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

Investments Advance Development of Mt. Hope Project (Press Release, 11/03/2015) 

*** 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 Strongest El Nino in Decades Is Going to Mess With Everything (Bloomberg News, 10/21/2015)

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

Copper Mine Spending Seen Sinking Below Financial-Crisis Levels (Bloomberg News, 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 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

Latest Nevada gasoline prices

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:

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 2,071.34 

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