"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 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

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