"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, November 27, 2015

Gold Dips to $1,051; Euro 1.05-level; China Blue


Diamond Range before the storm
Eureka, Nevada

Latest News

What do copper & gold signal for 2016? (by Richard Baker, Elko Daily Free Press, 12/03/2015)






Blasts from the Past


The online version:


"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:


***
Please checkout Mariana's Eureka, Nevada on Facebook

Numbers used for this morning's early analysis:

Goldman Sachs Commodity Index

S&P GSCI 343,0, 12/15 contract (intraday low 335.20 on 11/13/2015)

Nymex/Comex (most active contracts)

Nymex oil (WTI) $42.17 per barrel (intraday low $37.75 on 8/24/2015)
Brent crude $ 45.37 per barrel
Comex copper $2.0705 per pound (intraday low $2.0020 on 11/23/2015)
Comex gold $1,058.3 per ounce (intaday low $1,051.6 on 11/27/2015)
Comex silver $14.100 per ounce (intraday low $13.89 on 11/23/2015)

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

iShares iBoxx $ High Yield Corporate Bond (HYG) $82.97 ($81.66 52-week low)

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



South Ranch, Eureka, Nevada

Gold dips to $1,051; Euro 1.05-level


US dollar 7-month high, Gold 5.5-year low

Macro drivers: continued concerns about China; timing of a U.S. Federal Reserve interest rate rise

Wild cards: U.S. industrial recession, continued terrorist events

Bearish bet for next week: Retest $1,050-level

Morning Miners!

I trust you enjoyed a good Thanksgiving with lots of snow on the ground in Eureka, Nevada.

Don't let a half-day of open markets in the U.S. spoil it. If you enjoy a strong U.S. dollar and resilient stock market, today's trading brings more cheer. The green back just pegged 7-month high and the S&P 500 is hanging tough just below 2,100 territory. Although the latter is pasture well trodden through much of 2015 it's presently a healthy 12% above the August 1,867 low.

Wish the ole Colonel could say the same about gold. In August, the yellow metal rallied to $1,170 per ounce as copper plunged to $2.2 per pound. Now gold now follows the commodity herd to ever lower elevations. Just as the markets opened in the U.S., Comex gold dipped to $1.051.6. Copper is faring better today but plumbed $2.002 on Monday, trading presently at $2.0705 with it's lustrous compatriot now at $1,058.3.

How I described next week's outlook to the Kitco News Weekly Gold Survey (full report may be found at near the end of this blog):

My vote is down. Target price $1,050 per ounce.

Gold finds itself with few friends on a thinly traded day following the U.S. Thanksgiving holiday. Comex gold plumbed $1,051.6 per ounce in early morning dealings falling to a new low relative to U.S. equities - more than a 60% loss in value relative to the S&P 500 since November, 2012. 

The yellow metal is also highly correlated with embattled commodities oil and copper; all three influenced negatively by a strengthening U.S. dollar. Equally troubling is gold's continuing slide compared to the Japanese yen. A loss of traction with a devalued currency is a red flag - gold denominated in yen is now only 6% above its 2013 low. Although gold fares much better relative to the euro, it slipped below the key 1,000-euro level today - even as the euro fell to 1.059 on a stronger dollar.

Even though Comex gold is presently off its morning low, I believe it will retest the key $1,050 per ounce level next week.



China Blue

More troubling news from China certainly doesn't come to the aid of metal prices. This is the latest from the land of dragons as told by Wells Fargo's metals guru Janet Mirasola:

Shanghai Shares collapsed overnight, losing 5.48% as investor confidence was shaken by probes into brokerage companies. The China Securities Regulatory Commission has launched investigations into Citic, Founder Securities, Haitong Securities and China Merchants amongst others taking their equity values on a collective 10% slide. As China wobbles the rest of the world follows with the Nikkei losing 0.30% and the MSCI Asia Pacific Index falling 1.50%. In other news from China Industrial Profits fell 4.6% in October taking the shine off yesterday’s base metals rally that was triggered by hopes that the government would step in, save the industry and buy up surplus metals… Euro bourses and other base commodities are also slipping into the red as they too follow the China effect.

Hmm. Stay tuned pardner and hold on to your greenbacks.

What's got the cat worried?

This report continues to carry this link to remind us of some potential bumps in the road ahead. 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.

Chart to Watch

Gold price margins from 2013 lows (euro, yen)

A disturbing aspect of gold's recent decline in USD is the concurrent collapse in euro and yen terms.

One of the few accomplishments the yellow metal can boast is staying above its 2013 lows in terms of both currencies. The percent margin above those bottoms peaked in late January and has since trended down with the divergence of US monetary policy from Europe and Japan, and the associated rise of the US dollar. (click on chart for larger image).



Since late-October, the margin's rapid decline relative to yen has been particularly troubling. I posit that declining value of gold relative to a devalued currency is a red flag. On Friday, gold price in yen terms was falling fast closing only 6% above its 2013 low. If this margin falls to zero, an equivalent USD gold price suggests $997 per ounce given current exchange rates.

2013 lows:

879.64 euros per ounce on 12/20/2013
122,443 yen per ounce on 6/28/2013

Friday (11/27 close):

997.5 euros per ounce (+13.4% margin)
129,772 yen per ounce (+6.0% margin)

Market Stats

Here's the scorecard on the stock market, S&P 500 is presently trading at 2,091.97 (12:30 PM ET). 

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.

The S&P 500 did finally escape the fib box - let's stay there! 

Kitco News Gold Survey

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

My vote is down. Target price $1,050 per ounce.

Discussion:

Gold finds itself with few friends on a thinly traded day following the U.S. Thanksgiving holiday. Comex gold plumbed $1,051.6 per ounce in early morning dealings falling to a new low relative to U.S. equities - more than a 60% loss in value relative to the S&P 500 since November, 2012.

The yellow metal is also highly correlated with embattled commodities oil and copper, all three influenced negatively by a strengthening U.S. dollar. Equally troubling is gold's continuing slide compared to the Japanese yen. A loss of traction with a devalued currency is a red flag - gold denominated in yen is now only 6% above its 2013 low. Although gold fares much better relative to the euro, it slipped below the key 1,000-euro level today - even as the euro fell to 1.059 on a stronger dollar.

Comex gold is presently off its morning low but I believe it will retest the key $1,050 per ounce level next week.

This week's scorecard. With the exception of copper, gold is in value deficit compared to August averages (Note 1, click on chart for larger image):


Compared to mid-October, 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, November 13, 2015

Gold up from $1,073; Barrick Sells, Waterton Expands Eureka Footprint


Winter Approaches
Eureka MinerNovember 2010

Latest News




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:


***
Please checkout Mariana's Eureka, Nevada on Facebook

Numbers used for this morning's early analysis:

Goldman Sachs Commodity Index

S&P GSCI 343.0, 12/15 contract (intraday low 342.4 on 8/24/2015)

Nymex/Comex (most active contracts)

Nymex oil (WTI) $40.96 per barrel (intraday low $37.75 on 8/24/2015)
Brent crude $ 44.87 per barrel
Comex copper $2.1615 per pound (intraday low $2.1510 on 11/13/2015)
Comex gold $1,081.2 per ounce (intaday low $1,073.0 on 11/12/2015)
Comex silver $14.185 per ounce (intraday low $14.155 on 11/13/2015)

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

iShares iBoxx $ High Yield Corporate Bond (HYG) $83.14 ($81.66 52-week low)

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



Eureka MinerNovember 2010

Gold up from $1,073

US dollar remains strong

Macro drivers: concerns over China growth & timing of a U.S. Federal Reserve interest rate rise

Wild cards: U.S. industrial recession, oil falling to new lows

Bullish bet for next week: up, $1,090 per ounce

Morning Miners!

I'll return to Eureka next week and couldn't help but have some fond memories of November, 2010. Five years ago metals & mining were on a roll with mining stocks reaching peaks and copper fetching more than $4.5 a pound in early-2011. Gold set a new all time record by the fall of 2011 as copper prices crashed. Mining stocks have been in a steady decline since.

Nature of the business.

There are some signs that we are nearing the bottom. 2016 will likely be a year of transition as supply finds balance with lower global demand followed by sector recovery in 2017. In the meantime, there is definitely some bargain hunting going as demonstrated by the recent Barrick sale of key properties in Eureka County and elsewhere (see below).

I submitted a column to the upcoming Winter Edition of the Mining Quarterly with a copper and gold outlook for the first-half of 2016. Keep the faith.

Here is today's input to the Kitco News Weekly Gold Survey (full report may be found at near the end of this blog):

My vote is up. Target price $1,090 per ounce.

Discussion:

This has been a grim week for commodities starting with disappointing China industrial production numbers Monday to the worst-than-expected U.S. PPI and retail sales this morning. Although Comex gold dipped to $1,073 per ounce yesterday, the yellow metal has fared better on the week than oil, copper or silver - all touching new lows this morning. 

Trading presently at $1,081, I believe gold will see more relief next week with some safety trade and bargain hunting but fail resistance at this week's high of $1,094.9 per ounce. My target price is $1,090.

A currency red flag is still raised as gold continues to fall in yen terms - loss of gold value to a major devalued currency is a bearish indication. Slightly more bullish, gold has held its ground relative to the falling euro currency and U.S equities.


 Barrick Sells, Waterton Expands Eureka Footprint

This has been quite a news week with Barrick Gold Corp. (ABX) selling their share of Round Mountain, Bald Mountain, Spring Valley and Ruby Hill.

Barrick Sells Stakes In Four Nevada Assets; Kinross Among The Buyers (Kitco News, 11/12/2015)

Although Kinross Gold Corp. (KGC) picked up Barrick's 50% Round Mountain and 100% Bald Mountain interests, I found it very interesting that Waterton Precious Metals Fund II Cayman, LP bought the Ruby Hill Mine and a 70% interest in Spring Valley for $110 million in cash - what a fire sale!

Importantly, Waterton has greatly expanded their footprint in Eureka County. You may remember that Waterton came to the aid of Timberline Resources in late-September:

Timberline Resources Announces Closing of Non-Brokered Private Placement Financing with Waterton Precious Metals Fund II Cayman, LP (Press release, 9/23/2015)

Timberline controls the 23 square-mile Eureka project lying on the Battle Mountain-Eureka gold trend which includes a Lookout Mountain project and a drill program at the old Windfall mine. Add to these properties the Ruby Hill Mine and Waterton has a pretty good chunk of assets around the Eureka town site.

Finally, Barrick sold its 70% share of the Spring Valley joint venture and Waterton is apparently in negotiation for Midway Gold Corp.'s 30%.

Midway and Waterton Announce Agreement in Principle for the Sale and Acquisition of Midway’s 30% Interest in Spring Valley (Press Release, 11/12/2015)

Stay tuned.


What's got the cat worried?

This report continues to carry this link to remind us of some potential bumps in the road ahead. 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 2,037.86. 

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.

The S&P 500 did finally escape the fib box trading but is perilously near re-entering it from the topside today (bearish going forward) - 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 price $1,090 per ounce.

Discussion:

This has been a grim week for commodities starting with disappointing China industrial production numbers Monday to the worst-than-expected U.S. PPI and retail sales this morning. Although Comex gold dipped to $1,073 per ounce yesterday, the yellow metal has fared better on the week than oil, copper or silver - all touching new lows this morning.

Trading presently at $1,081, I believe gold will see more relief next week with some safety trade and bargain hunting but fail resistance at this week's high of $1,094.9 per ounce. My target price is $1,090.

A currency red flag is still raised as gold continues to fall in yen terms - loss of gold value to a major devalued currency is a bearish indication. Slightly more bullish, gold has held its ground relative to the falling euro currency and U.S equities.

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


Compared to a month ago, Friday (10/16):


Notes:

(1) an August comparison is relevant given the market collapse 8/24 & 8/25

Cheers - Colonel

Photos by Mariana Titus