"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, 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

Friday, October 16, 2015

Gold Rallies $1,190, Silver Shines $16.2, Copper Holds $2.4; Hoist Stalls for Miners


Rodeo Spirit, Eureka, Nevada
by Mariana Titus

Latest News



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 368.19, 11/15 contract (intraday low 342.4 on 8/24/2015)

Nymex/Comex (most active contracts)

Nymex oil (WTI) $47.63per barrel (intraday low $37.75 on 8/24/2015)
Brent crude $       per barrel
Comex copper $2.4015 per pound (intraday low $2.209 on 8/24/2015)
Comex gold $1,183.5 per ounce (intaday high $1,169.8 on 8/24/2015)
Comex silver $16.13 per ounce

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

iShares iBoxx $ High Yield Corporate Bond (HYG) $85.02 ($81.66 52-week low)

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




Gold Rallies $1,190, Silver Shines $16.2,
Copper Holds $2.4

Gold, silver rally, Gold gains on euro & yen - net bullish

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

Wild Cards: Debt ceiling confrontation

Bullish bet for next week: up, $1,190 per ounce


Morning Miners!

Thursday was a terrific day for gold and silver - add in resilient copper prices and we're in a second good week for metals. Today sees some profit-taking but not enough to spoil the party.

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

Still running with the gold bulls.

With the headwinds of a Fed rate decision becalmed until possibly next year, gold continues its run to the upside. Although trading presently at $1,183.5 per ounce, Thursday's 3.5 month high at $1,191.7 together with substantial gains against both euro and yen are impressive. Silver has even more shine besting gold's run when compared to August averages. On both Wednesday and Thursday, the white metal challenged $16.195 per ounce, presently trading at $16.130. ​​ The gold-to-copper ratio (GCR) has also risen in gold's favor. More importantly, the GCR is demonstrating markedly improved stability - a good omen for the metals complex in general. 

My vote is up. Target $1,190 per ounce.

Now that consensus has moved the likely date for a Federal Reserve rate hike to next year, precious metals are finally seeing some blue sky. There are a few rays of light for the red metal too. Bloomberg reported on a Citigroup forecast Tuesday:

Copper prices slumped for five straight quarters though September, the longest streak since 1996, as slowing economic growth in China fueled concern that production would exceed demand. With output cuts announced by Glencore Plc, Freeport-McMoRan Inc. and other producers signaling tighter supplies, the metal has posted two straight weekly gains for the first time in more than three months. Citigroup forecasts prices will average $5,550 [$2.5174] a metric ton in the fourth quarter, up from a closing price of $5,273 [$2.3918] on Tuesday, “with a more constructive outlook for next year,” the bank said in a report Oct. 13.

Comex copper is presently trading at $2.4015 per pound. Not all bad, pardner.

As China slowly transitions from a heavy industry, infrastructure, export led economy to one based on domestic consumption and services, the demand for industrial metals is a tough read. There do seem to be some signs of stabilization. Ironically as demand for raw materials has plummeted with growth predictions, the Chinese consumer does appear to be on a tear buying new cars, iPhones and Nike sportswear.

A second Bloomberg report features two opinions from South American copper experts:

“It doesn’t look like it will go down more than what it is,” [Antofagasta Plc] Chief Executive Officer Diego Hernandez said in an interview in London on Thursday. Still, prices may remain flat through next year as a modest increase in Chinese demand is expected to absorb any supply increase, he said.

The view is similar to that of Chile’s Mining Minister Aurora Williams, who said this week that lower prices will persist through next year followed by a measured recovery in early 2017. Copper has fallen 16 percent this year as China’s economic slowdown means there’s less demand for pipes, wiring and other building materials. “If China wants to continue to grow at a reasonable pace they need to continue with programs on infrastructure and power distribution,” Hernandez said. If the Chinese economy continues to grow at 6 percent to 7 percent annually then copper demand will grow by at least half of that figure, he said.

Finally, Wells Fargo Metals Group Director Janet Mirasola had this to say after attending the London Metal Exchange (LME) annual gala:

LME week is almost over and many of us have returned home to wonder if the news from China at the end of this month will support our industry and put some “bulls back in the ring”

I'm presently putting some thoughts together for a column on copper and gold outlook for the upcoming 2015 Winter Edition of Mining Quarterly - lots to consider...not all bad. Stay tuned.

Hoist Stalls for Miners

Miners had been following gold, silver and copper prices higher with gusto from their September lows. Interestingly, copper giant Freeport McMoran (FCX) and big gold miners Barrick (ABX) and Newmont (NEM) have now all stalled out just below their 100-day share price averages. This indicates some broad investor "wait and see" sentiment.

Today is mostly down for this report's tracking stocks (click on chart for larger image):


Source: Yahoo financial


What's got the cat worried?

This report continues to carry this link to remind us that Halloween isn't 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 2,026.96 

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 lately, the most promising may be today. 

On Oct. 15, the S&P 500 bullishly entered and closed within the box reaching 2,023.86. Today the rally continues with the S&P trading at 2,026.96 within a few points from the top. Let's see if we close above 2,0032 [Bingo! The S&P500 closed above the top of the fib box at 2,033.11, very bullish for equities going forward]

Kitco News Gold Survey

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

Still running with the gold bulls. My vote is up. Target $1,190 per ounce.

Discussion:

With the headwinds of a fed rate decision becalmed until possibly next year, gold continues its run to the upside. Although trading presently at $1,183.5 per ounce, Thursday's 3.5 month high at $1,191.7 together with substantial gains against both euro and yen are impressive. Silver has even more shine besting gold's run when compared to August averages (note 1). On both Wednesday and Thursday, the white metal challenged $16.195 per ounce, presently trading at $16.130. ​​

The gold-to-copper ratio (GCR) has also risen in gold's favor. More importantly, the GCR is demonstrating markedly improved stability (note 2) - a good omen for the metals complex in general.

Overall a net bullish development.

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


Last Friday (10/9):


Notes:

(1) an August comparison is relevant given the market collapse 8/24 & 8/25
(2) stability defined as the ratio day-to-day variability over a one month period

Cheers - Colonel

Photos by Mariana Titus

Friday, October 9, 2015

Oil, Gold & Metals Rally; Miners Catch Breath


Goddess of Metals
by Mariana Titus

Latest News

Updates on embattled benchmark miner Freeport McMoRan (FCX) are important to track:

Freeport McMoRan appoints two Icahn reps to board (Seeking Alpha, 10/7/2015)

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:



***
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

Please checkout Mariana's Eureka, Nevada on Facebook


Numbers used for this morning's early analysis:

Goldman Sachs Commodity Index

S&P GSCI 382.75, 11/15 contract (up 11.8% intraday low 342.4 on 8/24/2015)

Nymex/Comex (most active contracts)

Nymex oil (WTI) $50.12 per barrel (intraday low $37.75 on 8/24/2015)
Brent crude $53.47 per barrel
Comex copper $2.4050 per pound (intraday low $2.209 on 8/24/2015)
Comex gold $1,152.3 per ounce (intaday high $1,169.8 on 8/24/2015)
Comex silver $15.75 per ounce

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

iShares iBoxx $ High Yield Corporate Bond (HYG) $85.45 ($81.66 52-week low)

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



Eureka Sentinel Museum
Eureka, Nevada

Oil, Gold & Metals Rally

Gold pops, falls behind silver & copper, gains on euro & yen - net bullish

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

Wild Cards: Russians in Syria, debt ceiling confrontation in December

Bullish bet for next week: up, $1,160 per ounce (unchanged for 3 weeks)


Morning Miners!

What a surprisingly good week for metals! Silver flexed its muscles Wednesday hitting $16.115 per ounce on the Comex, levels not seen since late June. Following embattled Glencore's announcement of 500 kt and 100 kt cuts in zinc and lead production both base metals rallied on the spot exchanges (>9% zinc, > 5% lead).  Comex copper is showing strength too reaching $2.4375 per pound earlier in the day.

Behind all this (and perhaps because), Nymex WTI crude is above $50/bbl - at least briefly. Gold has enjoyed a lift with suggestion by the Federal Reserve minutes released this week that the zero interest rate policy (aka "zirp") may be around longer than many expected given global growth concerns

PIMCO thinks the worst of the commodity crunch is over according to a Bloomberg story, the ole Colonel is not quite ready to make that call. It is encouraging that the Goldman Sach's Commodity Index futures are up nearly 12% from their August bottom (see above).



Gold still holds the Fed zirp card

This is how I explained to the Kitco News Weekly Gold Survey the bounce in oil, gold, silver and copper:

You'll be happy I'm still with the gold bulls.

Whether by design or coincidence, Russia's presence in Syria has lifted WTI oil above $50/bbl giving a shot in the arm to commodities. Geopolitical hijinks coupled with a dovish read on this week's Fed minutes has brought gold near my target in early morning trading ($1,157.7), I remain bullish for next week.

Notably, silver had a terrific week briefly touching the $16-level; copper has rallied above the $2.4-mark. (full report given below)

My vote is up. Target $1,160 per ounce [Update 10/12 AM: Comex gold pushed through $1,160 for an intraday high of $1,168.6, just shy of the 8/24 high $1,169.8].

Comex gold is currently trading up $8.0 per ounce at $1,152.3

Miners Pause

Most miners have had a pretty good pop in the last nine market days. From the close on 9/28, benchmark miner Freeport McMoran (FCX) has been up 8 out of 9 days - so has General Moly (GMO). Newmont has enjoyed higher prices too, in the green for 5 out of 9. Today there may be some profit taking with a mixed bag for this report's tracking stocks (click on chart for larger image):

Source: Yahoo financial

Big gold miners Newmont (NEM) and Barrick Gold (ABX) are trading at $18.83 and $7.57 per share. Timberline Resources (TLR) is down 3.32% at $0.51 per share. Benchmark Moly Miner Thompson Creek (TC ) is still below "continuing listing standards" but still hanging on at $0.5579 per share. General Moly (GMO) is steady at $0.3302.  As of yesterday, moly oxide price is still at hamburger prices at $4.85 per pound. Midway Gold has been delisted since filing for Chapter 11 protection but trades over the counter (OTC) as MDWCQ, presently at  2.1 cents per share.

Finally, benchmark miner and copper giant Freeport-McMoRan (FCX) is pausing at $13.30 coming up an amazing 71% from its 8/26 intaday low of $7.76 per share. Investor Carl Icahn is now its largest share holder adding two of his people on the board this week.

As a point of disclosure, the Colonel doubled his position in General Moly (GMO) today and holds FCX and NEM. Please do your own research, markets can turn on you faster than a feral cat.

What's got the cat worried?

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 2,012.26 [Update 10/12 AM: The S&P500 is now trading at 2,012.31; Friday close, 2,014.89].

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.

Try#2: Oct. 8, the S&P 500 bullishly entered the box after the Fed minutes were released this week touching 2,020.13 today before settling back to 2,012.26. Let's see where we close this week [Friday close, 2,014.89] 

Try #1: 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 

Kitco News Gold Survey

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

You'll be happy I'm still with the gold bulls.

My vote is up. Target $1,160 per ounce [Update 10/12 AM: Comex gold pushed through $1,160 for an intraday high of $1,168.6, just shy of the 8/24 high $1,169.8]. ​

Discussion:

Whether by design or coincidence, Russia's presence in Syria has lifted WTI oil above $50/bbl giving a shot in the arm to commodities. Geopolitical hijinks coupled with a dovish read on this week's Fed minutes has brought gold near my target in early morning trading ($1,157.7), I remain bullish for next week.

Notably, silver had a terrific week briefly touching the $16-level; copper has rallied above the $2.4-mark.

Consequently, gold value has fallen behind oil, silver and copper compared to August averages* for key commodities. However, the yellow metals bump up against a falling dollar coupled with gains on both euro and yen are impressive: ​ Overall a net bullish development.

Last Friday AM:



Bullish for gold, the gold/copper ratio on the Shanghai futures exchange remains above 400 lb per ounce scoring 410.4 before the exchanges shut down for "Golden Week" (units chosen for comparison to the above chart). Now that traders are back from holiday, gold is losing to copper slightly due a copper rally (up more than 1% today). Nonetheless, the ratio is still above 400 at 405.5. The Chinese hold gold less dear relative to copper (e.g., today's 479.1 on the Comex compared to 405.5 on the SHFE). The ratio remained above 400 for some time before dipping bearishly below 400 several weeks ago.

* an August comparison is relevant given the market collapse 8/24 & 8/25

Cheers - Colonel

Photos by Mariana Titus

Friday, October 2, 2015

Jobs Shocker - Gold Pops, Dollar Drops, Miners Rally


Eureka'Tiques
Eureka, Nevada

Latest News

Updates on embattled benchmark miner Freeport McMoRan (FCX) are important to track:

Freeport-McMoRan Gains On Positive Developments In Peru, Chile, And China (Seeking Alpha, 10/01/2015)

Freeport McMoRan finds more oil in deepwater Gulf of Mexico (Seeking Alpha, 9/28/2015)

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)
  

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Numbers used for this morning's early analysis:

Goldman Sachs Commodity Index

S&P GSCI 354.65, 10/15 contract (intaday low 339.40 on 8/24/2015)

Nymex/Comex (most active contracts)

Nymex oil (WTI) $44.30 per barrel (intraday low $37.75 on 8/24/2015)
Brent crude $47.24 per barrel
Comex copper $2.2825 per pound (intraday low $2.209 on 8/24/2015)
Comex gold $1,134.3 per ounce (intaday high $1,169.8 on 8/24/2015)
Comex silver $14.985 per ounce

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

iShares iBoxx $ High Yield Corporate Bond (HYG) $81.76 ($81.66 52-week low)

Trouble ahead: HYG < $82

Latest Nevada gasoline prices


What's got the cat worried?

Jobs Shocker - Gold Pops, Dollar Drops

Gold regains US dollar value;  gains on metals, euro; competes with yen for safe haven

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

Wild Cards: Russians in Syria, debt ceiling confrontation in December

Bullish bet for next week: up, $1,160 per ounce (unchanged from last week)

Morning Miners!

This morning's monthly job report was a shocker - ouch!

The Labor department announced that the U.S. added just 142,000 jobs in September with expectations exceeding 200,000. Even more sobering, the August's 173,000 gain was revised lower to 136,000; July went from 245,000 to 223,000. Just to add to the misery, the weak numbers came with another big drop in the labor force participation rate, and declines in the average workweek and average hourly earnings. Headline unemployment clung to 5.1% (Labor folks call this U-3). Rough and tough on miners still:

Employment in mining continued to decline in September (-10,000), with losses concentrated in support activities for mining (-7,000). Mining employment has declined by 102,000 since reaching a peak in December 2014.

Slightly positive was the U-6 unemployment steady at 10% - this is everybody with a heart beat including that lazy bum kid on the couch who has never held a job (this kid is referred to as "marginally attached to the labor force").


Gold gets a break!

This is how I explained to the Kitco News Weekly Gold Survey the reactive bounce in gold with notable drops in the U.S. dollar (nearly 1%) and 10-year yield (below 2%):

You'll be happy I'm back with the gold bulls.

I think today's NFP [Non-farm payroll] flop with downward revisions for July and August gives the yellow metal a Federal Reserve "get out of (interest rate) jail free card." Throw in a little Russian mischief in Syria to offset their failing domestic economy and falling ruble (>60) and safe haven winds may be filling the sails of of our becalmed store-of-wealth - metaphors abound with rising market volatility.

[Pimco's] Mohamed El-Erian, arguably the master of market metaphors, had a good one this week. He compared the current situation to the 2008-2009 financial crisis. For the latter, he observed that the BRICs were the locomotive and rich developed nations, the caboose. Now as we import the woes of the world, the U.S. is the locomotive burdened by a very cumbersome BRIC caboose (with the possible exception of India). No longer the environment for imminent rate hikes in 2015. Gold is starting October mostly positive relative to August averages for key commodities and currencies...(full report given below)

My vote is up. Target $1,160 per ounce.

Comex gold is currently trading up $20.6 per ounce at $1,134.3

Miners Rally

A drop in the U.S. dollar favored miners today. This report's tracking stocks (click on chart for larger image):

Source: Yahoo financial

Big gold miners Newmont (NEM) and Barrick Gold (ABX) are trading at $16.77 and $6.54 per share, both over 5% on the gold bounce plus weaker dollar.  Timberline Resources (TLR) is up 0.13% at $0.4606 per share. Benchmark Moly Miner Thompson Creek (TC ) is now below "continuing listing standards" but still hanging on at $0.4181 per share, up 4.52%. General Moly (GMO) is down 6.72% at $0.5291.  As of yesterday, moly oxide price is still at hamburger prices at $5.40 per pound. Midway Gold has been delisted since filing for Chapter 11 protection but trades over the counter (OTC) as MDWCQ, presently at  9 cents per share.

Finally, benchmark miner and copper giant Freeport-McMoRan (FCX) is up 2.55% at $10.07.

What's got the cat worried?

My cat Bimba doesn't worry about anything but the yellow pad she's resting on has some troubling notes (you can read them by clicking on the above photo).

Cryptically (from 9/29/2015):

GS 120 x 17.5 = 2,100    HYG 82

The first of this coded message is actually optimistic. Goldman Sachs (GS) released an estimate of S&P 500 earnings ($120) and valuation (P/E = 17.5) for next year. If you multiply these together you get an estimate of where the S&P should trade or 2,100...about where we were for much of this year before the August crunch.

When I did the morning analysis,the S&P 500 was trading in the nineteenth century around 1,896 - that's a a few decades from 2,100...but it is still 2015, not 2016.

What could keep us from climbing up the mountain again? Many market watchers have pointed to high yield corporate bonds as the canary in the gold mine. The iShares iBoxx $ High Yield Corporate Bond (HYG) is a good way to track this concern. When I  wrote down the cryptic note, consensus warned the HYG is a sick birdie below 82...this morning we're at $81.76 ($81.66 52-week low).

Activist billionaire investor Carl Icahn explains why high yields are a scary indicator in this chilling video:

Danger Ahead

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

Market Stats

Here's the scorecard on the stock market, S&P 500 is presently trading at 1,896.69 [10:52 AM PDT update 1,931.59 - a nice reversal to the upside continuing to the close at 1,951.36, up 1.43% from Thursday]:

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 [Friday's close (10/03/2015 is lower still at 1,951.36].

Kitco News Gold Survey

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

You'll be happy I'm back with the gold bulls.

My vote is up. Target $1,160 per ounce.

Discussion:

I think today's NFP flop with downward revisions for July and August gives the yellow metal a Federal Reserve "get out of (interest rate) jail free card." Throw in a little Russian mischief in Syria to offset a their failing domestic economy and falling ruble (>60) and safe haven winds may be filling the sails of of our becalmed store-of-wealth - metaphors abound with rising market volatility.

Mohamed El-Erian, arguably the master of market metaphors, had a good one this week. He compared the current situation to the 2008-2009 financial crisis. For the latter, he observed that the BRICs were the locomotive and rich developed nations, the caboose. Now as we import the woes of the world, the U.S. is the locomotive burdened by a very cumbersome BRIC caboose (with the possible exception of India). No longer the environment for imminent rate hikes in 2015.


Gold is starting October mostly positive relative to August averages* for key commodities and currencies. This morning's comparison (click on table for larger image):


With exception of oil, gold is gaining value relative to silver & copper. The yellow metal has stabilized relative to the euro at the familiar 1,000-euro level but with slightly elevated volatility. It is concerning that gold is losing some ground to the yen, a competing safe haven. However, it is still a comfortable 10% above its 2013 low in that denomination.

Last Friday AM,



Bullish for gold, the gold/copper ratio on the Shanghai futures exchange remains above 400 lb per ounce scoring 410.36 before the exchanges shut down for "Golden Week" (units chosen for comparison to the above chart). The Chinese hold gold less dear relative to copper (e.g., today's 497.0 on the Comex compared to 410.36 on the SHFE). Nonetheless, the ratio was above 400 for some time until the dipping bearishly below 400 several weeks ago.

* an August comparison is relevant given the market collapse 8/24 & 8/25

Cheers - Colonel

Photos by Mariana Titus