce D. Hansen, Chief Executive Officer, said, “We are surprised and disappointed in the Supreme Court’s decision given the level of analysis and diligence performed prior to the granting of these permits and 3M Plan and the detailed and positive rulings the Company received at the State District Court level..."

This is what I wrote a longtime Eureka Miner follower after the press release (continued from headline discussion):

With respect to [General Moly] GMO, I'd like to see the reaction of AMER to the water rights ruling. I reduced my GMO position by 1/2 but would probably go back in if positive words are forthcoming come from AMER and/or POSCO

Other than a timeline issues (which, of course, will be resolved eventually - shortages follow gluts, gluts follow shortages) all the fundamentals remain unchanged - Mt. Hope remains a terrific resource for molybdenum and other critical/strategic minerals, POSCO is the highest tech steel manufacturer in the world & GMO has overcome major obstacles.

No real answers here, but these are my thoughts. As a proxy for the fate of the mining sector, I believe it was encouraging to see Carl Icahn invest in FCX and then increase his position recently.

The price for a pound of moly oxide is still competing with a pound of hamburger. On the LME futures exchange (9/24):

3-month seller $12,300 per tonne ($5.58 per pound)
15-month seller $13,025 per tonne ($5.91 per pound)

$5.85 (Metals Weekly, 9/18)

Please do your own research, markets can turn on you faster than a feral cat.

Update on Timberline Resources (TLR)

Timberline Resources Corp. (TLR) owns a 23 square-mile South Eureka land package which includes the old Windfall mine properties - the subject of my recent Mining Quarterly column (below headline photo).

South Eureka also features Timberline's flagship Lookout Mountain Project along with a pipeline of earlier-stage projects. Timberline describes South Eureka as one of the largest undeveloped gold properties in Nevada.

Timberline made this announcement Wednesday:

Timberline Resources Announces Closing of Non-Brokered Private Placement Financing with Waterton Precious Metals Fund II Cayman, LP (Press release, 09/23/2015)

Coeur d'Alene, Idaho - September 23, 2015 (click here to view this press release in pdf format) - Timberline Resources Corporation (NYSE MKT: TLR; TSX-V: TBR) ("Timberline" or the "Company"), announced today that it has closed the previously announced non-brokered private placement of 1,331,861 shares of common stock of the Company at a price of US$0.375 per share to Waterton Precious Metals Fund II Cayman, LP, for total proceeds of US$499,447.87...Timberline intends to use the net proceeds from the private placement for the continued advancement of the Company's projects in Nevada and for general working capital purposes.

Last week Timberline made the initial announcement:

Timberline Announces Non-Binding Letter Agreement for Acquisition by Waterton Precious Metals Fund II Cayman, LP and Private Placement Financing (Press release, 09/15/2015)

TLR is presently trading at $0.475 [09:13 AM PDT]

Another chapter to the Windfall story? Stay tuned, pardner.

Market Stats

Here's the scorecard on the stock market, S&P 500 is presently trading at 1,946.23 [8:56 AM PDT]:

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

In the coming weeks, getting inside the "fib box" is generally considered a "bullish" move to the upside; failing the "fib box" is a bearish indication.

Sept. 17, the S&P 500 bullishly entered the box after the Fed announcement touching 2,020.86 but then bearishly closed out of the box at 1,990.20. Last Friday's's close put us further away from redemption at 1,958.03 [Today's close at 1,931.43, even further away]

Kitco News Gold Survey

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

I must admit gold hit a home run yesterday in a late-season game advancing against not only its US dollar value but showing a respectable step up in value compared to other metals, the euro and the yen (chart).

Although it made a new high for for September ($1,156.4) it unfortunately failed to take out its August peak ($1,169.8). With an upward revision to U.S. second quarter GDP and "get in front of this.." comments from Fed Chair Yellen, it is likely the August high will remain unchallenged next week. Today's wild card is the unexpected resignation of House leader Boehner and what that portends for a possible government shutdown next week. Gold may still have a chance at making the playoffs this month, I'll take the outside bet...

My vote is (an unexpected) up. Target $1,160 per ounce.

Discussion:

A comparison of gold's rally with last Friday's numbers.

This morning's trades (click on chart for larger image):



Last Friday AM:


With the exception of its comparison to oil, gold made considerable progress this week. A future of rising rates and low inflation with a possible resumption of losses to key commodities and major currencies still weighs on the yellow metal.

Bullish for gold, the gold/copper ratio on the Shanghai futures exchange remains above 400 lb per ounce today at 417.1 (401.4 last week, units chosen for comparison to the above chart). The Chinese hold gold less dear relative to copper (e.g., today's 501.4 on the Comex compared to 417.1 on the SHFE). Nonetheless, the ratio was above 400 for some time until the dipping bearishly below 400 two weeks ago.

Cheers - Colonel

Photos by Mariana Titus with Nevada geologist Larry McMaster

Friday, September 18, 2015

Gold Bounces $1,140 but...; Good News for South Eureka Properties (TLR)?


Fall 2015 Mining Quarterly


Latest News

This morning (9/22/2015) General Moly stock (GMO) stock opened at $0.34 per share and is presently trading at $0.2625 (0732 PDT) down 44% from yesterday's close. The price for a pound of moly oxide is starting to compete with a pound of hamburger. On the LME futures exchange (9/21):

3-month seller $12,400 per tonne ($5.62 per pound)
15-month seller $13,125 per tonne ($5.95 per pound)

$5.70 (Metals Weekly, 9/11)

Not a great last day of summer for General Moly

General Moly Receives Ruling on Mt. Hope Water Rights (Press release, 9/21/2015)

Bruce D. Hansen, Chief Executive Officer, said, “We are surprised and disappointed in the Supreme Court’s decision given the level of analysis and diligence performed prior to the granting of these permits and 3M Plan and the detailed and positive rulings the Company received at the State District Court level..."

Blasts from the Past

The online version is up and running!

Fall 2015 Mining Quarterly

"Click to read" and the online version looks much like the printed magazine. My column on the Windfall 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:

Eureka’s Windfall – Birth of a modern gold district with community spirit

***
Memorable quotes (lately):

“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)

"Gold has no sponsor" - Jeff Currie, Goldman Sachs Commodity Guru on CNBC Business News, 8/26/2015, Currie reiterates $1,050 per ounce gold target

On the misgivings of lower oil... 

 “The problem is when people think of consumers saving a few pennies at the pump, they’re not going to take that money and buy a new house or a new car or send their child to college. They’re probably going to buy extra socks and potatoes...” (Walter Zimmermann Jr, vice president and chief technical analyst at United-ICAP, see Guardian article below)

Debbie Carlson of the Guardian explains the recent plunge in oil prices: US crude oil prices hit lowest since 2009, eliminating thousands of jobs (8/21/2015, The Guardian)
  

Please checkout Mariana's Eureka, Nevada on Facebook

Numbers used for this morning's early analysis:

Goldman Sachs Commodity Index

S&P GSCI 361.1, 10/15 contract (intaday low 339.40 on 8/24/2015)

Nymex/Comex (most active contracts)

Nymex oil (WTI) $45.76 per barrel (intraday low $37.75 on 8/24/2015)
Brent crude $48.35 per barrel
Comex copper $2.3870 per pound (intraday low $2.209 on 8/24/2015)
Comex gold $1,139.3 per ounce (intaday high $1,169.8 on 8/24/2015)
Comex silver $15.205 per ounce

Latest Nevada gasoline prices



Windfall Pit 
Windfall MineEureka Mining District, Nevada

Gold Bounces

Gold regains value on key commodities and currencies

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

A lone wolf in a bull pasture, target price for next week down, $1,120 per ounce.

Morning Miners!

Whoa! I was on the wrong side of that trade!

Last week I predicted the U.S. Federal Reserve would announce a rate hike Thursday and gold would fall to $1,090 per ounce. Federal Reserve Chair Janet Yellen delayed the hike on global concerns. In her own words:

“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”

This morning, Comex gold surged to $1,141.5 per ounce but fell short of taking out the September high at $1,147.9 - when I did my morning analysis, gold was still up at a respectable $1,139.3.

Hey, I don't want to be bearish in gold country - it's no fun. So why isn't the Colonel running with the bulls to higher prices? I submitted a Debbie Downer input to the Kitco Weekly Gold Survey (see below) just before the deadline and quickly received this reply from Kitco's Editor Neils Christensen,

"Darn it Rick you have ruined my survey this week! You are the only one to be bearish in this week’s gold survey. Now I have to start writing all over again. Just kidding thanks for the vote...But you are the lone wolf in the pack. Everyone is either neutral or bullish – Is now the time to be contrarian?

Neils was very gracious to the ole Colonel in his otherwise bullish report:

"The only analyst in the bear camp this week is Richard Baker, editor of the Eureka Miner. Despite the Fed’s monetary policy decision, he said that he thinks gold’s high for September is in place and is expecting prices to fall back to $1,120 an ounce."  

I must admit there are some nice flowers in this week's pasture.


On the positive side, gold's bounce following the decision to delay rate hikes has reversed recent comparative loses to key currencies & commodities. You can take a look at the admittedly upbeat chart below for a comparison with last week's malaise.

Why then be so gloomy? Even gold's fortunes have turned red on the Shanghai futures exchange regaining a key level relative to copper (in China red is good, green is bad).

OK. This is what  worries me - it's the worst case outlook: A future of rising rates and low inflation with a likely resumption of losses to key commodities and major currencies will weigh heavily on the yellow metal in 2016.

The Fed didn't move Thursday but they may in October or December, there are some that say 2016 - rates are going up sometime, pardner. Positive real rates prove kryptonite to gold price - roughly the difference between interest and inflation rates. Yellen's 2016 inflation expectations are "under pressure" so real rates should be positive and on the rise next year.

With big players like Glencore and Freeport McMoRan cutting back operations, copper prices will trend higher someday too. Citibank foresees a 2016 copper shortage of 248 K-tons due to a broad array of mine disruptions. Although this is at odds with a Goldman Sach's surplus estimate of 673 K-tons, the laws of supply and demand will re-balance eventually: shortages follow gluts, gluts follow shortages. This will erode the premium gold presently has over the red metal - copper up, gold down.

Lastly, gold must not return to its 2013 lows relative to the devalued euro and yen. So far so good on this account. With this week's gains gold is up nearly 14% from its euro-denominated low; up 11-plus % in yen terms...

Hey, maybe I am worrying too much!

Let's join Ferdinand and sniff the flowers of continued monetary accommodation. My gold target may be dead wrong next week too...but maybe not!

Good News for South Eureka Properties?

Timberline Resources Corp. (TLR) owns a 23 square-mile South Eureka land package which includes the old Windfall mine properties - the subject of my recent Mining Quarterly column (below headline photo).

South Eureka also features Timberline's flagship Lookout Mountain Project along with a pipeline of earlier-stage projects. Timberline describes South Eureka as one of the largest undeveloped gold properties in Nevada. This week Timberline made this announcement:

Timberline Announces Non-Binding Letter Agreement for Acquisition by Waterton Precious Metals Fund II Cayman, LP and Private Placement Financing (Press release, 09/15/2015)

Kiran Patankar, President and CEO of Timberline comments, "We are very pleased to announce this agreement with Waterton, which addresses Timberline's immediate financing requirements and, subject to completion of the Transaction, also provides cash consideration to Timberline shareholders at a significant premium to the current trading price in a difficult market for junior gold companies."

Hmm...

Waterton has offered to acquire all of the issued and outstanding shares of Timberline's common stock for cash consideration of US$0.58 per share. A little bird whispered in my ear that Waterton may be in town for a look see next week. Another chapter to the Windfall story? Stay tuned, pardner.

Market Stats

Here's the scorecard on the stock market, S&P 500 closed Friday at 1,958.03

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 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

In the coming weeks, getting inside the "fib box" is generally considered a "bullish" move to the upside; failing the "fib box" is a bearish indication.

Thursday, the S&P 500 bullishly entered the box after the Fed announcement touching 2,020.86 but then bearishly closed out of the box at 1,990.20. Friday's's close puts us further away from redemption at 1,958.03

Kitco News Gold Survey

My input to the Kitco News Weekly Gold Survey:

I was on the wrong side of this trade - no Fed rate hike, gold bounces! I'm still bearish and think the September highs are in with this morning's trade falling short of the high on the first ($1,141.5 versus 9/01/15 $1,147.3: Comex, 12/15).

My vote is down. Target for next week $1,120 per ounce.

Discussion:

On the positive side, gold's bounce following the Federal Reserve's decision to delay rate hikes has reversed recent comparative loses to key currencies & commodities:

This morning's trades (click on chart for larger image):


Last Friday AM:


Only silver is showing a slight decrease in relative value but is still up from its August average. Gold compared to copper, oil, euro and yen remain in the red but the losses to August's levels are small except for WTI (>5%). A future of rising rates and low inflation with a likely resumption of losses to key commodities and major currencies weigh on the yellow metal.

Thankfully, the gold/copper ratio on the Shanghai futures exchange has crept back above 400 lb per ounce today at 401.4 pounds per ounce (units chosen for comparison to the above chart). The Chinese hold gold less dear relative to copper (e.g., today's 477.3 on the Comex compared to 401.4 on the SHFE). Nonetheless, the ratio has stayed above 400 for some time. Last week the gold ratio dipped bearishly below 400.

Cheers - Colonel

Photos by Mariana Titus

Friday, September 11, 2015

Eureka's Windfall; Gold Falls Below $1,100 - What's Up (or Down)?


Windfall Shaft Locations (click for larger image)
Windfall MineEureka Mining District, Nevada
(embedded images courtesy of Sentinel Museum & Gary Edmondo)

Blasts from the Past

My latest article on the early mines of Eureka, Nevada appeared in the Elko Daily Free Press this week (9/10):

Eureka’s Windfall – Birth of a modern gold district with community spirit

It also appears in the printed edition of the Fall 2015 Mining Quarterly which came out Wednesday; the online ISSUU will be posted soon. Have a good read!

***

Memorable quotes (lately):

"Gold has no sponsor" - Jeff Currie, Goldman Sachs Commodity Guru on CNBC Business News, 8/26/2015, Currie reiterates $1,050 per ounce gold target

In the jargon of economists...

“There will have to be a re-pricing and that might be destructive,” IMF economists warning (Janet Mirasola Pre-market brief, 8/26/2015)


Freeport on China...

“We don’t see China having a hard-landing type situation as some are predicting,” Richard Adkerson, CEO of Freeport-McMoRan Inc., the largest publicly traded copper miner, said in July. “We see requirements for copper growing in absolute terms and China continuing to be a significant consumer.” (Bloomberg News, 08/25/2015)

On the misgivings of lower oil... 

 “The problem is when people think of consumers saving a few pennies at the pump, they’re not going to take that money and buy a new house or a new car or send their child to college. They’re probably going to buy extra socks and potatoes...” (Walter Zimmermann Jr, vice president and chief technical analyst at United-ICAP, see Guardian article below)

Debbie Carlson of the Guardian explains the recent plunge in oil prices: US crude oil prices hit lowest since 2009, eliminating thousands of jobs (8/21/2015, The Guardian)
  

Please checkout Mariana's Eureka, Nevada on Facebook

Numbers used for this morning's early analysis:

Goldman Sachs Commodity Index

S&P GSCI 359.5, 9/15 contract (intaday low 333.80 on 8/24/2015)

Nymex/Comex (most active contracts)

Nymex oil (WTI) $44.37 per barrel (intraday low $37.75 on 8/24/2015)
Brent crude $48.36 per barrel
Comex copper $2.4325 per pound (intraday low $2.209 on 8/24/2015)
Comex gold $1098.7 per ounce (Intaday high $1,169.8 on 8/24/2015)
Comex silver $14.305 per ounce

Latest Nevada gasoline prices



Windfall Shaft Locations (click for larger image)
Windfall MineEureka Mining District, Nevada
(embedded images courtesy of Mariana Titus)

Gold Loses Friends

Gold loses value to key commodities and currencies

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

Morning Miners!

It is a rare day indeed when I submit an early input to the Friday Kitco Weekly Gold Survey. There was a change in the ether for gold Wednesday (9/9) as explained in my survey input below.

For all of August, gold price in US dollars was loosely tied to the euro exchange rate - the euro went up, gold went up; the euro stumbled, gold stumbled. The good thing about this currency-like behavior was stability. The Eureka Miner has warned in the past that if the yellow metal trends lower relative to devalued currencies euro and yen, triple-digit US dollar price may be in the offing. It's too early to declare such a trend but on Wednesday, gold lost almost all of its friends. With the exception of silver, it fell in value relative to the euro and yen together with key commodities copper and oil (see table near the end of this report).

For currencies, gold is now down more that 3% from its August average for both euro and yen.

My target for next week is $1,090 per ounce unless the Federal Reserve delays a rate hike. This morning Comex gold plumbed $1,097.7 in early morning trading. Since August 24, gold has been trending down and copper has revived to the upside (presently $2.4325 per pound). The ratio of these two numbers is 452, that is an ounce of gold buys 452 pounds of copper. While this suggests a pretty healthy premium to the red metal historically, it is down from an August average of 481 (- 6%). Perhaps more ominously for gold, this ratio fell below a key level on the Shanghai futures exchange Wednesday. The Chinese hold gold less dear relative to copper but nonetheless, their ratio has stayed above 400 pounds per ounce for sometime - Wednesday it fell below.

Anything should be able to beat oil these days in a value match-up. Unfortunately, gold slipped in the goo even though Nymex WTI has returned to $44 per barrel this morning. It scores a 5.5% loss compared to August (last month an ounce purchased a respectable 26-plus barrels; this AM, less than 25).

My Kitco summary, "We could of course get a bounce if the Fed delays a rate hike next week but I think a future of rising rates and low inflation with continued losses to key commodities and major currencies would be about as rough as it gets for our shiny friend...(worst case)."

Ouch! Let's hope we see some trend reversals for our lustrous friend in the coming weeks.

To end on a positive note:
  1. Gold is still up in euros & yen from its 2013 lows (+10.7% & +8,3% respectively) although these margin have narrowed this week
  2. An ounce of gold buys considerably more barrels of oil & pounds copper than last November and many more compared to 2013 
  3. It is still struggling to find a bottom in value relative to US equities (wait, that's not very positive unless stocks correct more and gold gets a bounce!)
Hang in there, pardner!

Market Stats

Here's the scorecard on the stock market, S&P 500 presently 1,944.36

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 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

In the coming weeks, getting inside the "fib box" is generally considered a "bullish" move to the upside; failing the "fib box" is a bearish indication.

Kitco News Gold Survey

My input to the Kitco News Weekly Gold Survey:

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

Discussion [submitted Wednesday 9/9, table updated with this morning's numbers]:

Something has changed in the ether for gold today. We could of course get a bounce if the Fed delays a rate hike next week but I think a future of rising rates and low inflation with continued losses to key commodities and major currencies would be about as rough as it gets for our shiny friend...(worst case).

With the exception of silver, gold is quickly losing value to copper, oil, euro & yen. In August, gold held considerable premium over copper & oil and was loosely tied to the euro (high positive correlation). It appears things are breaking down quickly across the board (click on table for larger view).



Interestingly, the gold/copper ratio on the Shanghai futures exchange dropped below 400 lb per ounce today (units chosen for comparison to the above chart). The Chinese hold gold less dear relative to copper. Nonetheless, the ratio has stayed above 400 for some time. This a bearish development for gold.

Cheers - Colonel

Photos by Mariana Titus