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