"The history of Eureka lies in its future." - Lambert Molinelli, 1878


The author/editor of the Eureka Miner owns common shares of local mining stocks, General Moly (GMO) 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.

Thursday, March 24, 2016

Easter Bunny Finds Few Golden Eggs in His Basket...

Harris House & Hydrant
Eureka Miner, Easter 2011

Please checkout my latest Kitco News commentary: 

Gold & Oil: A Historical Ratio Turns Bad

Mining Quarterly

The Spring 2016 Spring Edition of the Mining Quarterly is here!

Editor Marianne Kobak McKown has down another excellent job with the Spring Edition. Important updates on Newmont, Jerritt Canyon, Pershing Gold at Relief Canyon and much, much more!

Please read my update on gold prices in the latest Mining Quarterly  - gold is showing glitter, pardner.

The online version:

"Click to read" and the online version looks much like the printed magazine. My column on gold prices for 2016 starts on page 52 (page 50 printed version). Press "Esc" to return to the Elko Daily Free Press. There is a handy scroll bar for page selection at the bottom of the screen. The same article appeared in the Elko Daily Free Press March 3:

Please checkout Mariana's Eureka, Nevada on Facebook

Numbers used for analysis (early AM prices):

Goldman Sachs Commodity Index

S&P GSCI 324.15, 04/16 contract (intraday low 279.25 1/20/2015)

Nymex/Comex (most active contracts)

Nymex oil (WTI) $38.58 per barrel 
Brent crude $ 39.36 per barrel 
Comex copper $2.2215 per pound
Comex gold $1,221.2 per ounce 
Comex silver $15.300 per ounce

Canary in the gold mine: Fate of high yield corporate bonds

iShares iBoxx $ High Yield Corporate Bond (HYG) $81.21 ($75.09 52-week low)

Trouble ahead: HYG < $82...recovery from bottom continues but the ole Colonel remains skeptical....

Latest Nevada gasoline prices

Oldies but Goodies

This month the Eureka Miner celebrates its 7th year of bringing market news to Eureka County. For old times sake, the ole Colonel will feature photos and excerpts from the past in this report and ones to follow. 

Here's an oldie from the Thursday before Easter 2011:


It is 5:39 AM. Have a welcome cup of Thor's Day Thunder. Our favorite Norseman and Old Miner Woden are painting Easter eggs. Thor forgot to boil the first batch so we may be having scrambled eggs with shells for breakfast. 

Gold $1510; Silver $46.3

You know the drill by now, pardner: start the day with new records for gold and silver. For a change, COMEX silver got to the party first - 7:00 AM bright and early with the paparazzi snapping photos at $46.27/oz. COMEX gold dropped by 20 minutes later doing high fives at $1509.6/oz but the crowds barely noticed. Silver stole the show again. 

Remember $50 per ounce silver - ha!

The Owl Club
Eureka Miner, Easter 2011

Easter Bunny Finds Few Golden Eggs in His Basket...

Macro drivers: Continued concerns about China, commodity-exporting economies; U.S. Federal Reserve interest rate trajectory

Wild cards: Terror events, Brexit, "lower for longer" commodity pricesfate of high yield bonds

Gold bet for next week: $1,210 per ounce

Morning Miners!

After terror in Europe, more loops and hoops in presidential primaries and a resurgent U.S. dollar, the ole Colonel is more than ready for an Easter break - have a relaxing weekend, pardner..

My morning input to the Weekly Kitco Gold Survey:

The Easter bunny will not find too many golden eggs in his basket this holiday.

Not even a tragic terror event in Europe could reverse the recent downtrend in the yellow metal as it joins falling commodities and loses ground to the U.S. dollar, euro and yen. Gold is again seeking equilibrium between diverging monetary policies - BoJ & ECB ventures into negative interest rate territory establish a price floor; recent hawkish U.S. Fed hints about an April rate hikes create a price cap. At least in the near term, gold prices are likely range bound between $1,110 and $1,280 per ounce. 

Gold has failed to take out its March highs in euro and yen terms. For the near term, I'm keeping on my old moth-eaten bear suit until there is an upward reversal in gold ratios and/or currency trends.

Key levels to watch: 

March highs (per ounce): EUR 1,157, JPY 144,680 
January 2015 highs (per ounce): EUR 1,160, JPY 153,270
This morning: EUR 1,095, JPY 137,290

 All-in-all the Lone Wolf is bearish near term. 

My vote is down. Next week’s target $1,210 per ounce.

Copper conundrum

The red metal rally has stalled. However for the year, copper has risen from its February 11 low of $1.998 per pound to this morning's trade at $2.222, a 11% rise. 

One curious aspect of the copper market is the build in inventory at the Shanghai Futures Exchange (SHFE) warehouses compared to London Metal Exchange (LME) and COMEX stocks. As of March 24th:

SHFE 394,777 tonnes
LME 151,375 tonnes
COMEX 71,541 tonnes

This week the SHFE inventory expanded by an additional 44,639 tonnes; the LME by only 700!

In more normal times the inventories are lower at the SHFE than in Western futures markets. This confuses real and speculative demand for the red metal. China comprises 45% of global copper demand. Something to watch in 2016.

Freeport reverses down

Copper mammoth and benchmark miner Freeport McMoRan (FCX) follows copper down this morning at $9.18 per share. This is still considerably up from its January low of $3.52 - a 161% improvement. As a point of disclosure, the ole Colonel reduced his position in FCX after the Draghi announcement this month.

Barrick & Newmont pause

Nevada's two big mining giants are still recovering from the depths of 2015 and both are off from last Friday AM prices. However, from September's low of $5.91 per share, Barrick Gold (ABX) is up 125% to trade at $13.31 this morning. Newmont (NEM) is up 80%; from a September $15.43 to $27.79 per share.

Chart to Watch

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 2015 and 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, an earlier version of this chart appears in Spring 2016 Mining Quarterly ):

Declining value of gold relative to a devalued currency is a red flag. January witnessed a key reversal in this downtrend for both euro and yen and then it was up and away - a bullish turn for gold. We are now witnessing a bearish reversal in this recovery.

2013 lows:

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

Friday AM (03/24/2016):

1,095 euros per ounce (+24.4% margin)
137,290 yen per ounce (+12.1% margin)

Market Stats

Here's the scorecard on the stock market, S&P 500 is at 2,028 (Friday AM):

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 since May:

August downdraft:

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%

Then from the late December high, the February downdraft:

S&P 500 high: 2,081.56, 12/29/2015
S&P 500 low: 1,810.10, on 2/11/2016 down 13.0% & 15.2% from 5/20/2015 high

S&P 500 bear market begins below 20% at 1,707.78

For Fibonacci folks the December-February "fib box" is:

50.0% retracement from 2/11 low = 1,946

61.8% retracement from 2/11 low = 1,978

Getting inside the "fib box" is generally considered a "bullish" move to the upside; failing the "fib box" is a bearish indication.

We're now above the Dec-Feb fib box and the 2,000- level. Tenuously bullish...but be careful.

Cheers - Colonel

Photos by Mariana Titus

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