Vanadium - A strategic & critical mineral
important to our future
Nevada Vanadium
***
"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: $1,960 per ounce, Target Silver Price: $26.56 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!
First things first.
Ron Espell informs me that Nevada Vanadium is hosting an open house of their Gibellini Project at the Eureka County Fairgrounds next Tuesday, August 25. Ron is a familiar face in Northern Nevada mining and is presently a key player in the development of the Gibellini Project in the southern part of Eureka County. Vanadium is a strategic and critical mineral important to our future. More on this later - Ron will be sending me a copy of the presentation materials.
More potholes for gold and silver this week but both ride on good suspensions and will recover to rally higher. As I mentioned last week, the ole Colonel submitted a column entitled "Gold and Silver Reach for The Sky." It will appear early-September in the Fall Edition Mining Quarterly and the Elko Daily Free Press. In that piece, I explain why gold is headed for $2,200-plus before the end-of-the year; silver should score $32. It could be bumpy ride, but we're going higher.
Here's where we we're trading this morning (Weekly summaries below are recorded near the market open):
Comex December gold is presently trading at $1,945.9 per ounce (8:54 am Eureka Time).
Comex December Silver is currently trading at $26.93 per ounce (8:54 am Eureka Time).
Comex December copper is presently $2.9380 per pound (8:54 am Eureka Time)
Thi is how I explained my gold and silver outlook to the Kitco News Weekly Gold Survey :
After reaching historic highs two weeks ago, Comex December gold is trading down again for the week. Although the weekly drop this morning is less than last Friday, the lustrous metal finds itself under a variety of pressures. Inklings of better economic prospects like the upbeat flash PMI and a slightly less dovish read from the Federal Reserve have underpinned some selling. However, this morning's intraday low ($1,916.6) is above the 8/12 low ($1,874.2) and the gold-to-silver (GSR) ratio is still near its 10-year average - both demonstrate resilience in precious metals.
If a trend of higher-lows continues, I believe $2,200 per ounce gold remains in the cards for 2020 with a possible run at $32 per ounce for the white metal.
Also, yields have fallen away from the recent 8-week high for the 10-year Treasury. Importantly, 10-year inflation expectations are trending higher (1.62% as of Thursday) maintaining real rates around negative 1% (-0.99%, 5-year -1.26%). This is quite bullish for a non-interest earning asset like gold.
It is likely
Comex gold will see $1,960 next week and silver $26.56
Three of my four conditions for higher gold remain since gold's record:
- There remains plenty of domestic and geo-political uncertainty: U.S. elections, a stalled recovery package in Congress, an out-of-control virus 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.
- With the euro still near 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. Also, there is a differential between countries recovering successfully from covid-19 (like China, Japan and Germany) and a still struggling U.S.
- U.S. real rates are continuing to be negative (see above)
A fourth condition noting a high persistent correlation with the broader commodity index has weakened and is thus removed as a key driver.
These are the strange times of coronavirus.
Since it continues to dominate markets, a covid-19 summary is updated below.
In July, Mariana and I completed a seven-state tour of some of the worst hit areas in the United States. Day-by-day accounts of our travels can be found on my twitter feed @Eurekaminer.
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?
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 June 2020:
Gold Record (2011) x [CPI (6/2020)/CPI (9/2011)] =
$1,923.7/t-oz x [257.214/226.597] = $2,183.62/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.
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. 5,584,154 (5,258,056) covid-19 cases; 174,442 (167,298) deaths
Nevada 63,584 (58,650) covid-19 cases; 1,172 (1,030) deaths
The Nevada daily positivity rate is HIGH at 15.0% (14.2%, Target < 5%)
5 (4) confirmed cases in Eureka County
Grim milestone: Nevada deaths nearly equal those of Japan (1,172 vs. 1,175)
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.
Copper &China Updates
Comex copper is above the $2.9-level occasionally breaking the mercurial $3 per pound, presently trading at $2.9380 per pound. On Wedensday (8/19), Comex December copper closed at $3.038 - that's a good sign! Improving Chinese demand and mining supply restrictions have kept prices up but don't expect gangbusters with much of the world suffering economically from the coronavirus.
Here's a recent column from Mining.com More columns this week @Eurekaminer.
China’s booming copper imports an echo of the last crisis (Mining.com, 8/13/2020)
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 0.4701 below the coronavirus peak of 1.8399 set February 11th and below the 6-year average (0.79). 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 little pop this week is somewhat worrying.
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 73.80 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 $28.40 (August 6). 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 has fallen away from its lofty perch but then bullishly reversed higher. It is showing some signs of flattening. 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 1.62%. 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:
Gold Versus Real Rates: $1,380+ by May Day 2019 (Kitco News, 1/2/2019)
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 0.5728 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)
Gundlach copper-gold indicator: low volatility in unexpected places (4/28/2020, Kitco News)
Copper, gold & the coronavirus (2/18/2020, Kitco News)
Leading indicator for U.S./China trade - copper, gold & yuan (1/13/2020, Kitco News)
Is Jeffrey Gundlach right about copper, gold & interest rates? (12/23/2020, Kitco News)
Gundlach indicator: stable copper-gold means low yield volatility (11/11/2019, Kitco News)
Gundlach Indicator: treasury yield and copper-gold ratio plummet (9/03/2019, Kitco News)
Robust Revival of Gundlach's 10-yr Treasury Relation with the Copper-Gold Ratio (6/17/2019, Kitco News)
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:
WW1 AND THE INFLUENZA EPIDEMIC 1918-1919 (Rhonda Shangle Gardner)
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
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