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

Copper Seen Near Bottom by Antofagasta as China Takes Supply (Bloomberg, 10/15/2015)

Copper Mine Spending Seen Sinking Below Financial-Crisis Levels (Bloomberg, 10/13/2015)

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)

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

Latest Nevada gasoline prices

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:

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.

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