"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, McEwen Mining (MUX) and General Moly (GMO). Please do your own research, markets can turn on you faster than a feral cat.

Friday, February 19, 2021

Gold $1,785 in House of Pain; Red Metal Breaks $4.00; Silver Resilient Above $27

"Habanero"
Winter Storms Uri & Viola
Clyde, Texas

Friday, February 19, 2021 AM

***
"I cannot overstate the potential harm the coronavirus can do to the world economy." (Eureka Miner, January 31, 2020)


Follow the ole Colonel on twitter @Eurekaminer

Next Week Target Gold Price: $1,760 per ounce, Target Silver Price: $27.50 per ounce


Morning!

Our dear friends in Clyde, Texas (outside Abilene) have seen brutal weather this week from Winter Storms Uri and Viola. The headline photo is "Habanero" toughing it out in the snow. Fortunately, they have generators, water and the donkeys have a warm place to shelter. The Eureka Miner sends its best and hopes for warmer weather!

Gold might as well be in a winter storm. The yellow metal is down from its early morning high of $1,790.9 per ounce, thankfully up from its low of $1,759. As you will see from my Kitco input yesterday, holding the $1,760-level is key or the yellow metal will really be in a house of pain. Comex copper broke above $4 per pound pound today - we haven't been at these levels in nearly 10 years! Silver has also shown considerable strength touching $27.74 per ounce before declining some:

Comex April gold is presently trading at $1,785.6 per ounce (8:32 am Eureka Time).

Comex May silver is presently $27.59 per ounce (8:31 am Eureka Time). 

Comex May copper is presently $4.0625 per pound (8:31 am Eureka Time)

This is how I explained my gold and silver outlook to the Kitco Weekly Gold Survey:

[Note: my inputs are now "early bird" Thursday morning summaries]

I remain bearish on gold at least for the near term - Comex futures will likely test the lows of mid-2020 before deciding whether the trend down is over (~$1,760-level).

The lustrous metal plight is illustrated by comparison to two metals and the S&P 500. The uncommon negative correlation with silver persists on a 1-month basis, both of these precious metals are usually highly correlated in a positive sense. The copper-to-gold ratio has been in a strong trend of higher-lows since last August and is accelerating higher with copper prices breaking the $3.9 [Friday update $4.0] per pound level. I believe the gold-to-silver ratio will plumb 64 ounce per ounce next week.

Takeaway - the yellow metal is steadily losing value to the red and white. Finally, gold has been losing value to rising equities since the U.S. Presidential Election. The gold-to-S&P 500 ratio has fallen to mid-2019 levels. My gold target for next week is $1,760 with silver rising slightly to $27.50.

On the flip side, market-driven inflation expectations are still on the rise. The 10-year Treasury breakeven rate is now above 2% (2.21% 2/17 Wednesday). However interest rates still have not risen as fast as expectations, so the 10-year real rate is a negative 0.89%; the 5-year is a negative 1.83%. For a non-interest earning asset like gold, negative interest rates are potentially bullish. Gold is also considered by many to be an inflation hedge. 

These are the strange times of coronavirus.

Stay safe my friends.

Chart for the Week

The ratio of copper-to-gold prices has really taken off from last October. As you can read from the commentaries below, there is a strong relationship between this ratio and interest rates.

Copper-to-Gold Ratio


The Colonel's Latest Kitco News Commentaries

Cheers,

Colonel Possum & Mariana

Friday, December 18, 2020

Gold $1,896, $1,900+ Next Week; Red Metal New High $3.64

 

Open Road, Lone Mountain
Eureka County, NV
If I were asked to pick two words to describe America it would be "open road."
Freedom of travel, the notion of a new horizon beyond every skyline.
These are at the very core of the beautiful experiment we call America.

Friday, December 18, 2020 AM

***
"I cannot overstate the potential harm the coronavirus can do to the world economy." (Eureka Miner, January 31, 2020)


Follow the ole Colonel on twitter @Eurekaminer

Next Week Target Gold Price: $1,920 per ounce, Target Silver Price: $26.45 per ounce

My latest Kitco News commentary: Is silver near a top? (7/27/2020, Kitco News) [summary of recent commentaries given at the bottom of the blog]

Baker: Gold in the time of coronavirus (Elko Daily Free Press, 6/4/2020)

An easy-to-understand overview on gold (32 slides, read explanation below each slide): History of gold and which countries have the most



Morning!

Gold is down from its early morning high of $1,895.7 per ounce but should fly above $1,900 next week. The ole Colonel remains bullish for 2020. Comex copper scored a new high earlier this morning at $3.6445 per pound.

Comex February gold is presently trading at $1,889.2 per ounce (8:53 am Eureka Time).

Comex March silver is presently $26.07 per ounce (9:03 am Eureka Time). 

Comex March copper is presently $3.6250 per pound (9:03 am Eureka Time)

This is how I explained my gold and silver outlook to the Kitco Weekly Gold Survey:

[Note: my inputs are now "early bird" Thursday morning summaries]

This morning's [12/17] Comex February gold breakout above the $1,900-level is a welcome sign and may signal a reversal in gold's range-bound behavior since (U.S.) Thanksgiving week ($1,880.7, 11/23 range top; $1,767.2, 11/30 bottom). This may seem counterintuitive with global equities surging higher and the U.S. dollar plumbing a new low (DXY= 89.75) on positive vaccine news and additional fiscal stimulus in the pipeline. However, there are good reasons for safe-havens to enjoy a reboot in the coming weeks. 

Weaker signals from the U.S. manufacturing sector and spike up in unemployment claims signal that the road to a robust economic recovery will still be rocky in the months ahead. Real interest rates also provide some clues. The U.S. 5-year real rate has dropped a full 31 basis points (bps) more negative in only 1-month (-1.57%); the 10-year is less dramatic but notably slumping 19 bps (-1.06%). Negative interest rates are a bullish environment for a non-interest earning asset like gold.

Finally, the copper-to-gold ratio peaked last week (0.1946, 12/10). This is a fairly dependable leading indicator for 10-year Treasury yield. The ratio and yields have been trending higher - a falling ratio signals lower interest rates ahead, at least until the recovery catches a gear. 10-year Inflation expectations are also on the rise (1.92%, 12/16) which, in combination with yield, supports more negative real rates and possible inflationary pressures in 2021. Gold is considered by many to be an inflation hedge. 

These are the strange times of coronavirus.

Stay safe my friends.

Chart for the Week

The stability trajectory of the copper-gold ratio suggests the ratio has peaked for the time being. The two charts below were first created last Friday (12/11) and updated with this Friday's close. They tell the story. Presently the copper-gold ratio is 0.1923 which is less than the high of 12/10 or 0.1946.

Ratio extremum (high or low) typically happen in the upper-right quadrant of the lambda-Map (first graph). A counter-clockwise trajectory turn marks when the peak/trough in copper-gold occurs (usually within several market days). Given recent data, Thursday 12/10 may very well be the peak following 4 market-days after the turn (blue arrow). The second graph shows the copper-gold ratio plotted against time. Interestingly, the ratio low (0.1384) occurred last summer during another period of ratio instability.* 

* an unstable condition is defined as a ratio whose 1-month and 3-month volatility both exceed 4%. This level is based on historical records of the copper-gold relationship.

Copper-Gold Ratio lambda-Map

Copper-Gold Ratio


The Colonel's Latest Kitco News Commentaries

Please checkout my latest Kitco News columns on the stunning relationship of copper and gold prices with interest rates:

Is silver near a top? (7/27/2020, Kitco News)


Copper, gold & the coronavirus (2/18/2020, Kitco News)








Cheers,

Colonel Possum & Mariana

Friday, October 30, 2020

Gold Recovers $1,890; Next Week Like No Other

 

Mailboxes (2006)
Eureka County, Nevada

Friday, October 30, 2020 AM

***
"I cannot overstate the potential harm the coronavirus can do to the world economy." (Eureka Miner, January 31, 2020)


Follow the ole Colonel on twitter @Eurekaminer

Next Week Target Gold Price: $1,910 per ounce, Target Silver Price: $24.04 per ounce

My latest Kitco News commentary: Is silver near a top? (7/27/2020, Kitco News) [summary of recent commentaries given at the bottom of the blog]

Baker: Gold in the time of coronavirus (Elko Daily Free Press, 6/4/2020)

An easy-to-understand overview on gold (32 slides, read explanation below each slide): History of gold and which countries have the most



Morning!

Gold is down from its early morning high of $1,890 per ounce but should find some giddy-up next week. The ole Colonel remains bullish for 2020 - I believe we will see a breakout higher post-election. Here's where we're trading:

Comex December gold is presently trading at $1,882,4 per ounce (8:17 am Eureka Time).

Comex December Silver is presently $23.65 per ounce (8:17 am Eureka Time). 

Comex December copper is presently $3.0535 per pound (8:17 am Eureka Time)

This is how I explained my gold and silver outlook to the Kitco Weekly Gold Survey:

Although gold got battered below the key $1,900-level this week, it did well compared to key commodities, domestic equities and the euro from a comparative value viewpoint. With some Central banks selling gold to cover covid expenses and jewelry demand down, it is up to the investor to keep prices supported. That support turns on how much market uncertainty lies ahead - it's hard to imagine a time less certain than next week. Presidential elections, contested or not, alarming covid infections in the U.S., lockdowns in Europe and stalled stimulus plans in Congress create a witches brew that will extend well beyond Halloween. The near-term fortunes of safe-havens shine bright.

One troubling sign is a persistent divergence of correlations between gold and copper compared to those of the Chinese yuan and copper [see discussion below]. Extreme divergence occured in early-February when covid was ravaging China but just reaching the shores of Europe and the U.S. This peak in divergence presaged the March market chaos in the West. Now the roles are reversed: China is on the road to recovery as Europe and the U.S. face new waves of coronavirus infections. Although the recent correlation divergence is less severe, it may portend another round of market chaos in the weeks ahead. If it does, precious metals will prosper.

I believe gold will regain $1,910 per ounce next week with silver following to $24.05 per ounce. My target for 2020 remains unchanged at $2,200 for gold and a lower $28 target for silver.

Three conditions for higher gold remain since gold's all-time record:
1. There remains plenty of domestic and geo-political uncertainty to support safe havens: U.S. election controversy, a stalled recovery package in Congress, a stubbornly pervasive covid-19 virus, civil unrest and simmering U.S./China tension.
2. The longer-term fortunes of the U.S. dollar grow dimmer with more expected Federal Reserve and U.S. Treasury largesse when a relief package does eventually pass.
3. Negative U.S. benchmark real rates continue - bullish for non-interest earning assets like gold and silver (10-year real rate = -0.88%). Notably, recent inflation expectations have ticked back up to near August levels (1.71% vs. 1.80%) 

These are the strange times of coronavirus. 

Stay safe my friends.

Chart for the Week

Our Chart for the Week is an update from last week.The ole Colonel is closely monitoring correlations of copper with gold and also the Chinese currency. China's economy is recovering to near pre-pandemic levels and they account for about one-half of global copper demand. Therefore, a positive indication for China is a strengthening yuan coupled with demand-driven copper prices. However, when gold and copper prices go in different directions there is often trouble afoot. Presently, pessimism about global recovery with new waves of coronavirus in Europe and possibly the U.S. has caused some de-correlation of the red and yellow metals (click on image for larger size):

Correlation Map of Copper with the Yuan & Gold

The divergence between the two correlation trajectories is shown by the dashed magenta arrow. You can learn more about how this works in a Kitco column I wrote earlier this year:


If we plot divergence (d) versus time, you can see how the U.S./China trade tensions caused spikes in divergence last year (Point A) and also how the coronavirus initially impacted China (Point B). In this chart, a low number (i.e. low divergence) is considered good. There has been a move back up above the 6-year average (d=0.78) and the peak may have occurred Wednesday (1.5604). Divergence breaks above the falling trend line (dashed blue arrow), remains troubling. 

Extreme divergence occured in early-February (Point B) when covid was ravaging China but just reaching the shores of Europe and the U.S. This peak in divergence presaged the March market chaos in the West. Now the roles are reversed: China is on the road to recovery as Europe and the U.S. face new waves of coronavirus infections. Although the recent correlation divergence is less severe, it may portend another round of market chaos in the weeks ahead. If it does, precious metals will prosper.

China 2-rho Divergence Indicator

WHAT IS THE RECORD GOLD PRICE?

The new all-time Comex gold record is $2,089.2 (December contract)

What makes a record gold price? There are many correct answers to this question, different answers but no less true. Some folks refer to the spot gold price on a particular day others futures prices. They may cite a closing or intraday number. For the purposes of this report, the "all-time record" refers to the highest intraday price on the Comex futures exchange for the most active front-month contract.

The old record was $1,923.7 per ounce.

That occurred on Tuesday, September 6, 2011. I reported on the record intraday price the following day in this Eureka Miner:

Gold Trips; Copper & Oil Bounce (Eureka Miner, 9/7/2011)

WHAT IS THE INFLATION-ADJUSTED 2011 GOLD RECORD? [Updated for latest CPI]

You can bring the 2011 gold record forward in time by using the Consumer Price Index (CPI). The government data is easily accessible on the internet. The numbers below were taken from a chart provided by the Federal Reserve Bank of St. Louis in a database called FRED (Federal Reserve Economic Data). Here's the formula, given the monthly data through September 2020:

Gold Record (2011) x [CPI (7/2020)/CPI (9/2011)] = 
$1,923.7/t-oz x [260.209/226.597] = $2,209/t-oz

An even easier method is to use one of the many inflation calculators on the internet that use CPI. This link takes you to one provided by the Bureau of Labor Statistics (BLS).

$2,200 is therefore a reasonable next target for gold price this year if you believe, as the ole Colonel does, that the rally continues.

The Colonel's Latest Kitco News Commentaries

Please checkout my latest Kitco News columns on the stunning relationship of copper and gold prices with interest rates:

Is silver near a top? (7/27/2020, Kitco News)


Copper, gold & the coronavirus (2/18/2020, Kitco News)








Cheers,

Colonel Possum & Mariana

Friday, October 23, 2020

Gold Falls from $1,936 Wednesday High; Breakout Higher Post-Election

 

Willow Creek Ranch
Eureka County, Nevada

Friday, October 23, 2020 AM

***
"I cannot overstate the potential harm the coronavirus can do to the world economy." (Eureka Miner, January 31, 2020)


Follow the ole Colonel on twitter @Eurekaminer

Next Week Target Gold Price: $1,920 per ounce, Target Silver Price: $24.93 per ounce

My latest Kitco News commentary: Is silver near a top? (7/27/2020, Kitco News) [summary of recent commentaries given at the bottom of the blog]

Baker: Gold in the time of coronavirus (Elko Daily Free Press, 6/4/2020)

An easy-to-understand overview on gold (32 slides, read explanation below each slide): History of gold and which countries have the most



Morning!

Gold is down from its Wednesday high of $1,936 but don't despair. The ole Colonel remains bullish for 2020 - I believe we will see a breakout higher post-election. Here's where we're trading:

Comex December gold is presently trading at $1,901.1 per ounce (8:32 am Eureka Time).

Comex December Silver is currently trading at $24.69 per ounce (8:33 am Eureka Time). 

Comex December copper is presently $3.1395 per pound (8:32 am Eureka Time)

This is how I explained my gold and silver outlook to the Kitco Weekly Gold Survey:

Lacking a late-October surprise, it is challenging to imagine a market driver that will move the lustrous metal from its resilient meanderings of late until post-election. December Comex prices remain locked in a wedge defined by September highs and lows ($1,983.8 and $1,851.0). This suggests a breakout higher in November given the lengthening shadows of coronavirus infections both here and in Europe. Europe PMI today indicating contraction is a good example. I believe gold will move just above the middle of the wedge next week to $1,920 per ounce with silver following to $24.93 per ounce.

It has been much more exciting to monitor interest rates this week. Globally they are on the rise with the 10-year approaching mid-June levels (0.86% vs. 0.90%). Here's the good news for gold: inflation expectations are also headed north. The 5-year real rate increased negativity a full 7 basis points to -1.31% which is very bullish for precious metals (point 3 below). 

China's yuan also continues to strengthen from late May as their economy approaches pre-pandemic levels and the virus there is relatively contained. Concurrent with this currency strength is the rise of copper prices above $7,000  per tonne [$3.1752 per pound], China comprises 50% of the global demand for the red metal. This underlines the growing disparity between covid-recovering economies while the U.S. and Europe face a new wave of cases. This disparity will fuel market uncertainty further supporting gold prices into the new year.

My target for 2020 remains unchanged at $2,200 for gold and $32 for silver.

Three conditions for higher gold remain since gold's all-time record:

1. There remains plenty of domestic and geo-political uncertainty to support safe havens: U.S. election controversy, a stalled recovery package in Congress, a stubbornly pervasive covid-19 virus, civil unrest and simmering U.S./China tension.

2. The longer-term fortunes of the U.S. dollar grow dimmer with more expected Federal Reserve and U.S. Treasury largesse when a relief package does eventually pass.

3. Negative U.S. benchmark real rates continue - bullish for non-interest earning assets like gold and silver. Notably, recent inflation expectations have ticked back up to near August levels (1.76% vs. 1.80%) These are the strange times of coronavirus. Stay safe my friends.

Chart for the Week

Our Chart for the Week is an update from last week.The ole Colonel is closely monitoring correlations of copper with gold and also the Chinese currency. China's economy is recovering to near pre-pandemic levels and they account for about one-half of global copper demand. Therefore, a positive indication for China is a strengthening yuan coupled with demand-driven copper prices. However, when gold and copper prices go in different directions there is often trouble afoot. Presently, pessimism about global recovery with new waves of coronavirus in Europe and possibly the U.S. has caused come de-correlation of the red and yellow metals (click on image for larger size):

Correlation Map of Copper with the Yuan & Gold

The divergence between the two correlation trajectories is shown by the dashed magenta arrow. You can learn more about how this works in a Kitco column I wrote earlier this year:


If we plot divergence (d) versus time, you can see how the U.S./China trade tensions caused spikes in divergence last year (Point A) and also how the coronavirus initially impacted China (Point B). In this chart, a low number (i.e. low divergence) is considered good. There has been a move back up (d=1.37010) above the 6-year average (d=0.78) but the peak may have occurred yesterday (1.38750). Divergence breaks above the falling trend line (dashed blue arrow), remains troubling. I will monitor this closely.

China 2-rho Divergence Indicator

WHAT IS THE RECORD GOLD PRICE?

The new all-time Comex gold record is $2,089.2 (December contract)

What makes a record gold price? There are many correct answers to this question, different answers but no less true. Some folks refer to the spot gold price on a particular day others futures prices. They may cite a closing or intraday number. For the purposes of this report, the "all-time record" refers to the highest intraday price on the Comex futures exchange for the most active front-month contract.

The old record was $1,923.7 per ounce.

That occurred on Tuesday, September 6, 2011. I reported on the record intraday price the following day in this Eureka Miner:

Gold Trips; Copper & Oil Bounce (Eureka Miner, 9/7/2011)

WHAT IS THE INFLATION-ADJUSTED 2011 GOLD RECORD? [Updated for latest CPI]

You can bring the 2011 gold record forward in time by using the Consumer Price Index (CPI). The government data is easily accessible on the internet. The numbers below were taken from a chart provided by the Federal Reserve Bank of St. Louis in a database called FRED (Federal Reserve Economic Data). Here's the formula, given the monthly data through September 2020:

Gold Record (2011) x [CPI (7/2020)/CPI (9/2011)] = 
$1,923.7/t-oz x [260.209/226.597] = $2,209/t-oz

An even easier method is to use one of the many inflation calculators on the internet that use CPI. This link takes you to one provided by the Bureau of Labor Statistics (BLS).

$2,200 is therefore a reasonable next target for gold price this year if you believe, as the ole Colonel does, that the rally continues.

The Colonel's Latest Kitco News Commentaries

Please checkout my latest Kitco News columns on the stunning relationship of copper and gold prices with interest rates:

Is silver near a top? (7/27/2020, Kitco News)


Copper, gold & the coronavirus (2/18/2020, Kitco News)








Cheers,

Colonel Possum & Mariana

Friday, October 16, 2020

Gold $1,918, Bullish Breakout on the Horizon

 


Kitchen's Market
Eureka, Nevada

Friday, October 16, 2020 AM

***
"I cannot overstate the potential harm the coronavirus can do to the world economy." (Eureka Miner, January 31, 2020)


Follow the ole Colonel on twitter @Eurekaminer

Next Week Target Gold Price: $1,920 per ounce, Target Silver Price: $24.67 per ounce

My latest Kitco News commentary: Is silver near a top? (7/27/2020, Kitco News) [summary of recent commentaries given at the bottom of the blog]

Baker: Gold in the time of coronavirus (Elko Daily Free Press, 6/4/2020)

An easy-to-understand overview on gold (32 slides, read explanation below each slide): History of gold and which countries have the most



Morning!

Gold is down for the week nearly a percent but nicely treading water. The ole Colonel remains bullish for 2020. Here's where we're trading: gold pulling back from $1918,7 per ounce:

Comex December gold is presently trading at $1,909.1 per ounce (8:06 am Eureka Time). 

Comex December Silver is currently trading at $24.43 per ounce (8:06 am Eureka Time). 

Comex December copper is presently $3.0635 per pound (8:06 am Eureka Time)

This is how I explained my gold and silver outlook to the Kitco Weekly Gold Survey:

Not exactly a fun day at the beach for markets, lots of cross-currents and a few rip tides. This morning is a good example: U.S. retail sales surprise to the upside, industrial production surprises to the downside. As gold holds its ground above the $1,900-level, market participants appear pleased to have the lustrous lifeguard on duty but few are crying for help. December Comex prices are locked in a new wedge defined by September highs and lows ($1,983.8 and $1,851.0) suggesting a breakout higher if a bad headline or two washes beachgoers out to sea.

What are the cross currents? Currencies and interest rates offer some clues. China's yuan has been strengthening since late May as their economy returns to pre-pandemic levels and the virus there is relatively contained. In stark contrast, the euro has been trending lower since early-September as a second wave of infections puts a chill on their recovery. The German bund tumbled a full 10 basis points more negative this week as the U.S. 10-year Treasury bumped a few higher. With startling higher case rates in many states, it seems the U.S is on a path with Europe to more challenging times. Gold will likely remain in the wedge next week - my targets are Comex gold $1,920 with silver following to $24.67. My target for 2020 remains unchanged at $2,200 for gold and $32 for silver. 

Three conditions for higher gold remain since gold's all-time record: 
  1. There remains plenty of domestic and geo-political uncertainty to support safe havens: U.S. election controversy, a stalled recovery package in Congress, a stubbornly pervasive covid-19 virus, civil unrest and simmering U.S./China tension. 
  2. The longer-term fortunes of the U.S. dollar grow dimmer with more expected Federal Reserve and U.S. Treasury largesse when a relief package does eventually pass. 
  3.  Negative U.S. benchmark real rates continue - bullish for non-interest earning assets like gold and silver. Notably, recent inflation expectations have ticked back up to nearAugust levels (1.69% vs. 1.80%)
These are the strange times of coronavirus. Stay safe my friends.

Chart for the Week

The ole Colonel is closely monitoring correlations of copper with gold and also the Chinese currency. China's economy is recovering to near pre-pandemic levels and they account for about one-half of global copper demand. Therefore, a positive indication for China is a strengthening yuan coupled with demand-driven copper prices. However, when gold and copper prices go in different directions there is often trouble afoot. Presently, pessimism about global recovery with new waves of coronavirus in Europe and possibly the U.S. has caused come de-correlation of the red and yellow metals (click on image for larger size):

Correlation Map of Copper with the Yuan & Gold

The divergence between the two correlation trajectories is shown by the dashed magenta arrow. You can learn more about how this works in a Kitco column I wrote earlier this year:


If we plot divergence (d) versus time, you can see how the U.S./China trade tensions caused spikes in divergence last year (Point A) and also how the coronavirus initially impacted China (Point B). In this chart, a low number (i.e. low divergence) is good. Last Friday's closing numbers suggest a troubling move back up (d=1.1038) above the 6-year average (d=0.78). If divergence breaks above the falling trend line (dashed blue arrow), there may be trouble ahead for everyone.

China 2-rho Divergence Indicator

WHAT IS THE RECORD GOLD PRICE?

The new all-time Comex gold record is $2,089.2 (December contract)

What makes a record gold price? There are many correct answers to this question, different answers but no less true. Some folks refer to the spot gold price on a particular day others futures prices. They may cite a closing or intraday number. For the purposes of this report, the "all-time record" refers to the highest intraday price on the Comex futures exchange for the most active front-month contract.

The old record was $1,923.7 per ounce.

That occurred on Tuesday, September 6, 2011. I reported on the record intraday price the following day in this Eureka Miner:

Gold Trips; Copper & Oil Bounce (Eureka Miner, 9/7/2011)

WHAT IS THE INFLATION-ADJUSTED 2011 GOLD RECORD? [Updated for latest CPI]

You can bring the 2011 gold record forward in time by using the Consumer Price Index (CPI). The government data is easily accessible on the internet. The numbers below were taken from a chart provided by the Federal Reserve Bank of St. Louis in a database called FRED (Federal Reserve Economic Data). Here's the formula, the latest monthly data is through July 2020:

Gold Record (2011) x [CPI (7/2020)/CPI (9/2011)] = 
$1,923.7/t-oz x [258.723/226.597] = $2,196/t-oz

An even easier method is to use one of the many inflation calculators on the internet that use CPI. This link takes you to one provided by the Bureau of Labor Statistics (BLS).

$2,200 is therefore a reasonable next target for gold price this year if you believe, as the ole Colonel, that the rally continues.

The Colonel's Latest Kitco News Commentaries

Please checkout my latest Kitco News columns on the stunning relationship of copper and gold prices with interest rates:

Is silver near a top? (7/27/2020, Kitco News)


Copper, gold & the coronavirus (2/18/2020, Kitco News)








Cheers,

Colonel Possum & Mariana

Friday, September 4, 2020

Gold Retreats from $1,956, Copper above $3; August Jobs Surprise

 

Backside of Devil's Gate
Alaskite columnar formations
Eureka, Nevada

NOTICE: Below is the 1,000th report by the Eureka Miner and sadly its last. After 11 years of reporting market news for Eureka County and surrounding areas, the ole Colonel has decided to move on to new adventures. I still plan to do market analysis and to be a periodic contributor to Kitco News, Elko Daily Free Press, Mining Quarterly and others. Please follow the ole Colonel on twitter @Eurekaminer. It's been a good ride, Happy Trails!

Friday, September 4, 2020 AM

***
"I cannot overstate the potential harm the coronavirus can do to the world economy." (Eureka Miner, January 31, 2020)


Follow the ole Colonel on twitter @Eurekaminer

Next Week Target Gold Price: $1,950 per ounce, Target Silver Price: $27.17 per ounce

My latest Kitco News commentary: Is silver near a top? (7/27/2020, Kitco News) [summary of recent commentaries given at the bottom of the blog]

Baker: Gold in the time of coronavirus (Elko Daily Free Press, 6/4/2020)

An easy-to-understand overview on gold (32 slides, read explanation below each slide): History of gold and which countries have the most



Morning Miners!

There is good news on two fronts. The August jobs report, released today, shows headline unemployment falling into single digits at 8.4%. The peak was 14.7% in April - that's progress! The daily covid-19 positivity rate for Nevada is also falling, briefly into single digits earlier this week. It was in a worrying range of 14-15%. Positivity has crept up a bit to 11.8% but the trend is down - under 5% is the goal. Stay safe, pardner!

Before the report, Comex December gold made a run at $1,956.6 per ounce. Here's where we're trading, gold and silver pulling back from earlier highs (Weekly summaries below are recorded near the market open, 6:30 Eureka Time):

Comex December gold is presently trading at $1,927.9 per ounce (9:16 am Eureka Time). 

Comex December Silver is currently trading at $26.62 per ounce (9:16 am Eureka Time). 

Comex December copper is presently $3.0515 per pound (9:16 am Eureka Time)

This is how I explained my gold and silver outlook to the Kitco News Weekly Gold Survey :

The much better-than-expected August jobs report demonstrates that the economy is solidly improving but still has a long way to go. The U.S. dollar Index is up strongly today on the news but is still woefully below its 200-day average at levels last seen in May 2018 (DXY early this AM 92.82, post-report 93.07; 200-day av. 96.34). The S&P 500 made new all-time highs this week even with an S&P 500 volatility Index (VIX) above 20. The benchmark index pulled back significantly yesterday and is falling in morning trading with a VIX now above 30. We remain in a mix of domestic and geopolitical uncertainty that is supportive of gold price.

Comex Gold has certainly been challenged lately and is down post-report but I believe it will remain in a trading range, established in August between $1,874 per ounce (8/12) and $2,025 (8/18), as headlines ebb and flow into the coming Presidential election. I believe it likely that gold will move up to the mean of this range next week or $1,950 per ounce. In my view, $2,200 is still in the cards if there is a breakout from this range.

Notably the gold-to-silver ratio is very near its 10-year average and is showing signs of short-term stability. If gold moves to $1,950, silver will follow at $27.17 per ounce [see Silver Watch below].

The benchmark 10-year Treasury demonstrates that inflation expectations, although contained, are still ahead of yields (10-year real rate = -1.03%). A non-interest earning asset like gold prospers in that environment. 

Three conditions for higher gold remain since gold's recent record price:

  1. There remains plenty of domestic and geo-political uncertainty: U.S. elections, a stalled recovery package in Congress, a pervasive coronavirus infection in the U.S., the potential for civil unrest and escalating U.S./China tensions continue to be concerns causing investors to seek safe-havens.
  2. With the euro above 1.18 EURUSD, a weakened dollar boosts dollarized commodities like gold. The fortunes of the U.S. currency grow dimmer with more expected Federal Reserve and U.S. Treasury largesse. 
  3. U.S. real rates are continuing to be negative (see above) 

These are the strange times of coronavirus.

Since it continues to dominate markets, a covid-19 summary is updated and included near the bottom of the blog (new location).

The ole Colonel has also included the overview of the 1918-1919 Influenza impact on Eureka County from previous posts (bottom of blog). Mark Twain cautiously reminds us, 'History doesn't repeat itself, but it often rhymes.' October-December 1918 were a bad months for Eureka County that had escaped the U.S. spring wave that year followed by an August surge. Take covid-19 seriously, pardner.

WHAT IS THE RECORD GOLD PRICE?

The new all-time Comex gold record is $2,089.2 (December contract)

What makes a record gold price? There are many correct answers to this question, different answers but no less true. Some folks refer to the spot gold price on a particular day others futures prices. They may cite a closing or intraday number. For the purposes of this report, the "all-time record" refers to the highest intraday price on the Comex futures exchange for the most active front-month contract.

The old record was $1,923.7 per ounce.

That occurred on Tuesday, September 6, 2011. I reported on the record intraday price the following day in this Eureka Miner:

Gold Trips; Copper & Oil Bounce (Eureka Miner, 9/7/2011)

WHAT IS THE INFLATION-ADJUSTED 2011 GOLD RECORD? [Updated for latest CPI]

You can bring the 2011 gold record forward in time by using the Consumer Price Index (CPI). The government data is easily accessible on the internet. The numbers below were taken from a chart provided by the Federal Reserve Bank of St. Louis in a database called FRED (Federal Reserve Economic Data). Here's the formula, the latest monthly data is through July 2020:

Gold Record (2011) x [CPI (7/2020)/CPI (9/2011)] = 
$1,923.7/t-oz x [258.723/226.597] = $2,196/t-oz

An even easier method is to use one of the many inflation calculators on the internet that use CPI. This link takes you to one provided by the Bureau of Labor Statistics (BLS).

$2,200 is therefore a reasonable next target for gold price this year if you believe, as the ole Colonel, that the rally continues.

Copper & China Updates

Comex copper is above the key $3.0-level, presently trading at $3.0515 per pound. Improving Chinese demand and mining supply restrictions have kept prices up but don't expect gangbuster prices with much of the world still suffering economically from the coronavirus. Here's the latest from Mining.com:


China, which still represents copper's highest demand, is on the mend. Here is my China Indicator updated through this morning (see above 2/18/2020 Kitco column). A LOW NUMBER IS GOOD

China 2-rho Divergence Indicator

A bottom of 0.3012 occurred after the signing of the Phase I deal seemed certain (Friday, 1/10/2020). This AM the indicator sits at 1.0750 below the coronavirus peak of 1.8399 set February 11th and below the 6-year average (0.78). The covid-19 pandemic has stabilized in China. Let's keep an eye for any moves higher given any renewed U.S./China tensions or virus outbreaks (click on chart for larger size). The latest sharp increase is worrying but has stalled this week.

I've been actively tweeting market news/events during the week so please follow me at @Eurekaminer.  I usually tweet Sunday night which is Monday morning at the Shanghai Futures Exchange (SHFE) for a heads up on copper & gold prices in the Year of the Rat.

                            
Weekly Summary

Here is a weekly summary chart of gold and my 16 favorite market variables. They are grouped in categories "Commodities", "Interest Rates", "Indexes" and "Currencies" of 4 variables each. Over time, each variable has played some part in the gold story. It is prudent to monitor all 16 to understand the key price drivers that are currently active for the yellow metal. Importantly, this is not a unique collection of variables but one that works well for the ole Colonel

Because The Eureka Miner is a morning report, Friday AM prices are compared with the closing prices of the previous week (click on charts for larger size):




This weekly chart of comparative value tracks the value of gold relative to key currencies, commodities and indexes :


Silver Watch

Comex silver is above $26 per ounce. Please check this out if you get the silver bug:

How to Invest in Silver (Debbie Carlson, U.S. News & World Report, August 1, 2019)

How to smartly buy gold and silver:

How to Mine Physical Precious Metals for an IRA (Debbie Carlson, Barrons, Sept. 8, 2019)

The gold-to-silver ratio (GSR) set a new high Wednesday, 3/18, of 123.9 ounce per ounce solidly above July 11 high of 91.3 - a trend down from this top is bullish for silver when the Lustrous One rallies.

At 71.76 silver is close to its 10-year average relative to gold

The 10-year average GSR is 69.5 ounce per ounce.

Importantly, the GSR has broken a long-term trend of higher-lows established April 2011 - a very bullish indication for silver.

Comex silver closed at a new high of $29.216  (August 10). Please checkout my Kitco commentary: 

Is silver near a top? (7/27/2020, Kitco News) 

(click on image for larger size)

Gold-to-Silver Ratio

The 3-month beta with gold fell from its high but then bullishly reversed higher. It is showing signs of strengthening. Beta tells you how gains (losses) in gold are related to gains (losses) in silver. You prefer a high beta (i.e. greater than 1.00) when gold rallies. For example, a beta of 2.0 implies a 1% bump in gold price should yield a 2% jump for silver. Peaks in beta typically occur near highs and lows.

(click on image for larger size).

Silver-to-Gold Beta (3-month base)

Historical note:

In the past, when gold and silver were legal tender (see gold overview link below headline photo), it was important to set a value relationship between them. In 1792, the U.S. fixed its price at 15:1. This means that 1 troy ounce of gold was worth 15 troy ounces of silver. Over the years, as this ratio has changed, precious metal investors have used it as a signal of when to buy.

Stay tuned.

Inflation Watch

Inflation expectations made a high of 2.18% April 23, 2018. They have tracked steadily down from there with a dive to the 0.5%-level before reversing higher - yesterday's number was 1.65%. Expectations have been rising at a faster pace than 10-year U.S. Treasury yields resulting in negative real rates again (see Weekly Summary Charts) - a bullish signal for a non-interest earning asset like gold.

10-year Inflation Expectations

Many believe, including the ole Colonel, that gold price is more sensitive to inflation expectations than other measure of inflation. My January Kitco News commentary explains the importance of tracking "real rates" which are a function of inflation expectations:



 Old Glory
Eureka, Nevada

Chart to Monitor

Here's a chart to monitor for 2020 (Click on the image for a larger size):

Gold-to-S&P 500 Ratio

An important gold ratio is gold-to-S&P500 or AUSP. The ratio bottomed in early-December of 2015 and reversed to a bullish trend, peaking February 11, 2016 (0.6849). It bottomed December 20, 2016 (0.4973) trended higher but then bearishly reversed into a downward channel bottoming again October 1, 2018 (0.4063). Currently this AM the AUSP is at 0.5610 below the high of 0.7029 set March 23, 2020. Importantly, the ratio has aggressively left the downward trending channel with an uptrend trend of higher-lows starting with the October 2018 low. 

The Colonel's Latest Kitco News Commentaries

Please checkout my latest Kitco News columns on the stunning relationship of copper and gold prices with interest rates:

Is silver near a top? (7/27/2020, Kitco News)


Copper, gold & the coronavirus (2/18/2020, Kitco News)







COVID-19 Update

The website created for Eureka County to track and report on the covid-19 pandemic:


Here are the grim covid-19 statistics reported this morning (last Friday AM in parentheses):

U.S.A. 6,153,735 (5,884,174) covid-19 cases; 186,834 (181,092) deaths
Grim comparison: 3.2 x the U.S. soldiers who died in Vietnam (1964-1975: 58,220 deaths)

Nevada 67,220 (67,220 ) covid-19 cases; 1,271 (1,271) deaths
The Nevada daily positivity rate is HIGH at 11.8% (14.7%), Target < 5%, the good news is that the positivity rate is falling from the 14-15% range

7 (5) confirmed cases in Eureka County

Grim milestone: Nevada deaths exceed those of Japan (1,363 vs. 1,339)
Japan has 44-times more people than Nevada


If you want to track the charts and projections that Dr. Anthony Fauci and Dr. Deborah Birx reference, check out this site (included in the Eureka website also):


This is only a model prediction - it can change and adapt as we learn more each day.

Remember each region has its own curve and numbers can vary widely state-to-state, county-to-county. Face masks and social distancing are currently our only weapon to change the curve's shape. 

Stay safe and distant my friends, wear a mask in public.

1918 Influenza in Eureka County (Update)

Earlier this year I researched old newspapers (newspapers.com) to see how Eureka County was affected by the 1918-1919 Spanish Influenza Pandemic. With 500 million cases worldwide and an estimated death toll exceeding the military fatalities of WWI and WWII, Eureka County also suffered fatalities from this deadly virus. Influenza was first detected in the U.S.A. in January 1918 but didn't make it to Northern Nevada until October of that year. 

Typical newspaper column of the day reporting
1918 Influenza in Northern Nevada

There were cases reported in surrounding counties of Lander, White Pine and Elko. Some nearby cities/towns cited with influenza were Reno, Carson City, Winnemucca, Silver City, Elko, Pioche and Tonopah. I didn't find any newspaper columns specifically citing Eureka County but with a little digging (using findagrave.com) discovered two confirmed deaths, one in Palisade and another in the ghost town of Mineral (Mineral Hills Cemetery, headline photo). I found four possible influenza deaths in Eureka cemeteries and one in Beowawe. That was seven total for the County. Since then, excellent research by Rhonda Shangle Gardener shows a much higher confirmed death count of 38 which includes 1919 and a re-occurrence in 1922.

Charles Safford Walker 
(photo: findagrave.com)

Mining and Army training camps were often where trouble began. The main line east-west railroad was suspected to be a path of transmission. I was informed by Roger Colton that his great uncle,Charles Safford Walker (1882-1918, 36 years old), died of complications after the flu. Mr. Walker was then the owner of the Palisade Ranch. The death certificate listed the cause of death as “bronchial pneumonia following influenza,” October 31, 1918. The town of Palisade is located on the mainline in the north County suggesting that trains may have indeed been an enabler for virus spread in rural communities.

Roy Plummer Gravesite 
(photo: Robert Frenchu)

A second confirmed death is Roy Plummer (Nov. 21,1896 to Dec. 23, 1918, 22 years old) buried in the Mineral Hills Cemetery. Here is his death certificate:

Death Certificate for Roy Plummer

Here is a recent news column from the Carson City Nevada News:

Echoes of the past: Exploring the 1918 influenza epidemic in Nevada (Carson City Nevada News - Carson Now, April 19, 2020) 

Rhonda Shangle Gardner reached out to me and provided some excellent research she compiled. Rhonda worked from recorded death certificates to identify 19 influenza deaths in Eureka County in 1918, 10 in 1919 and 9 in 1922. This is a total of 38 confirmed and there are other "possibles" declared simply as pneumonia on the death certificate. The 1922 record indicates the re-occurrence of Spanish Influenza in Eureka County. The 1918 deaths include four I found (above) and eliminated some others. 

Here is a link to her detailed and informative research: 


Interestingly, a lot of these cases occurred in sheep camps and ranches in Antelope Valley and Bean Flat. Here is a death certificate for Alfred Pedlar of Bean Flat from Rhonda's research (35 years old, died November 23, 1918):

Death Certificate for Alfred Pedlar


Cheers,

Colonel Possum & Mariana