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!

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

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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

Latest Nevada gasoline prices

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:

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 2,012.26 [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