I have just submitted an update on the gold and copper price ranges discussed in the last issue below - gold is starting to show some glitter, pardner!!
The online version:
For old times sake, The Eureka Miner will feature photos and excerpts from 2011 in this report and ones to follow. That was the year when China began to slow but oil and copper prices started on a tear. Gold would set an all time record later that year along with some market mayhem. Here's a blurb from February 15, 2011:
Let's update the record books for the big three metals with copper's new high and add Brent crude as a reminder of what may come our way soon:
COMEX Gold $1432.5/oz 08:25:00 ET 12/7/2010, February contract most active
COMEX Silver $31.275/oz 08:15:00 ET 01/03/2011, March contract most active
COMEX Copper $4.6495/lb 18:15:00 ET 02/14/2011, March contract most active
ICE Brent crude $104.30/bbl 16:30:00 ET 02/14/2011, April contract most active
Those were the days my friend!
Year of the Red Fire Monkey
Gold and copper are feeling some giddy-up go this new year of the Chinese Red Fire Monkey against a backdrop of otherwise declining commodity and equity markets. I just submitted a column on both for the upcoming Spring 2016 Edition of the Mining Quarterly which will be out March 2.
This morning Comex gold posted a 3-1/2 high of $1,164.0, now trading at $1,149.7 per ounce [UPDATE: Friday close $1,157.7, new intraday high $1,175]. Comex copper has recovered nicely from its scary $1.936 low January 19 posting its recent 2016 high yesterday at $2.138 per ounce, now trading at $2.0980 per pound. I believe gold has more to go but the red metal may need another trip to the basement after the Chinese New Year before heading higher again.
This is how the ole Colonel summarized the near term fortunes of both metals for the Kitco Weekly Gold Survey:
Will a confluence of celebrations - Super Bowl, Mardi Gras & Chinese Lunar New Year - bring more glitter to gold? Probably not.
Chinese New Year will draw liquidity form the metals market potentially increasing volatility next week. When traders there return from holiday it is likely copper will retreat from recent highs and gold may resume its rally on renewed fears of declining global growth.
In the meantime, I believe the yellow metal will step back to trend support after making 3-1/2 month highs. Key features this week were the abrupt decline of the U.S dollar relative to the euro and yen together with a rapid re-correlation of copper with gold. Although these events supported price increases for both, this may not last.
There is still divergence of monetary policy between the U.S. vis-à-vis Europe and Japan, even though the U.S. Fed may slow the pace of interest rate increase. This supports a stronger dollar. Although to a lesser degree than oil, copper production is not slowing fast enough to support much higher prices and could again retest sub-$2 per pound lows.
My vote is down. Target for next week $1,135 per ounce.
Hey, I'm not a party pooper - it's just a tough market environment, pardner!
For example, this morning was a mixed monthly jobs report. It disappointed on jobs added, 151,000 versus 185,000 expected, but unemployment fell to 4.9% with a slightly higher participation rate. This restarts the debate about what the Fed will do in March with consensus still favoring a delay in rate hikes on fears that the U.S. economy is slowing. A delay will favor gold price.
Here's the whole enchilada for January:
Employment Situation Summary
Unemployment 4.9% (5.0% December)
Participation rate 62.7% (62.6% December)
Employment in mining continued to decline in January (-7,000). Since reaching a peak in September 2014, employment in the industry has fallen by 146,000, or 17 percent.
Let's put that behind us for now and look forward to a great Super Bowl weekend!
Gold price margins from 2013 lows (euro, yen)
A disturbing aspect of gold's 2015 decline in USD was the concurrent collapse in euro and yen terms.
The yellow metal has stayed above its 2013 lows in terms of both currencies. The percent margin above those bottoms peaked in late January and has then 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 was particularly troubling. I maintain that declining value of gold relative to a devalued currency is a red flag. Fortunately, January witnessed a key reversal in this downtrend for both euro and yen - very bullish for gold!
879.64 euros per ounce on 12/20/2013
122,443 yen per ounce on 6/28/2013
Friday AM (02/05/2016):
1033.44 euros per ounce (+18.8% margin)
134,655 yen per ounce (+9.8% margin)
S&P 500 high: 2,134.72, 5/20/2015
Then from the late December high, the January downdraft:
S&P 500 high: 2,081.56, 12/29/2015
S&P 500 low: 1,812.29, on 1/20/2015 down 12.0% & 15.1% from 5/20/2015 high
S&P 500 bear market begins below 20% at 1,707.78
We're still below the Dec-Jan fib box - a very bearish indication.