Strong Jobs Report; Gold Tests $1,160 (Update); Soaring Dollar Jolts Euro, Yen, Miners

View from Croesus Mine, Eureka, Nevada

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My Latest Kitco News Commentary: As Copper Goes, So Goes Gold (03/16/2015)

*** Local Mining News ***

Construction At Pan Gold Project Nears CompletionMidway Expects First Gold Production In March (Press release, 03/03/2015)
 
MIDWAY COMPLETES DRAFT ENVIRONMENTAL IMPACT STATEMENT FOR GOLD ROCK PROJECT, NEVADA (Press release, 2/13/2015)
  

*** AM Prices ***

The early morning prices used for today's analysis (6:48 AM PT, most active contracts):

Goldman Sachs Commodity Index

S&P GSCI 411.90 (381.3 52-wk low) 3/15 contract

Nymex/Comex

Nymex oil (WTI) $50.11 per barrel
Brent crude $60.33 per barrel
Comex copper $2.6200 per pound
Comex gold $1,175.9 per ounce
Comex silver $15.840 per ounce

Latest Nevada gasoline prices

Strong Jobs Report

*** UPDATE (3/7/2015) *** Next levels of support for Comex gold price (April) are the December & November lows of last year: $1,143.4 (12/15/2014) & $1,132.2 (11/17/2015). Gold miners  got hit particularly hard Friday: Newmont (NEM) & Barrick (ABX) closing at $23.30 down 7.91% & $11.34 down 6.97% respectively...Midway (MDW) $0.56 down 11.81%

*** BREAKING NEWS *** New Comex gold low for 2015: $1,162.9 per ounce, April contract, 13:35 ET 

[updates] in brackets below...

Morning Miners!

A strong monthly jobs report jolted markets this morning - gold price is a good example. The Department of Labor releases their monthly report on the first Friday of the month at 5:30 AM Eureka time. At 5:25 AM, the yellow metal already appeared nervous trading below the key $1,200-level at $1,197.0 per ounce. Five minutes after it was announced that 295,000 jobs had been added to the labor force and unemployment fell to 5.5%, gold dipped to $1,182.0 then headed for its morning low of $1,172.5 - ouch! [the intraday low was $1,162.9]

Nonfarm payrolls exceeded an expectation of 240,000 reaffirming the economy is on track and growing stronger with gains in the private sector (288,000) and decent upticks in manufacturing, retail and finance - what's not to like? The data overcame job losses in the mining sector [Mining & Logging down 8,000] and oil patch, the West coast dock bottleneck and miserable weather in the East. A robust report coupled with knowledge that the European Central Bank will begin quantitative easing this Monday (printing euros to buy European bonds) propelled the U.S dollar crushing the euro to 11-year lows (1.0852) [1.0843] and shoving the yen above 121 (121.2820).

Given the strength of these numbers, many market participants now fear a rate hike from the Fed in June instead of September. The 10-year yield responded in kind briefly touching 2.25% [2.26%] in morning trade. With inflation in check (so far), higher rates are kryptonite for gold in combination with an ever stronger dollar. Commodities suffered across the board blunting copper's recent rally and knocking the S&P Goldman Sachs Commodity Index (GSCI) down from its mid-February highs. Comex copper is currently trading at $2.62 per pound [$2.6090, close]; the GSCI, at 411.9 (down 3.6% from February) [410.45, close].

Kitco news carried an interesting note on physical demand just prior to today's labor report announcement:

Chinese investors have been the lone buyers of gold as the price has dipped below $1,200 an ounce, but even that interest appears to be waning as the market looks heavy, says Alex Thorndike, senior precious metals dealer at MKS SA. “The metal continues to oscillate within a $1195-1210 range where we have been trapped for some time. Asia continually bids the market higher while [New York] continually pushes it lower usually at the close of the session,” he says. (Market Nuggets, Neils Christensen of Kitco News, 03/06/2014)

This report will carefully monitor whether the break lower from the MKS range is a transient overreaction to Friday's news or a sustained challenge to the $1,200-level. [Note support levels above]

The Eureka Miner's Gold Value Index (GVI), which measures gold value against oil, copper and silver independent of currency, fortunately continues to bullishly trend higher (dashed orange line, click for larger view):

The January 28, 2015 GVI (point C) is at high levels not seen since the dark days of early-2009 (point A). Reassuringly gold has been trending higher relative to these key commodities (i.e. real stuff, not paper money) since mid-2006.

This report closes with a gold forecast based on the GVI and recent price action of the yellow metal.

Local & Benchmark Mining Stocks

The morning news clobbered miners too. Big gold producers Newmont (NEM) and Barrick Gold (ABX) are trading at $23.85 and $11.53, shedding more than 5% of value on the day (chart below, click for larger view) . Midway (MDW) is $0.6172 per share and down 2.8%. Benchmark Moly Miner Thompson Creek (TC) is down 3.74% at $1.2610. Timberline Resources (TLR) is $0.58 per share down 3.38%. Please checkout the latest press release from Midway at the top of this report.

General Moly (GMO) is the outlier today; below 50 cents per share but up 2.33% at $0.44. Although at very depressed levels, moly oxide has had an uptick from $7-territory, trading at $8.15 per pound (Metals Week, 2/27/15,  Molybdenum, Daily Dealer Oxide).

Finally, benchmark miner and copper giant Freeport-McMoRan (FCX) is down 2.92 % at $19.60. Freeport has taken on oil interests to diversify so feels double-pain when red metal and oil prices are down. FCX plumbed $16 depths in January:

Mining Stocks, Yahoo Finance

Iron Ore Warning Flag

Friday, a faithful follower of the Eureka Miner sent me two excellent articles from mining.com (March 6, 2015):

Rick Rule: Gold price could easily see $1,000

Iron ore spot price drops to record low

"Bottoming process" is the key word for gold as well as other key commodities - My favorite three are Nymex oil (West Texas Intermediate, WTI), Chinese iron ore (SGX TSI) & Comex copper.

With respect to iron ore dragon style, I asked Janet Mirasola (Wells Fargo metals guru) this question on Feb. 12:

Eureka Miner: Should we be happy China iron ore has held above 60 for some time?

Mirasola: Hey there, don’t bank on it holding much longer….

She was right, iron ore dipped below $60/tonne this week. Copper is above $2.50/lb again but could see some more downside. Oil could go a lot lower in the U.S. if storage tops out (international benchmark Brent crude is currently more than $10/bbl more expensive).

Beside supply issues for domestic oil, all three suffer from the pressures of declining global demand. If China does restart infrastructure projects there may be some relief; the bottoming process could continue for weeks or months but likely not years. My view is that gold will have a hard time getting a footing in a declining commodity market when inflation expectations are low and interest rates threaten to be higher later this year.

For this quarter (end of this month), I will stick with my Mining Quarterly prediction (late October) that gold will fall in a range of $1,010 to $1,170 per ounce. I have, however, moved the lower number up to $1,080 since writing the Halloween piece....
 
Gold Forecast Update



Below are updates for the charts and numbers provided in my column for the  Winter 2014 Mining Quarterly - the underlying assumptions for 2015 remain unchanged (see pages 72-77 of the online edition or 75-79 of the printed version).

Some highlights updated through this morning's trading:

1. Gold still fares quite well compared to other key commodities; one ounce buys more ounces of silver, pounds of copper and barrels of oil than it did in late-December 2013. Countering a 2.2% loss in U.S. dollar price, glitter is up 20% over the white metal, 27% over the red and 92% over oil (chart #1, below). A 8-1/2 year uptrend in gold value relative to these commodities is intact. 
2. Gold's relation to commodities works like the force of gravity. Without the propulsion of safe haven or monetary hedge, the yellow metal falls back in line with commodity prices and historical norms. 
3. This relation has formed a declining value wedge since 2011 (chart #2, dashed red lines) which has proved quite accurate in predicting future price ranges. Extending the dashed lines suggests a commodity value range of $1,080 to $1,170 per ounce for this quarter (1Q2015). There was some indication that gold price escaped the value wedge with transition from value compression to expansion - that trend is now challenged with a return of gold price to the upper boundary of the wedge.
4. Gold presently carries a premium to the aggregate of key commodities in chart #2; this has been mostly true since August 2011. This premium is declining from the peak in January.

Again, gold find itself at the crossroads - will it return to stabilization around $1,200 per ounce or closer to the $1,170 upper 1Q2015 target shown in Chart #2? Presently, I believe either case is more likely than a descent to triple-digit prices.

Chart #1 (updated from the Winter 2014 Edition of the Mining Quarterly, click for larger view):

Chart #2: 

Cheers - Colonel

Photos by Mariana Titus

From Roaring Tiger to Green Wooden Goat

From Roaring Tiger to Green Wooden Goat

Please checkout Mariana's Eureka, Nevada on Facebook

*** Local Mining News ***

MIDWAY COMPLETES DRAFT ENVIRONMENTAL IMPACT STATEMENT FOR GOLD ROCK PROJECT, NEVADA (Press release, 2/13/2015)
 
General Moly Announces Agreement with POS-Minerals to Utilize $36 Million in Reserve Account to Fund Mt. Hope Project (Press release, 1/21/2015)

*** AM Prices ***

The early morning prices used for today's analysis (most active contracts):

Goldman Sachs Commodity Index

S&P GSCI 420.00 (381.3 52-wk low) 3/15 contract

Nymex/Comex

Nymex oil (WTI) $51.28 per barrel
Comex copper $2.5880 per pound
Comex gold $1,210.7 per ounce
Comex silver $16.410 per ounce

Latest Nevada gasoline prices

Year of the Green Wooden Goat

Morning Miners!

Gong Xi Fa Cai! Chinese New Lunar New Year celebrations started this week and will continue into next - always a curious time for commodity markets as the world's biggest customer takes off to party hardy. Copper is a good example. The red metal bounced on the Comex anticipating things will be rosier in the land of the Dragon when bleary-eyed traders return to their desks from holiday. Although off its highs for the week, Comex copper is enjoying $2.6 per pound territory after dipping below $2.5 in late-January. Copper giant Freeport McMoRan (FCX) is up a full 25% from its January low - lunar forces at work....Gong Xi Fa Cai!

Of course, recent history reminds us that red metal rallies typically return to earth after the last Chinese sky rocket is lit - the commodity downcycle is not over and there will no doubt be more pain in the metal complex for 2015. It is the year of the Green Wooden Goat not the roaring 2010 Tiger of the Chinese zodiac - remember all those years when copper rarely dipped below $3 per pound?

There are, however, signs the commodity world has entered a bottoming process in much the same way as gold prices. The S&P Goldman Sachs Commodity Index (GSCI, see above) which covers everything from corn to copper is off its January lows too. Although biased heavily to energy futures, oil has seen some recent upward momentum. There are still calls for a trip to $35 per barrel or lower; for now, Nymex (WTI) crude is showing resilience at the $50-level. The currencies of oil-dependent economies like Russia are stabilizing some too. The ruble is trading in the low 60s after making a scary run at 70 earlier this month (to give this some perspective a U.S. dollar fetched 32-plus rubles at the beginning of 2014). On a sobering note, The EIA reports that oil stockpiles are the greatest in 80 years.

With China momentarily out of the picture, Europe is center stage with grave concerns that Greece may be expelled from the eurozone. Europe is the second biggest copper consumer which explains why the recent red metal rally is a bit tarnished. Concerns about sooner-than-later interest rate hikes from the U.S. Federal Reserve dropped Comex gold to $1,197.2 per ounce Wednesday but "Grexit" concerns lifted the yellow metal above $1,200 as the weekend approaches. Comex gold is currently trading at $1,210.7 per ounce.

My guess is that Europe will find some way to kick the can a little further down the road and China copper demand may not excite but will keep prices above $2.5 per pound for the time being - 2015 may well be remembered as the year of price stabilization. Gold seems to already be honoring $1,200 per ounce.

That's not so bad, pardner.

The Eureka Miner's Gold Value Index (GVI), which measures gold value against oil, copper and silver independent of currency, continues to bullishly trend higher (click for larger view):

The January 28, 2015 GVI (point C) is at high levels not seen since the dark days of early-2009. Reassuringly gold has been trending higher relative to these key commodities (i.e. real stuff, not paper money) since mid-2006.

My gold 2015 price forecasts (below) are derived from the Colonel's column on the yellow metal in the latest edition of the...

Winter 2014 Mining Quarterly

The online edition of the Winter 2014 Mining Quarterly is out and about. Elko Daily Free Press Editor Marianne Kobak McKown and her team have done an outstanding job on this publication. There are feature articles on Cortez Hills, Barrick's Turquoise Ridge and Newmont's Twin Creeks together with updates on Comstock, Pershing Gold, Veris Gold and Western Lithium. It's a dandy!

The ole Colonel wrote a gold price outlook for 2015, Gold at the Crossroads, which you can find on pages 72-77 of the online edition and 75-79 of the printed version.

This report closes with updates for the charts and numbers provided in this column - the underlying assumptions for 2015 remain unchanged.

Local & Benchmark Mining Stocks

For the most part, the Mining Sector has been moving up and away from January's doldrums. Big gold miners Newmont (NEM) and Barrick Gold (ABX) are trading at $26.11 and $13.02 (chart below, click for larger view) . Midway (MDW) is $0.74 and unchanged in morning trade. Benchmark Moly Miner Thompson Creek (TC) is up 4.25% at $1.5950. GMO is just below 50 cents per share at $0.48. Timberline Resources (TLR) is unchanged at $0.66 per share. Please checkout the latest press release from Midway at the top of this report.

Finally, benchmark miner and copper giant Freeport-McMoRan (FCX) is down 0.36 % at $21.03. Freeport has taken on oil interests to diversify so feels double-pain when red metal and oil prices are down. It is especially encouraging to see FCX at the $21-level after plumbing high-$16 depths in January.

Mining Stocks, Yahoo Finance

Gold Forecast Update

Some highlights updated through this morning's trading:

1. Gold has fared quite well compared to other key commodities; one ounce still buys more ounces of silver, pounds of copper and barrels of oil than it did in late-December 2013. Outpacing a 0.7% gain in U.S. dollar price, glitter is up 19% over the white metal, 32% over the red and 93% over oil (chart #1, below). A 8-1/2 year uptrend in gold value relative to these commodities is intact. 
2. Gold's relation to commodities works like the force of gravity. Without the propulsion of safe haven or monetary hedge, the yellow metal falls back in line with commodity prices and historical norms. 
3. This relation has formed a declining value wedge since 2011 (chart #2, dashed red lines) which has proved quite accurate in predicting future price ranges. Extending the dashed lines suggests a commodity value range of $1,080 to $1,170 per ounce for this quarter (1Q2015). There is some indication that gold price has escaped the value wedge and is in transition from value compression to expansion - a bullish sign that the U.S. dollar lows may indeed be in for gold price.
4. Gold presently carries a premium to the aggregate of key commodities in chart #2; this has been mostly true since August 2011. Although this premium is declining from the peak in January, there are now signs of price stabilization above the $1,200-level.

Chart #1 (updated from the Winter 2014 Edition of the Mining Quarterly, click for larger view):

Chart #2: 

Cheers - Colonel

Photos by Mariana Titus

Gold Giddy-Up; Europe Throws Miners a Curve Ball; GMO Surprise

Eureka-Croesus Mine, Eureka, Nevada

Please checkout Mariana's Eureka, Nevada on Facebook

*** Local Mining News ***

General Moly Announces Agreement with POS-Minerals to Utilize $36 Million in Reserve Account to Fund Mt. Hope Project (Press release, 1/21/2015)

Midway Provides Construction Update For Pan Gold Project, Nevada (Press release, 01/16/2015)

Timberline Resources Drilling Identifies New Zone of Gold Mineralization at Eureka (Press release, 01/14/2015)

General Moly Announces Closing of Private Placement Financing (Press release, 12/30/2014)

*** AM Prices ***

The early morning prices used for today's analysis (most active contracts):

Goldman Sachs Commodity Index

S&P GSCI 380.6 (378.5 52-wk low)

Nymex/Comex

Nymex oil (WTI) $46.17 per barrel
Comex copper $2.5065 per pound
Comex gold $1,295.7 per ounce
Comex silver $18.345 per ounce

Latest Nevada gasoline prices

Note: There are several changes to the Eureka Miner for the new year. For the time being, Kitco News, Montreal has suspended their weekly gold survey due to staffing changes. However, I will provide a periodic gold price outlook based on my column in the Winter 2014 Edition of the Mining Quarterly with updates to the analysis and charts given in that piece (see below). This replaces the weekly survey input to Kitco News. The ole Colonel will continue to contribute periodic articles to that publication and this report.

Super Mario

Morning Miners!

Another crazy week in global markets!

No, it wasn't the death of Saudi King Abdullah that has roiled equities and commodities. In the not too distant past, such an event would spike oil prices and trigger broad-based volatility. Nowadays, after a brief pop, oil continues its slide down, down. The Kingdom announced early this morning, that it is likely to continue to pump crude in the face of a global glut - Nymex light sweet crude is presently trading at $46.17 per barrel down 40% from its late-October high. As far as OPEC drama goes - ho-hum.

Central bankers wear the big hat these days and this week it was Europe's turn to walk the walk. European Central Bank (ECB) President Mario Draghi announced the launch of an eye-popping monthly 60 billion euro private and public bond-buying program yesterday which is scheduled for 18 months beginning in March. This long anticipated monetary largese, will put 1.1 trillion new euros into the world's currency pot - that's printing some money, pardner!

The reaction? The euro fell to an 11-year low (1.1116) approaching near parity with the U.S. dollar. King dollar in turn raced to a 12-year high as measured by the U.S. dollar index (.DXY). Most raw commodities are priced in U.S. dollars which caused additional downward pressure on metals and blunted a brilliant gold rally that had touched $1,307.8 per ounce (Comex, February contract) prior to the ECB announcement.

Although it is satisfying to see the U.S. dollar in strong ascendancy, it creates a new headwind for the mining sector. The good news for gold miners is that the yellow metal continues to hold a much stronger hand than other players in the metals complex. This morning Comex gold is trading at $1,295.7 per ounce; Comex copper is at a lowly $2.5065 per pound. The Eureka Miner's Gold Value Index (GVI), which measures gold value against oil, copper and silver independent of currency tells the story (click for larger view):

Todays GVI (point C) is at high levels not seen since the dark days of early-2009. Reassuringly gold has been trending higher relative to these key commodities (i.e. real stuff, not paper money) since mid-2006.

My gold 2015 price forecasts (below) are derived from the Colonel's column on the yellow metal in the latest edition of the...

Winter 2014 Mining Quarterly

The online edition of the Winter 2014 Mining Quarterly is out and about. Elko Daily Free Press Editor Marianne Kobak McKown and her team have done an outstanding job on this publication. There are feature articles on Cortez Hills, Barrick's Turquoise Ridge and Newmont's Twin Creeks together with updates on Comstock, Pershing Gold, Veris Gold and Western Lithium. It's a dandy!

The ole Colonel wrote a gold price outlook for 2015, Gold at the Crossroads, which you can find on pages 72-77 of the online edition and 75-79 of the printed version.

This report closes with updates for the charts and numbers provided in this column - the underlying assumptions for 2015 remain unchanged.

Local & Benchmark Mining Stocks

The Mining Sector is still in the storm of volatile metal prices with gold miners faring best. Big gold miners Newmont (NEM) and Barrick Gold (ABX) are trading at $24.29 and $12.61 (chart below, click for larger view) . Midway (MDW) is $0.7510 down 1.18% in morning trade. Benchmark Moly Miner Thompson Creek (TC) is down 0.79% at $1.2699. GMO is just below 60 cents per share at $0.5753. Timberline Resources (TLR) is up 4.29% at $0.70 per share. Please checkout the latest press releases from General Moly, Midway and Timberline at the top of this report.

Finally, benchmark miner and copper giant Freeport-McMoRan (FCX) is down 2.47% at $19.52. Freeport has taken on oil interests to diversify so feels double-pain when red metal and oil prices are down.

Mining Stocks, Yahoo Finance

General Moly (GMO) Surprise

As flagged by Wednesday's Eureka Miner e-mail alert, General Moly got a significant funding boost from POS-Minerals (subsidiary of South Korean steel giant POSCO and 20% owner of Mt. Hope):

General Moly Announces Agreement with POS-Minerals to Utilize $36 Million in Reserve Account to Fund Mt. Hope Project (Press release, 1/21/2015)

Bruce D. Hansen, Chief Executive Officer, said, “This agreement, combined with the recently announced $8.5 million private placement financing that closed in December 2014, provides the Company with a significantly improved project and corporate liquidity profile as we bridge to a project financing for Mt. Hope, while at the same time minimizing the dilution to our shareholders. We want to thank POS-Minerals for their continued financial support and partnership.”

Mr. Hansen continued, “We remain confident in the progress being made toward full Mt. Hope Project financing. Negotiations on investment agreement terms, sponsorship requirements, and indicative loan terms associated with a $700 to $750 million debt and equity package, are continuing to advance. We have strong interest from multiple private Chinese industrial companies and a large Chinese bank in advancing the fully permitted, construction-ready project.”

Gold Forecast Update

Some highlights updated through this morning's trading:

1. Gold has fared quite well compared to other key commodities; one ounce still buys more ounces of silver, pounds of copper and barrels of oil than it did in late-December 2013. Outpacing a 7.8% gain in U.S. dollar price, glitter is up 14% over the white metal, 46% over the red and a whopping 130% over oil (chart #1, below). A 8-1/2 year uptrend in gold value relative to these commodities is intact. 
2. Gold's relation to commodities works like the force of gravity. Without the propulsion of safe haven or monetary hedge, the yellow metal falls back in line with commodity prices and historical norms. 
3. This relation has formed a declining value wedge since 2011 (chart #2, dashed red lines) which has proved quite accurate in predicting future price ranges. Extending the dashed lines suggests a commodity value range of $790 to $1,170 per ounce for this quarter (1Q2015). The lower number represents a U.S. dollar floor for gold relative to key commodities. 
4. Gold presently carries a premium to the aggregate of key commodities in chart #2; this has been mostly true since August 2011. Using the gravity analogy, gold needs to achieve escape velocity (>$1,300) from the value wedge by increasing premium even more. If that premium disappears gold will follow commodities lower this year. This week, we witnessed gold's first attempt to challenge the key-$1,300 level.

Chart #1 (updated from the Winter 2014 Edition of the Mining Quarterly, click for larger view):

Chart #2: 

Cheers - Colonel

Photos by Mariana Titus

Gold Breaks $1,280; Copper Crash Bottom? Miners Embattled, Not Broken

Winter Sky, Eureka, Nevada

Please checkout Mariana's Eureka, Nevada on Facebook

*** Local Mining News ***

Midway Provides Construction Update For Pan Gold Project, Nevada (Press release, 01/16/2015)

Timberline Resources Drilling Identifies New Zone of Gold Mineralization at Eureka (Press release, 01/14/2015)

General Moly Announces Closing of Private Placement Financing (Press release, 12/30/2014)

Timberline Resources Commences Drilling at Eureka (Press release, 12/17/2014)

*** AM Prices ***

The early morning prices used for today's analysis (most active contracts):

Goldman Sachs Commodity Index

S&P GSCI 387.5 (378.5 52-wk low)

Nymex/Comex

Nymex oil (WTI) $47.49 per barrel
Comex copper $2.5760 per pound
Comex gold $1,273.1 per ounce
Comex silver $17.360 per ounce

Latest Nevada gasoline prices

Note: There are several changes to the Eureka Miner for the new year. For the time being, Kitco News, Montreal has suspended their weekly gold survey due to staffing changes. However, I will provide a periodic gold price outlook based on my column in the Winter 2014 Edition of the Mining Quarterly with updates to the analysis and charts given in that piece (see below). This replaces the weekly survey input to Kitco News. The ole Colonel will continue to contribute periodic articles to that publication and this report.

Wipe Out Wednesday

Morning Miners!

What a crazy week this has been - crashing copper prices, gold rally to a new 4-month high and blood on the street for the Mining Sector. Although red metal prices started their fall Monday, the worst day was Wednesday with Comex copper plumbing $2.4240 per pound. The Eureka Miner issued an e-mail alert which included Wells Fargo Securities Janet Mirasola warning in her pre-market brief:

"Copper – our Red One! was crushed overnight as traders in China stampeded the exits leaving a 9% scar on the price as it traded to a low of $5353 mt [$2.4281 per pound] before recovering back to current levels around $5500 and a more manageable overnight loss of only 6.5%. This move highlights the contagion that began in the Oil market where values have lost about 60% since last June. “What could possibly go wrong?” is obvious here and the fact that CHINA IS REALLY SLOWING tells us that this commodity rout may not be an isolated move and could start to affect global asset classes across the board."

Ouch! Fortunately, Comex copper bounced off these lows and is trading this morning at $2.5760 per pound. Are the lows in? Hard to say, but Mirasola sees surplus and declining demand. Her brief continued Thursday:

"Now that the dust is settling a bit, investors will likely take time to reassess portfolio strategies. What is clear is that there still remains a real mispricing between copper and oil. While copper had been under steady pressure, oil was falling at a faster pace over the last six months. Copper hadn’t really reacted to the oil move as many were hoping for some kind of Chinese stimulus that would save the day. The reality is that most analysts expect the market to be in surplus until 2017. With oil’s sell off, production costs are actually lower (sub $5k per tonne[$2.27 per pound]), so a correction of some magnitude is not surprising. We just didn’t expect it would come in one day. We expected to see the steady erosion we’d seen over the last few months. The move overnight appears to be some kind of capitulation of a major long which then had a snowball effect. On a relative basis, you could still see further downside in copper if oil prices stay low (the ratio of copper prices to oil prices is still running way above historical averages)."

Oil, oil, oil - that is the question! Although lower crude oil prices mean lower gas prices and input costs for domestic manufacturing, there are some real downsides too if we stay in the $40 per barrel range for long. The fracking boom has contributed much to U.S. recovery and the rise in employment - prices at this level could put the brakes on that industry with adverse ripple effects for the economy.

On the global scale, oil-dependent countries like Russia and Venezuela could potentially liquidate a portion of their substantial gold reserves given that their economies already on the brink. This would introduce supply pressure on gold prices. But for now....

Gold is a Shining Star!

Gold has re-established a considerable "safe-haven" premium. Pick your favorite combination of worldly woes du jour: slowdown in China, oil and copper precipitous declines, Russia turmoil and ruble collapse, renewed debate over Greece’s membership in the EU and horrifying attacks in France. Clearly the biggest driver to the late-week rally was the Swiss National Bank (SNB) surprising decision to unpeg the franc from the euro causing volatility in both the currency and precious metal markets.

There is some delight in seeing gold rally briefly above $1,280 per ounce on the same day the U.S. Dollar Index soars to new highs. This report tracks the Powershares DB U.S. Dollar Index Fund (UUP) which is up a full 17% from its May low of last year. In contrats the euro is dropping to new lows (presently 1.1517) as deflation fears in the euro-zone accelerate.

My gold 2015 price forecasts are derived from the Colonel's column on the yellow metal in the latest edition of the...

Winter 2014 Mining Quarterly

The online edition of the Winter 2014 Mining Quarterly is out and about. Elko Daily Free Press Editor Marianne Kobak McKown and her team have done an outstanding job on this publication. There are feature articles on Cortez Hills, Barrick's Turquoise Ridge and Newmont's Twin Creeks together with updates on Comstock, Pershing Gold, Veris Gold and Western Lithium. It's a dandy!

The ole Colonel wrote a gold price outlook for 2015, Gold at the Crossroads, which you can find on pages 72-77 of the online edition and 75-79 of the printed version. This report closes with updates for the charts and numbers provided in this column - the underlying assumptions for 2015 remain unchanged.

Local & Benchmark Mining Stocks

The Mining Sector is recovering from a horrible week of broad-based declines. Big gold miners Newmont (NEM) and Barrick Gold (ABX) are trading at $22.07 up 2.60% and $11.77 up 3.56% (chart below, click for larger view) . Midway (MDW) is $0.7531 up 1.50% in morning trade. Benchmark Moly Miner Thompson Creek (TC) is up 7.21% at $1.29. GMO is just below 50 cents per share at $0.49. Timberline Resources (TLR) is down 3.45% at $0.70 per share. Please checkout new press releases from Midway and Timberline at the top of this report.

Finally, benchmark miner and copper giant Freeport-McMoRan (FCX) is up 3.06% at $18.89 after a horrendous week that witnessed a $17 handle. Freeport has recently taken on oil interests to diversify so feels double-pain when red metal and oil prices are down. Comex copper is trading presently at $2.5760 per pound.

Blood on the streets? How about when a benchmark miner like Freeport falls to $17.85 on Wipe Out Wednesday - 54.6% below it July intraday high for 2014 ($39.32 per share).

Mining Stocks, Yahoo Finance

Gold Forecast Update

Some highlights updated through this morning's trading:

1. Gold has fared quite well compared to other key commodities; one ounce still buys more ounces of silver, pounds of copper and barrels of oil than it did in late-December 2013. Outpacing a 5.9% gain in U.S. dollar price, glitter is up 18% over the white metal, 40% over the red and a whopping 119% over oil (chart #1, below). A 8-1/2 year uptrend in gold value relative to these commodities is intact. 
2. Gold's relation to commodities works like the force of gravity. Without the propulsion of safe haven or monetary hedge, the yellow metal falls back in line with commodity prices and historical norms. 
3. This relation has formed a declining value wedge since 2011 (chart #2, dashed red lines) which has proved quite accurate in predicting future price ranges. Extending the dashed lines suggests a commodity value range of $790 to $1,170 per ounce for this quarter (1Q2015). The lower number represents a U.S. dollar floor for gold relative to key commodities. 
4. Gold presently carries a premium to the aggregate of key commodities in chart #2; this has been mostly true since August 2011. Using the gravity analogy, gold needs to achieve escape velocity (>$1,300) from the value wedge by increasing premium even more. If that premium disappears gold will follow commodities lower this year. 

Chart #1 (updated from the Winter 2014 Edition of the Mining Quarterly, click for larger view):

Chart #2: 

Cheers - Colonel

Photos by Mariana Titus

Mixed Jobs Report; Gold Rallies; General Moly (GMO) Up and At'em

Prospect, Eureka County, Nevada

Please checkout Mariana's Eureka, Nevada on Facebook

*** Local Mining News ***

General Moly Announces Closing of Private Placement Financing (Press release, 12/30/2014)

Timberline Resources Commences Drilling at Eureka (Press release, 12/17/2014)

*** AM Prices ***

The early morning prices used for today's analysis:

Goldman Sachs Commodity Index

S&P GSCI (1/15 futures contract) 396.55 (395.2 52-wk low)

Nymex/Comex

Nymex oil (WTI) $48.52 per barrel
Comex copper $2.7515 per pound
Comex gold $1,214.3 per ounce
Comex silver $16.395 per ounce

Latest Nevada gasoline prices

Happy New Year Miners!

There are several changes to the Eureka Miner for the new year. For the time being, Kitco News, Montreal has suspended their weekly gold survey due to staffing changes. However, I will provide a periodic gold price outlook based on my column in the Winter 2014 Edition of the Mining Quarterly with updates to the analysis and charts given in that piece (see below). This replaces the weekly survey input to Kitco News. The ole Colonel will continue to contribute periodic articles to that publication and this report.

This morning started off with the first monthly Labor Department report for 2015. The good news is that the U.S. added 252,000 jobs in December while economists expected a gain of 240,000 nonfarm payrolls. Revisions also showed employers added 50,000 more jobs in October and November than previously estimated. The unemployment rate fell to 5.6%, its lowest level since June 2008. The economy is improving.

Unfortunately, average hourly earnings fell from the prior month and were up only 1.7% from a year earlier.  No signs of  wage inflation indicates there is still considerable slack in the labor force. Key for gold price is the timing of the first interest-rate increase by the Federal Reserve and many investors expect that to occur this year. Any unexpected weakness in employment growth could delay the first increase along with worries about weak growth in Europe and Japan and the threat of deflation in the former. A continued low interest stance by the Fed is supportive of gold prices going forward.

Presently there is a significant safe-haven premium built into gold price given the situation in Europe and the deflationary effects of falling oil prices. As a consequence, the Comex gold is keeping its head above the key-$1,200 per ounce level bouncing slightly to $1,214.3 per ounce as the report did its analysis following the jobs data. Midday prices are up a bit more at $1217.6.

As explained below, gold has fared far better than silver, copper and oil since the close of 2013. An ounce of gold today buys nearly twice as much oil as a year ago and continues to show strength relative to the euro and Japanese yen. Although dollar price still hovers around $1,200 with little net change year-over-year, that's a good enough for most mining operations. Macquaire sees improving physical demand coming from both China and India:

Macquarie: Gold Has Potential To Move Higher In 2015 (Kitco News, 01-09-2015)

HSBC has moved their forecast up to $1,234 per ounce but sees headwinds for PGMs; their silver forecast remains unchanged at $17.65 an ounce for the coming year:

 HSBC Raises Gold Forecast To $1,234/oz, Lowers PGM Forecast (Kitco News, 01-09-2015)

On the darker side, if an oil price-dependent economy like Russia collapses and forces their central bank to begin liquidating gold reserves, gold price could move significantly south in 2015. The commodity support for gold is now a very lowly $854 per ounce based on AM prices (see below).

General Moly (GMO) Up and At'em

General Moly got an $8.5M lifeline in December as detailed in this press release near the close of last year:

General Moly Announces Closing of Private Placement Financing (Press release, 12/30/2014)

The Private Placement financing, is a bridge to a project financing for Mt. Hope designed to minimize dilution to shareholders.

As a point of disclosure, I remain positive on GMO and added to my position at $0.36 per share in December prior to learning of the placement. My thoughts were pretty simple: the world is still here, folks need steel products even though global demand is in decline and Mt. Hope is a tangible asset filled with critical and strategic minerals. The ole Colonel is willing to wait this out. After the first news of the placement, GMO share price bumped to $0.67. This morning GMO is trading at $0.53. Please do your own research, markets can turn on you faster than a feral cat.

A trusted source added some background to this release for the Eureka Miner. Steve Mooney, the former Chairman and Chief Executive Officer of Thompson Creek Metals Company (TC), provided the lion's share of the financing with a $5 million investment. Mr. Mooney founded TC in 1993 and led its sale in 2006, after helping build it into one of the largest primary molybdenum producers in the world. He has significant experience in the mining and molybdenum space and a deep understanding of the viability of the Mt. Hope Project. That's commitment, pardner.

As explained in the above release, General Moly’s executive management team and board of directors supported the Private Placement by investing over $2 million in aggregate underscoring the strong internal support for the future prospects of the company.

Metals Week (1/2/2015) reports a moly oxide price of $9.10.

Relative to molybdenum fundamentals in 2015, my source pointed out that Thompson Creek Mine and Endako Mine halted production by year-end 2014 (the two mines produced 33mm pounds in 2013, the most recent full year report currently available). Furthermore, Mercator’s Mineral Park Mine (10mm pounds produced in 2013) has been put on care and maintenance. Together this could remove approximately 40mm lbs of 2014 moly production from the market in 2015. This goes a long way to offset production from Sierra Gorda when that mine comes online sometime in 2015.

Reduced supply and improving global demand should be supportive of both moly price and GMO's efforts to secure construction financing for Mt. Hope. Keep the faith.

Winter 2014 Mining Quarterly

The online edition of the Winter 2014 Mining Quarterly is up and ready to rock n' roll. Elko Daily Free Press Editor Marianne Kobak McKown and her team have done an outstanding job on this publication. There are feature articles on Cortez Hills, Barrick's Turquoise Ridge and Newmont's Twin Creeks together with updates on Comstock, Pershing Gold, Veris Gold and Western Lithium. It's a dandy!

The ole Colonel wrote a gold price outlook for 2015, Gold at the Crossroads, which you can find on pages 72-77 of the online edition and 75-79 of the printed version. This report closes with updates for the charts and numbers provided in this column - the underlying assumptions for 2015 remain unchanged.

Local & Benchmark Mining Stocks

Big gold miners Newmont (NEM) and Barrick Gold (ABX) are trading at $20.41 and $10.88 (chart below, click for larger view) . Midway (MDW) is $0.7410 up 1.51% in morning trade. Benchmark Moly Miner Thompson Creek (TC) is don 3.59% at $1.58. GMO remains above 50 cents per share at $0.5294. Timberline Resources (TLR) is up 4.31% at $0.7510 per share. Checkout the December press release on TLR at the top of this post.

Finally, benchmark miner and copper giant Freeport-McMoRan (FCX) is down .32% at $23.29. Freeport has recently taken on oil interests to diversify so feels double-pain when red metal and oil prices are down. Comex copper is trading presently at $2.7515 per pound.

Mining Stocks, Yahoo Finance

Gold Forecast Update

Some highlights updated through this morning's trading:

1. Gold has fared quite well compared to other key commodities; one ounce still buys more ounces of silver, pounds of copper and barrels of oil than it did in late-December 2013. Outpacing a 1.0% loss in U.S. dollar price, glitter is up 19% over the white metal, 25% over the red and a whopping 105% over oil (chart #1, below). 
2. Gold's relation to commodities works like the force of gravity. Without the propulsion of safe haven or monetary hedge, the yellow metal falls back in line with commodity prices and historical norms. 
3. This relation has formed a declining value wedge since 2011 (chart #2, dashed red lines) which has proved quite accurate in predicting future price ranges. Extending the dashed lines suggests a commodity value range of $810 to $1,170 per ounce for this quarter (1Q2015). 
4. Gold presently carries a premium to the aggregate of key commodities in chart #2; this has been mostly true since August 2011. Using the gravity analogy, gold needs to achieve escape velocity from the value wedge by increasing premium even more. If that premium disappears gold will follow commodities lower this year. 

Chart #1 (updated from the Winter 2014 Edition of the Mining Quarterly, click for larger view):

Chart #2: 

Cheers - Colonel

Photos by Mariana Titus

Gold Outlook for 2015; Winter 2014 Edition Mining Quarterly

The Winter 2014 Edition is out!!

Please checkout Mariana's Eureka, Nevada on Facebook

My latest Kitco News commentary:

Is Gold Still on a Slippery Slope? (Nov. 24, 2014)

*** Local Mining News ***

Timberline Resources Commences Drilling at Eureka (Press release, 12/17/2014)

MIDWAY RECEIVES FIRST BANK FUNDS FOR PAN GOLD PROJECT (Press release, 12/1/2014)

*** AM Prices ***

The early morning prices used for today's analysis:

Goldman Sachs Commodity index (Enhanced)

S&PGSCIES 250.01 (246.84 52-wk low)

Nymex/Comex

Nymex oil (WTI) $55.89 per barrel
Comex copper $2.8765 per pound
Comex gold $1,197.5 per ounce
Comex silver $15.930 per ounce

Latest Nevada gasoline prices

Morning miners!

The online edition of the Winter 2014 Mining Quarterly is up and ready to rock n' roll. Elko Daily Free Press Editor Marianne Kobak McKown and her team have done an outstanding job on this publication. There are feature articles on Cortez Hills, Barrick's Turquoise Ridge and Newmont's Twin Creeks together with updates on Comstock, Pershing Gold, Veris Gold and Western Lithium. It's a dandy!

The ole Colonel wrote a gold price outlook for 2015, Gold at the Crossroads, which you can find on pages 72-77 of the online edition and 75-79 of the printed version. My input to the Kitco Gold Survey today (see below) updates the charts and numbers provided in this column - the underlying assumptions for 2015 remain unchanged.

Two big drivers of gold price this week were the collapse of the Russian ruble and the latest output of the Federal Reserve Open Market Committee (FOMC). The ruble has been under tremendous pressure this year; first with sanctions imposed during the Ukraine crisis and more recently with the dramatic decline of oil price. Oil sage T. Bonne Pickens joked a few days ago that all Russia exports is oil and vodka and they drink most of the latter. Presumably, a lot more potato liquor was consumed after the ruble touched 68.025 (USD/RUB) Wednesday following the Tuesday Nymex oil dip to $53.94/bbl (Western Texas Intermediate crude).

To give this some perspective, the ruble started the year at a healthy 32.5 before misadventures in the Ukraine caught the world's attention. Drastic action by Russia's central bank has since stabilized the ailing currency around 60 rubles per U.S. dollar. The ruble trades at 59.28 this morning as Nymex oil prices rebound to $55.89/bbl.

Russia has several options beyond raising interest rates to prop up the ruble - selling foreign currency reserves, selling some of their massive 1,100 metric ton gold reserve, or a combination of both. Putting a large amount of gold on the world market would have a very negative impact on gold price. Something to watch, pardner.

On the positive side, the FOMC  reaffirmed that patience is a virtue and will be slow to raise interest rates anytime soon. A dovish FOMC posture is supportive of gold prices. All in all, Comex gold is down about $25 from last Friday's close, trading at $1,197.5 per ounce.

Predictably, mining stocks are still in the doldrums although mostly recovering from the lows of the week. Big gold miners Newmont (NEM) and Barrick Gold (ABX) are trading at $19.69 and $10.98 (chart below, click for larger view) . Midway (MDW) is $0.6761 down 0.57% in morning trade. Benchmark Moly Miner Thompson Creek (TC) is up 4.14% at $1.76 recovering from a long fall down the shaft earlier this week. GMO is now below 30 cents per share at $0.2876. Timberline Resources (TLR) is down 3.45% at $0.6295 per share. Checkout the press release on TLR at the top of this post, they have Eureka in their sites (again).

Finally, benchmark miner and copper giant Freeport-McMoRan (FCX)is up 1.17% at $22.708. Freeport has recently taken on oil interests to diversify so feels double-pain when red metal and oil prices are down. Comex copper is trading presently at $2.8765 per pound.

Mining Stocks, Yahoo Finance

Here is my input to the Kitco News Weekly Gold Survey:

1. Could [economist] Nouriel Roubini’s call for $1,000 gold in 2015 be right? Yes.

2. Why?

I recently wrote a column for the Mining Quarterly (Winter 2014 Edition) that gave an outlook for gold price next year. Some of the highlights updated through this morning's trading:

1. Year-to-date gold has fared far better in 2014 when compared to other key commodities; one ounce still buys more ounces of silver, pounds of copper and barrels of oil than it did in late-December. Outpacing a 0.4% loss in U.S. dollar price, glitter is up 21% over the white metal, 17% over the red and 75% over oil (chart #1, below). 
2. Gold's relation to commodities works like the force of gravity. Without the propulsion of safe haven or monetary hedge, the yellow metal falls back in line with commodity prices and historical norms. 
3. This relation has formed a declining value wedge since 2011 (chart #2, dashed red lines) which has proved quite accurate in predicting future price ranges. Extending the dashed lines suggests a commodity value range of $850 to $1,170 per ounce for next year’s first quarter (1Q2015). 
4. Gold presently carries a premium to the aggregate of key commodities in chart #2; this has been mostly true since August 2011. Using the gravity analogy, gold needs to achieve escape velocity from the value wedge by increasing premium even more. If that premium disappears gold will follow commodities lower early next year. 

The Roubini $1,000 per ounce forecast is roughly near the midpoint of the above 1Q2015 forecast.

Chart #1 (updated from the Winter 2014 Edition of the Mining Quarterly, click for larger view):

Chart #2: 

Have a Merry Christmas and Happy New Year!!!

Cheers - Colonel

Headline photo by Mariana Titus

"Really Good" Jobs Report Clobbers Oil, Foreign Currencies; Gold Down, Still Resilient

Pancake Quarry, White Pine, Nevada (click for larger view)

My latest Kitco News commentary:

Is Gold Still on a Slippery Slope? (Nov. 24, 2014)

*** Local Mining News ***

MIDWAY RECEIVES FIRST BANK FUNDS FOR PAN GOLD PROJECT (Press release, 12/1/2014)

*** AM Prices ***

The early morning prices used for today's analysis:

Goldman Sachs Commodity index (Enhanced)

S&PGSCIES 271.57 (267.52 52-wk low)

Nymex/Comex

Nymex oil (WTI) $65.78 per barrel
Comex copper $2.9110 per pound
Comex gold $1,195.3 per ounce
Comex silver $16.335 per ounce

Gas prices are expected to move lower:

Latest Nevada gasoline prices

Morning miners!

On the release of the monthly jobs numbers a CNBC contributing economist exclaimed, "A really good jobs number!" and "...the revisions are fantastic!" One might expect such praise from the White House with 312,000 jobs added in November against 230,000 expected and notable upward revisions for the previous two months. But no, these were the comments from American Enterprise Institute Senior Fellow Kevin Hassett, former economic adviser for Mitt Romney and Senator John McCain presidential campaigns and President George W. Bush in 2004.

It was a good jobs report from any perspective (full report below).

Despite what politicians may argue, the private sector is the force behind job creation posting a healthy 314,000 new positions last month. Unemployment remains at 5.8% but hourly wages are up and the 12-month average gain of nonfarm payrolls is a very respectable 224,000.  Although, some of today's gains account for early Christmas temporary jobs, it is still a strong showing with upward revisions for September of 271,000 up from 256,000; and August, 243,000 up from 214,000.

Oil is presently looking for any excuse to drop lower and it did on the positive news returning to $65 per barrel territory. The U.S dollar surged against the euro and yen, both posting new weakness with the euro dipping to 1.2271 and the yen cresting the key 120-level at 121.68. The DOW flirted with the mercurial 18,000 and the S&P 500 made a new intraday high at 2,079.47.

On a strong dollar and expectations that the Federal Reserve may now raise interest rates "sooner than later," gold fell below $1,200 for an intraday low of $1,186.4 per ounce . However, the lustrous one demonstrated much greater resilience than other key commodities (discussion below).

Poor mining stocks got another wallop. Big gold miners Newmont (NEM) and Barrick Gold (ABX) fell to $19.05 and $11.61 (chart below) . Midway (MDW) is $0.72 down 3.08% in morning trade. Benchmark Moly miner Thompson Creek (TC) and General Moly (GMO) are both feeling pain falling 3.97% and 7.27% respectively. GMO is now below 40 cents per share at $0.38. Timberline Resources (TLR) was the only miner in the green of those tracked by this report; up 4.98% at $0.63 per share.

Finally, benchmark miner and copper giant Freeport-McMoRan (FCX) dropped 1.17%. Freeport has recently taken on oil interests to diversify so is feeling double-pain when red metal and oil prices are down.

Mining Stocks, Yahoo Finance

Overall, an American economy gaining momentum with a strong currency behind it is good news and a lot better situation than our friends across the pond. European GDP growth has just been notched down to 1% from 2% for 2015 - keep the faith, pardner.

Look for my column on gold outlook for 2015 in the upcoming Winter Edition of the Mining Quarterly.

Here is my input to the Kitco News Weekly Gold Survey :

My vote: Sideways. Next week's target price, $1,190 per ounce.

Discussion: 

On the release of the monthly jobs numbers, a CNBC contributing economist exclaimed "A really good jobs number!" and "...the revisions are fantastic!" One might expect such praise from the White House with 312,000 jobs added in November against 230,000 expected and notable upward revisions for the previous two months. But no, these were the comments from American Enterprise Institute Senior Fellow Kevin Hassett, former economic adviser for Mitt Romney and Senator John McCain presidential campaigns and President George W. Bush in 2004. It was a good jobs report from any perspective.

On the news, U.S. bond yields rose and the U.S. dollar flexed even greater muscle against both euro and yen. Expectedly, gold dropped but with much less drama than Nymex oil which slumped to $65.17 per barrel. Importantly, on ounce of Comex gold at $1,195 now buys nearly 50% more barrels than at the end of 2013. Although fractionally down for the year in U.S. dollar terms, the value of gold in morning trading is up 16% versus copper and 18% relative to silver.

The yellow metal resilience relative to commodities should keep gold closer to the upper boundary of the "value wedge" as illustrated in the second chart: my target is $1,190 per ounce for next week. If lower oil prices lead to geopolitical instability (e.g., collapsing Russian economy), gold could rally significantly. Without additional catalyst, gold could fall with commodities to a range between $950 to $1,170 per ounce in the first quarter of next year.

Have a great weekend!

Cheers - Colonel

Headline photo by Mariana Titus