"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.

Friday, June 24, 2016

Gold touches $1,362; Silver, $18.4 on Brexit; Global Markets Plummet; Barrick & Newmont Rock

South Ranch - Eureka, Nevada

Friday, July 1, 2016 AM (Update to last report)

Comex gold $1,340.6 per troy ounce
Comex silver $19.445 per troy ounce
Comex copper $2.1950 per pound

Gold & silver still on a run. My input to this morning's Kitco Gold Survey:

With domestic equity markets returned to pre-Brexit levels buttressed by global rallies elsewhere, it is tempting to believe the Brexit storm has passed. Gold and currencies tell a different story. Market uncertainty keeps the pound sterling near its 31-year low, yen strength is approaching the 100-level and the yellow metal fast approaching $1,400 per troy ounce.

The world awaits stimulus from somewhere - either BOE [Bank of England] or BOJ [Bank of Japan] accommodation would provide a catalyst higher. In this light, I remain bullish gold: 

My vote is up. Next week target price $1,360 per troy ounce.

Perhaps more exciting is the continuing silver story. This morning's dealings above $19 per troy ounce have broken a second multi-year gold-to-silver ratio (GSR) trend line in silver's favor (chart below). The ratio has fallen below 70 which implies $20-plus prices if gold can indeed reach $1,400.

I checked with gold and silver trader Sumeru Salla of the renowned Nathabhai Silver Jewelry in Mumbai who informed me, "...INR [Indian rupee] silver had more solid ground than INR gold since the BRexit outcome- a temporary shift from the usual trend. Surprisingly, physical gold is available at a 5% discount to MCX rates [Indian metals & energy futures market]. If given a choice, I would buy silver over gold because of stricter excise norms affecting the gold jewelry industry. Outlook will need to be revised after August festive demand though." 

 Hi-ho silver away!

(Click on image for larger size)

Friday, June 24, 2016 AM

My input to this morning's Kitco Gold Survey (more commentary below):

Gold has behaved more like a currency than a commodity since March 2015 and it proudly displayed that character post-Brexit vote last night [Britain votes to leave the European Union].

Touching $1,350+ levels against a rising U.S. dollar, gold posted a new high against the euro (levels not seen since March 2013) and competed positively with the yen for safe haven status (see chart).

With all the uncertainty the Brexit result will bring to markets in the coming days, gold's new momentum should carry prices higher than this AM's dealings (Comex currently $1,318).

My vote is up. Target price $1,340 per troy ounce. 

Key chart to watch (click on image for larger size)

Summer Edition 2016 - Mining Quarterly

Marianne Kobak McKown has done another outstanding job of getting the Mining Quarterly in step with this year's Mining Expo! There are excellent columns on Silver Strand's Marigold Mine, Newmont's conservation efforts at IL ranch, Jerritt canyon safety improvements, Barrick' Goldstrike and much, much more.

My column on silver's good year was also carried in the Elko Daily Free Press:

(Click on this link for the online Mining Quarterly)

Happy reading!

Numbers used for analysis (June, 24 early AM prices):

Goldman Sachs Commodity Index

S&P GSCI 370.40, 07/16 contract (intraday low 279.25 1/20/2015)

Nymex/Comex (most active contracts)

Nymex oil (WTI) $47.98 per barrel 
Brent crude $ 48.60 per barrel 
Comex copper $2.1205 per pound
Comex gold $1,319.8 per troy ounce 
Comex silver $17.780 per troy ounce

Gold touches $1,362; Silver, $18.4 on Brexit Vote; Global Markets Plummet 

Morning Miners!

The U.K. has voted to leave the European Union.

The so called "Brexit vote" started yesterday and was not tallied until the wee hours. Betting parlors held odds highly in favor of a "Remain" outcome - so did global markets. This report also thought a "Leave" result to be unlikely and that gold prices would fall by this Friday. When you are wrong it is nice to have lots of company.

I watched Bloomberg Asia News as results trickled in after polls closed at 10:00 p.m. London time. A reporter called it "squeaky bum time" with the first a wild swing in pound sterling. This is a British expression for a fear-induced contraction of one's posterior region.

The Wall Street Journal reported the rapid descent of the pound:

A victory for Leave in Swansea, in South Wales, helped drive the pound still lower—down below $1.41, off more than 5% from just before the polls closed. Around 2:30 a.m. in London, more than four hours after the polls had closed, Betfair had made Leave the favorite, with odds of 63%.

Earlier in the day the bookies were 80% for Remain. The pound had touched $1.50 per pound on bullish optimism and dipped to a 30-year low of $1.32 as more Leave tallies came in. That's a drop of 12% - currencies typically move much less than 1% in a day [Friday close 1.3684, down 8.8%]. As the Brexit vote tally turned away from Remain, a Bloomberg Asia correspondent watched the pound sterling-based currency board turn from red to magenta remarking, "I've never seen that color before!"

The Comex highs for gold and silver were $1,362.60 per troy ounce and $18.37 for silver. Currently gold is $1,322 and silver $17.805 [10:56 a.m.]. Fortunately copper is hanging in there at a resilient $2.116 per pound [Friday close: $1,322.4 Au, $17.789 Ag, $2.1105; GSR = 77.01 oz/oz, GCR = 626.6 lbs/oz].

I started to have doubts on Thursday when a CNBC Business reporter had trouble finding any Remain voters on the streets of London. She then tried to go into a betting parlor but was given the boot. The pub next door was more friendly but only one Remain punter was found.

Another clue of reversing fortune were long lines queueing up at exchange houses. Wells Fargo's Janet Mirasola remarked this morning, "The smartest man in the room turned out to be that Brit on the street who yesterday flooded banks by cashing in their hard earned pounds at the highest value this year buying Euros for their holidays!!"

U.K. Prime Minister David Cameron resigned this morning. Ouch!

Global equity markets are down by high single-digit or double-digits. Nuts!

The U.S. markets are now open and the DOW is off a whopping 522 points at 17,489; the S&P 500 is down 65.7 points at 2,047.61 [10:17 a.m. Eureka time, Friday close: 17,400.75 DOW, 2037.41 S&P 500]. However, on a percentage basis these losses, down 2.9% and 3.1% respectively,  are much tamer than some foreign exchanges. The Japanese Nikkei Index fell nearly 8%. The U.S. is still perceived to be in a stronger position than an unraveling Europe or wobbly China. Many countries have negative interest rates; our government bonds are in high demand and positive (our 10-year Treasury is presently 1.58%) [Monday 6/27  update - Wells Fargo's Janet Mirasola reports: In dollar terms Friday's loss of $2.08 trillion on global equity markets overtook the previous record from Sept. 29th 2008, the day when Congress rejected a $700 billion bailout package for Wall St. during the financial crisis when global markets lost $1.94 trillion]

It will take quite some time to understand the full global impact of this decision by English voters. Is there light in this market tunnel for Eureka? Perhaps...

Barrick & Newmont Rock

In all the market carnage, gold miners are getting a healthy bounce today. Barrick (ABX) is presently up 5.7% at $20.46 per share; Nemont is up 5.5% at $16.31. Even if these gains are given back when the gold dust settles, Barrick is still up more than 150% from mid-January lows and Newmont around 125%. With negative interest rates and uncertainty about the future of the European Union, gold miners should be in good shape and their product in demand. Let's see if things start changing locally for the better, pardner.

$1,300 is the new $1,250

One gold trader summed up Friday's gold price action, "$1,300 is the new $1,250." There's some truth to this. In the Summer Edition 2016 of Mining Quarterly , I gave $1,350 per troy ounce as a cap for 2016 gold price given anticipated interest rate increases by the U.S. Federal Reserve. The violent market response to Brexit likely puts the Fed in pause mode for some time and $1,400 may be a better target now for higher prices. At $1,400, silver may have a shot at $20 per troy ounce in 2016.

Copper was spared a dramatic selloff Friday reaching a low of $2.0665 per pound to a Friday close of $2.1105. It is important to watch the red metal for a journey below $2 in the coming months. If it is spared significant downside, Brexit may be more of a transient than a lasting shift in the market trade winds.

Remember the U.K. is still "in" the European Union, getting out is at least a 2-year process. David Cameron has resigned but will probably serve until this fall as a new government is formed. Brexit will be around for quite some time.

Cheers  - Colonel

Photos by Mariana Titus if not otherwise noted

Friday, June 10, 2016

A Salute to Eric John Pastorino - A Good Man Passes

Eric John Pastorino
(b. October 3, 1960; d. June 4, 2016)

Update Friday, June 17, 2016 AM

My input to this morning's Kitco Gold Survey:

For the short term, the outcome of the Brexit vote [referendum for the U.K. to leave the European Union] Thursday will determine closing gold prices for next week. I expect that Britons will vote to stay after this week's tragic events and building pressure from major financial institutions (e.g., IMF, JP Morgan). The cold calculus of markets was clear when the death of Labor MP Jo Cox, who favored staying in the EU, pulled gold price quickly away from its 2-year high yesterday. Another decline should follow a confirmed vote to stay.

However, a longer term bullish trend is still intact with bond yields remaining near record lows, flagging faith in central banks, U.S. election turmoil and the reemergence of terror threats. A key trend to monitor is the continued loss of gold value relative to the yen. There is an increasing divergence between gold in euro and yen terms (chart below) - gold in euro briefly peaked above its January 2015 high as gold in USD bolted above the $1,300-level. 

Although gold in yen had a bump, the trend to lower value is clear. Secondly, albeit not center stage, is the startling devaluation of the Chinese yuan - now at levels that scared global markets only last January. Bullish longer term but... 

My vote is down. Target for next week $1,280 per troy oz

Key chart to watch (click on image for larger size)

Summer Edition 2016 - Mining Quarterly

Marianne Kobak McKown has done another outstanding job of getting the Mining Quarterly in step with this year's Mining Expo! There are excellent columns on Silver Strand's Marigold Mine, Newmont's conservation efforts at IL ranch, Jerritt canyon safety improvements, Barrick' Goldstrike and much, much more.

My column on silver's good year was also carried in the Elko Daily Free Press:

(Click on this link for the online Mining Quarterly)

Happy reading!

Numbers used for analysis (June, 17 early AM prices):

Goldman Sachs Commodity Index

S&P GSCI 374.00, 07/16 contract (intraday low 279.25 1/20/2015)

Nymex/Comex (most active contracts)

Nymex oil (WTI) $47.26 per barrel 
Brent crude $ 48.08 per barrel 
Comex copper $2.0645 per pound
Comex gold $1,294.1 per troy ounce 
Comex silver $17.445 per troy ounce

A Salute to Eric John Pastorino - A Good Man Passes

[Posted June 10, 2016] Morning Miners,

It has been a sad week in Eureka with the passing of Eric John Pastorino. On June 4, Eric passed away unexpectedly at age 55. All who knew Eric will remember him for his kind and generous spirit. He was active in mining and loved all aspects of its history in Northern Nevada - a truly proud son of the Silver State.

Elko Daily Free Press will carry an obituary for Eric tomorrow.The Free Press archives obits so folks that miss the paper can use this link and search window to find Eric after publication:

Elko Daily Free Press Obituaries

Memorial Services will be held in Eureka Saturday, July 2. There will be a service at the Eureka Opera House beginning at 11:00 a.m. followed by a procession down Main St. that will continue throughout town on the way to the Catholic Cemetery.

Pastorino forebears came to Eureka in the late-1800s from the small mountain villages of Alpicella and Stella in the Varazze region near Genoa, Italy. They participated in the lead-silver boom of that time and local ranching. Eric's father Tom Pastorino was Eureka County's Assessor for many years. He interrupted a long tenure that began in 1938 to serve in the Army overseas during World War II where he met Eric’s mother Marge Pastorino. After the war, Tom married his English sweetheart and they had two sons, David and Eric. The Pastorino family owned the historic Eureka Opera House from 1946 until the early-1990s.

After studying at UNR as a Civil Engineer, Eric worked as a miner and later as a surveyor for a number of mines in the Eureka area including Ruby Hill, Bald Mountain, Pan Project, Gold Bar, Windfall, and Buckhorn. He also worked with his brother in private land development within the Eureka town site.

The Eureka & Palisdade Engine #4 Returns to Eureka (1992)
(courtesy Eureka Restoration Enterprise)

Eric was a lover of trains. In 1992, he was instrumental in bringing the restored Eureka & Palisade locomotive #4 to the Eureka fairgrounds. Fair goers were thrilled to ride the E&P with Eric as engineer on a 600-foot semi-circle of newly laid track. In the old days, the E&P provided the rail link to the mainline at Palisades greatly facilitating both mining and ranching in Eureka County.

E&P on the Durango & Silverton Narrow Gauge Railroad

In 2009, Eric rode the E&P #4 again on the Durango & Silverton Narrow Gauge Railroad for Colorado’s 11th Annual Railfest Event. Eric recalled, "I got to ride in the wood car, my shirt pockets filled with cinders and I have burn holes in my hat and shirt!" His enthusiasm for trains and local history will be greatly missed.

The E&P crosses the Animas River

Eureka Fairgrounds (1992)
Left to right: Dan Markoff (owner of E&P #4), Marge Pastorino, Eric Pastorino, unidentified others

The Eureka Miner Remembers Eric Pastorino

This report has carried news about Eric's train adventures and the Pastorino role in Eureka history over the last several years. Here are the links:

Ruby Hill Pours One Million, E&P Railroad News (August 3, 2009)

Eric Rides the Rails - Gold Scares $1250 (August 31, 2010)

A Salute to Marge Pastorino; The Colonel's Gold, Silver & Copper Prices for Next Week (July 13, 2012)

Christmas Eve with Dave, Eric and Marge Pastorino (2012, Photo by Mariana Titus)

A Windfall Memory for Eric Pastorino

Mariana and I first visited the Windfall Mine with Eric Pastorino in the early 1990s. We packed into his old green Ford 4WD pickup and a stop at the Windfall was just one in Eric's tour of mines in Windfall, Ratto and Secret Canyon. He knew all their history and had worked in the Windfall and Rustler pits some years ago with his brother Dave, and with Pete, Tommy and Ellaree Damele. 

A link to my Elko Daily Free Press column: 

Eureka’s Windfall – Birth of a modern gold district with community spirit (September 10, 2015)

When I started contributing columns to the Elko Daily Free Press and Mining Quarterly, I thought it would be a lot of fun to revisit the Windfall Mine. Eric supplied these photographs and related some terrific stories of mine work in those days. His mother, Marge Pastorino, described Windfall operations in September, 1978 as the Eureka correspondent for the Ely Daily Times. I will very much miss my good friend and neighbor. Nobody could tell a better story than Eric Pastorino. Bless his kind soul.

Old school Euclid and Terex equipment was used to excavate the Windfall pit and then operations moved to create the Rustler pit to the south and the Paroni pits to the north (Photo by Eric Pastorino)

Tommy Damele operates Windfall’s Gardner-Denver Air Track Drill. Sister Ellaree was on the drill team (Photo by Eric Pastorino)

Gold on the Move

Eric would no doubt find it fitting that golf price is on the move again. My input to the Kitco New Gold Survey today:

It's hard to imagine a more favorable environment for higher gold prices near term - global bond yields at record lows, Brexit uncertainty, global growth downgrades & U.S. election turmoil. 

The only bearish indication I can find is a trending loss of gold value relative to the yen where deflationary pressures have anointed cash as king. Gold in euro terms appears to be stabilizing, where the European currency has a high positive correlation with the yellow metal (~1,130 EUR/troy oz; 1-month rolling correlation = +0.8).

Shockingly, the Comex gold-to-copper ratio this AM exceeds the highest level during the financial crisis (2/20/2009) - 630 lb/troy oz vs 621 Even the Shfe ratio is extraordinarily high (519 lb/troy oz) where the Chinese presumably hold gold less dear relative to the red metal. 

My vote is up. Target for next week $1,290 per troy oz

Cheers to Eric - Colonel

Photos by Mariana Titus if not otherwise noted