"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, July 22, 2016

Gold Takes a Break at $1,320 - Where to Now?


Eureka, Nevada at Dusk

Friday, July 22, 2016 AM (Update)

Comex gold $1,320.4 per troy ounce
Comex silver $19.665 per troy ounce
Comex copper $2.2650 per pound

Gold & silver take a break. My input to this morning's Kitco Gold Survey:

A mixed week for gold. On the value front, gold gained on silver and oil but lost ground to copper and the S&P 500 - this give-and-take likely implies that gold price is taking a time out from its multi-month rally to stabilize around the $1,320-level.

Against this backdrop, the yellow metal's relation to equities is the key gold ratio to watch. The gold-to-S&P 500 (AUSP) steadily declined from November 2012 to December of last year [chart below, money shifts from safe havens to equities]. The 2016 gold rally reversed those fortunes propelled by central bank negative interest rates, the U.S. Federal Reserve's pause in rate hikes and market uneasiness caused by such worries as Brexit and Italian banks. The recent rally of U.S. equities to new highs blunted gold's advance.

The key AUSP ratio to watch is 0.6, falling below that level would be a very bearish indication for gold. At the $1,320-level this would imply danger ahead if the S&P 500 breaks 2,200 (less than 1.5% up from current trading). On the bullish side are continued macro-uncertainties which now include the U.S. presidential election process. Unexpected catalysts like a zika virus outbreak in the lower states have a much lower likelihood but nonetheless remain in the darker corners of concern. 

For a change, the currency front has been rather quiet for gold as the Bank of Japan and the ECB balked this week at further monetary stimulus (at least for now). The euro/yen cross rate has stabilized around 116 EUR/JPY suggesting that neither currency is gaining on the other. Gold in euros seems to hovering around 1,200 EUR per troy ounce; gold in yen terms finds comfort about 140,000 JPY per troy ounce. Pretty ho-hum compared to currency volatility earlier this year (1-month volatility of the euro is now less than 1%; for the yen, less than 2%). 

My vote is down (slightly). Target price for gold is $1,320; target for silver, $19.7

Take a clue from gold - take a break and have a fun weekend!

Gold's fortune's reversed to the upside this year!
(Click on chart for larger view)


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 (July 22 early AM prices):

Goldman Sachs Commodity Index

S&P GSCI 347.72, 08/16 contract (intraday low 279.25 1/20/2015)

Nymex/Comex (most active contracts)

Nymex oil (WTI) $44.18 per barrel 
Brent crude $ 45.61 per barrel 
Comex copper $2.2650 per pound
Comex gold $1,320.4 per troy ounce 
Comex silver $19.665 per troy ounce

Latest Nevada gasoline prices


Malarkey's - A tradition carries on
Eureka, Nevada

Gold Takes a Break at $1,320 - What's the Next Challenge?

Morning Miners!

As I mentioned in my Kitco News brief (above) it appears that gold price is seeking a stable level before the next catalyst appears. Goldman Sach's commodity guru Jeff Currie appeared on CNBC Business News this week to affirm his new target of $1,300 per troy ounce:

Gold's upside from here is limited, says Goldman's Currie (Michelle Fox CNBC Monday, 27 Jun 2016, 6:01 PM ET)

He believes the upside from here is rather limited, "One of the key reasons for that is the market is incredibly long. We've also seen a sharp decline in interest rates, particularly U.S. Treasurys, which suggests that we probably are topping out here..."

$1,300 is not a bad place to be, pardner - especially in gold country! To give his view some perspective, Currie and others warned that gold could see triple-digits a few years ago. His target for 2015 was $1,050 per ounce, now $1,300 for 2016. That's trending in the right direction.

I recently upped my upper price target to $1,400 but that would take a new catalyst and a Federal Reserve that continues a "lower-for-longer" interest rate stance. That's OK, I worry more about lows than highs and we've got a very solid foundation below today' prices. Dovish central banks around the world have caused trillions of dollars to now earn negative interest rates. This puts in a floor for gold around $1,200 to $1,250 per troy ounce. Look at this chart that appeared in the Wall Street Journal recently (click for larger view):


The pool of global debt is north of $44 trillion dollars (blue) and $13 trillion is now negative-yielding (30%). Given slowing global growth and increasing market uneasiness, gold becomes an attractive place to go - it sure beats paying a bank to hold your money!

By my calculation, based on oil (WTI), silver and copper prices, the commodity value of the yellow metal is about $1,140-$1,160. This is the basement below the central banks but far above the $1,050-level and way-way above a triple-digit dungeon.

I'm a gold buyer below $1,300. As this report often reminds readers, "please do your own research, markets can turn on you faster than a feral cat."



Cheers  - Colonel

Photos by Mariana Titus if not otherwise noted

Friday, July 8, 2016

Word from Adella Harding! Gold touches $1,377, Silver $20.5

Eureka, Nevada

Friday, July 15, 2016 (Latest Update, 4:19 Eureka time)

Comex gold $1,338.0 per troy ounce
Comex silver $20.31 per troy ounce
Comex copper $2.2360 per pound

An unexpected military coup in Turkey has occurred within the last several hours bumping gold & silver prices. Turkey is key in the war on ISIS, a member of the European Union and controls the waterway (Bosphorous Straits) that allows the Russian Black Sea Fleet access to the Mediterranean. The last point is key because Turkey is also a member of NATO. The authority in charge at this hour is unclear. A very tense situation.



Early morning assessment of gold and silver prices (below).

Friday, July 15, 2016 AM (Update)

Comex gold $1,325.2per troy ounce
Comex silver $20.145 per troy ounce
Comex copper $2.2500 per pound

Gold & silver pause with stocks soaring this week, but there is still some glitter to go. My input to this morning's Kitco Gold Survey:

The dynamics of gold price can be described by the Chinese philosophy of Yin-Yang - opposite forces that are complementary, interconnected, and interdependent in the marketplace. The Yang or "sunny side" for the yellow metal began Monday with Shinzo Abe ordering more stimulus following a favorable parliamentary election in Japan. This weakened the yen which competes with gold for safe haven status - a bullish indication for gold. But stimulus coming from any major central bank tends to also elevate equity markets. The Yin or "shady side" gathered momentum as new highs for the DOW & S&P 500 did indeed put the recent gold rally in the shade. 

This trend persists this morning with upbeat U.S. economic news boosting equities still higher but the devastating terror attack in France keeping the precious metal safety trade in play. Gold is net down for the week but this could change quickly in gold's favor. In this Yin-Yang balance, the euro/Japanese yen cross rate [i.e. EURJPY = a euro buys this many yen*] emerges as a key indicator for gold price. For example, if the latest terror attack in France increases the probability of "Frexit" (albiet currently low), the sharp cross rate reversal to the upside on the Abe announcement may fade as the euro plunges and yen regains its safe haven allure. However, such new market uncertainty could also reverse equity rallies bringing more sunshine to gold. I believe the net effect is still bullish gold which should break $1,400 per troy ounce this summer.

My vote is up. Target price for gold is $1,340; target for silver, $20.6 

May your weekend have more yang than yin!


* Nearly a year ago the Japanese yen weakened to 138.8 EURJPY. The yen slowly strengthened with a powerful dip to 111 EURJPY in early July. After the Abe announcement the euro has gathered significant relative strength scoring 117.5 this morning (6% up from low point).

Friday, July 8, 2016 AM

Comex gold $1,362.6 per troy ounce
Comex silver $19.930 per troy ounce
Comex copper $2.1305 per pound

Memorable quote of the morning, "The economy is a healthy tortoise not a sickly hare." (CNBC Business News contributor)

Gold & silver still on a run even with a stronger-than-expected monthly jobs report*. My input to this morning's Kitco Gold Survey:

An excellent week for gold and silver. Both posted levels not seen since 2014 - the yellow metal nearly breaching $1,380 per troy punce in early morning trading and silver moving briefly above $20.5 Wednesday. 

Gold and silver also demonstrated great resiliency following a much stronger-than-expected nonfarm payroll report. Although both dipped briefly after the Labor Department announcement, prices should settle above last Friday's close with good margin. The trend higher remains intact.

My vote is up. Target price for gold is $1,380; target for silver, $20.5

On the currency front, gold preformed well too. The lustrous one outpaced the yen on the week which is important because gold and the yen compete for safe haven investment. As gold posted new 2-year highs in U.S. dollar, gold in euro terms is now 40% above its 2013 low on new highs. The world awaits stimulus from somewhere – more Bank of Japan accommodation to weaken the yen may provide the next catalyst higher for gold prices.

Chart for the Week 



(Click on image for larger size)

* June report : 287,000 jobs added (175,000 expected); Headline unemployment 4.9%; Average hourly wages up 0.1% (0.2% expected); participation rate up slightly at 62.7%

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!

Word from Adella Harding!

Gold price, mining stocks rebound (ADELLA HARDING Free Press Correspondent, Elko Daily Free Press, July 9, 2016)




Numbers used for analysis (July 8 early AM prices):

Goldman Sachs Commodity Index

S&P GSCI 355.05, 07/16 contract (intraday low 279.25 1/20/2015)

Nymex/Comex (most active contracts)

Nymex oil (WTI) $45.65 per barrel 
Brent crude $ 46.94 per barrel 
Comex copper $2.1305 per pound
Comex gold $1,362.3 per troy ounce 
Comex silver $19.930 per troy ounce

Latest Nevada gasoline prices


Flowers among Andesite
South Ranch, Eureka, Nevada

Word from Adella Harding! Gold touches $1,377, Silver $20.5

Morning Miners!

I was contacted this week by Adella Harding - what a terrific surprise!

For years, Adella was a tireless staff writer/reporter for Elko Daily Free Press and editor of the Mining Quarterly before retiring in June, 2012.

I wrote then in Adella Retires (Eureka Miner, June 1, 2012):

Mining Editor par excellence Adella Harding of the Elko Daily Free Press will be retiring today with the publishing of the summer edition of Mining Quarterly. Her "boots-on-the-ground" reporting style and photography are legendary in the northern Nevada mining industry above and below ground. Adella has written daily columns for the Free Press for years and her Mining Quarterly magazines are well respected expositions on the state and progress of mining in the heart of North American gold country - a publication the ole Colonel eagerly awaits every quarter.

Adella told me, "I am probably nuts to retire again, but plan to move to Wyoming later this summer to be near family." This report wishes her all the best on her new adventure and she will be greatly missed in these parts and beyond.

Adella remains happily retired in Cheyenne, Wyoming but was recently asked by Editor Jeff Mullins of the Elko Daily Free Press to write a column on gold prices and share prices of gold miners. When it posts, the ole Colonel will carry the column link at the top of this report - what a delight!

She asked me for my thoughts on the topic and I replied, "You must be an angel of good fortune to re-appear as gold & silver post levels not seen since 2014 and with both Barrick & Newmont share price whistling Dixie!" An angel indeed. Here is the full transcript of what I submitted to Adella:

7 July 2016

With domestic equity markets returned to pre-Brexit levels buttressed by global rallies elsewhere, it is tempting to believe the Brexit storm has passed [“Brexit” is the vote by referendum for the U.K. to leave the European Union]. Gold and currencies tell a different story. Market uncertainty keeps the pound sterling near its 31-year low, yen strength is close to the 100-level [USD/JPY] and the yellow metal is fast approaching $1,400 per troy ounce.

The world awaits stimulus from somewhere – more BOJ [Bank of Japan] accommodation to weaken the yen would provide a catalyst higher for gold since both compete for investor safe havens. In this light, I remain bullish gold.

Perhaps most exciting is the continuing silver story. This morning's dealings have retreated some but yesterday Comex silver touched $20.585 per troy ounce as gold peaked at $1,377.5. Neither of these levels have been seen since 2014. Another bullish sign for silver is the closely watched gold-to-silver ratio (GSR) which has turned in the white metal’s favor. Since silver peaked above $49 per troy ounce in April 2011, it has slowly lost value relative to gold. This trend reversed in April of this year and now silver is gaining on the venerable store-of-wealth. The 10-year average GSR is 62 ounces of silver for an ounce of gold. The current ratio has fallen below 70 after being as high as 83 this March. Although still elevated from the long term average, a smaller number implies strengthening silver. Since silver is an important by-product of Northern Nevada gold mining, the rally of both precious metal prices is very welcome news indeed. 

Barrick Gold and Newmont have certainly benefitted in share price for 2016. Gold miners are among the strongest performers in U.S. stock markets this year. As gold and silver posted new highs yesterday Barrick (ABX) finished at $23.16 per share compared to a lowly closing price of $7.38 for 2015. Newmont (NEM) is up $23.45 from it 2015 close, posting an impressive $41.42 per share.

A big shout out for Adella!

Cheers  - Colonel

Photos by Mariana Titus if not otherwise noted