The Eureka Miner

Friday, September 16, 2016

A Big Week Ahead for Gold Whether Bull or Bear - Colonel says $1,360

Diamond Mountains (Spring 2011)

Eureka, Nevada

Update Friday, September 23, 2016 AM

Comex gold $1,343.6 per troy ounce

Comex silver $19.880 per troy ounce

Comex copper $2.2045 per pound

Gold didn't quite make the $1,360-level this week but sure scared the hell out of $1,350 yesterday (intraday high $1,347.8 per ounce). Silver and copper got some much needed giddy-up too. Why? Central bank actions continue to benefit gold and there may a second move higher in October (see my Kitco News input below).

Here's some fun reading for the weekend. McEwen Mining's CEO Robert McEwen believes we may see $1,900 gold before the end of this year. McEwen Mining plans to begin mine construction in 2017 at the old Atlas Gold Bar pit north of Eureka. Finalization of permits is expected for the first quarter of next year. This is beyond exciting for us old timers that remember the Atlas mining days of yore. Here's the article that appeared in Bloomberg News this week:

Gold Bull McEwen Sees Prices as High as $1,900 by End of Year (Bloomberg News, 9/20/2016)

My input to this morning's Weekly Kitco Gold Survey:

The Federal Reserve delayed raising interest rates and the Bank of Japan rolled out yet another experiment in monetary easing - the combination propelled gold to nearly $1,350 per ounce yesterday. Although there is some profit-taking as the week closes, the yellow metal may get second boost from the Peoples Bank of China (PBOC) in October.

On October 1st, the IMF will add the Chinese yuan to its honored basket of reserve currencies. There is evidence that the PBOC has been supporting their currency funded partially by a dramatic sale of U.S. Treasuries commencing in July. Recent wild swings in their offshore unsecured overnight lending rate (or HIBOR - notably with a spike this Monday to nearly 24%) are an effort to squeeze out speculators that bet on the yuan to weaken. Presumably these actions are to maintain currency stability prior to the IMF induction.

After that fanfare, there may very well be an official devaluation that reflects less sanguine economic conditions in the world's second largest economy. Prior unexpected devaluations in August 2015 and January of this year caused market chaos and a bounce for gold price. A similar outcome in October keeps prices above $1,360 in play.

However, as September closes, there will likely be consolidation about $1,330 per ounce next week.

My vote is down. Next week's target price for gold is $1,330; target for silver, $19.2

Have a relaxing weekend.

Friday, September 16, 2016 AM

Comex gold $1,313.4 per troy ounce
Comex silver $18.850 per troy ounce
Comex copper $2.1475 per pound

Astrological influences aside, things could get crazy for gold next week. My input to this morning's Weekly Kitco Gold Survey:

Next week, the summer will close with an epic battle of King Kong and Godzilla - the U.S Federal Reserve and Bank of Japan have [separate] 2-day meetings on the 20th-21st that could significantly impact gold price in either direction. The FOMC will decide the pace of future rate hikes which could include one next week; the BoJ is desperately trying to weaken the yen and will be reviewing their few remaining monetary tools to do so.

The most bullish outcome for the yellow metal would be a Fed delay in interest rate hikes until December or beyond and a bold move by Japan that some believe could include "helicopter money." The hotter than expected CPI this morning adds another boost to this scenario since inflation expectations reduce the magnitude of real interest rates*.

The bearish outcome is a September rate hike and a BoJ that follows the ECB path earlier this month - talk a good game but forestall further accommodation decisions. Gold could take out its September high for the bullish case, bouncing above $1,360 per ounce. The bearish scenario test will surely shock test the $1,300 floor. A mixed outcome puts gold somewhere between these extremes.

As the Sun crosses the celestial equator on the 22nd, I'll wager with the bulls. If this proves wrong, any dip below $1,300 is a buying opportunity. It doesn't get more exciting than this.

My vote is Up. Target price for gold is $1,360; target for silver, $19.7

* real interest rates are approximately the nominal rate (what you read in the paper) less the expected inflation rate. Rising real rates are a significant headwind for gold. The Consumer Price Index (CPI), a measure of inflation, rose 0.2% for August versus an expected 0.1%. Core inflation for the year is 2.3% compared to the Federal Reserve target of 2.0%

(more commentary below...)

Fall Edition 2016 - Mining Quarterly

The Fall Edition 2016 of Mining Quarterly has hit the streets.

Marianne Kobak McKown has done another outstanding job creating a terrific MQ which features a column by our old friend Adella Harding! There is an excellent update on Newmont's Long Canyon Project, Barrick's Turquoise Ridge and much, much more.

My MQ column on gold's bullish path forward was also carried in the Elko Daily Free Press:

Gold, currencies and negative interest rates; The stars and planets of global monetary systems align for gold (September 8, 2016)

(Although not posted yet checkout the online Mining Quarterly soon!)

Happy reading!

Numbers used for analysis (August 26 early AM prices):

Bloomberg Commodity Index (BCOMTR:IND)

168.04 (low January 20, 2016 146.8798)

Nymex/Comex (most active contracts)

Nymex oil (WTI) $43.46 per barrel

Brent crude $ 46.30 per barrel

Comex copper $2.1475 per pound

Comex gold $1,313.4per troy ounce

Comex silver $18.850 per troy ounce

Latest Nevada gasoline prices

Godzilla (BoJ) versus King Kong (U.S. Federal Reserve)

A Big Week for Gold Next Week Whether Bull or Bear

The Colonel remains bullish on gold

Morning Miners!

As I mention in my Kitco News brief (above) and in the last several reports, the meetings of two major central banks next week could be a big driver for gold - up or down. My thoughts on gold going forward are in the latest Mining Quarterly (also above) and a recent commentary for Kitco News:

In the Quiet of August, a Troubling Spike (September 8, 2016)

The bottom line is a fairly shiny future for the yellow metal in the light of the latest central bank monetary policies. Things may not bode so well for the commodity complex - on this point, I hope I'm wrong. Watch copper price for clues. More on this in the weeks to come.

Have a good weekend!

Photos by Mariana Titus if not otherwise noted

Friday, August 26, 2016

September Gold Surprise? Bob Dinwiddie - A Good Man Passes

Don Hull with Bob Dinwiddie

(Mariana Titus - Eureka Album of the Good Ole Days)

Eureka, Nevada

Tribute to Bob Dinwiddie at the end of this report...

Update: Friday, September 2, 2016 AM

Comex gold $1,327.6 per troy ounce ($1,333.9 high)
Comex silver $19.345 per troy ounce
Comex copper $2.0905 per pound

Gold bounces after a worse-than-expected Nonfarm Payroll Report (NFP) for August: 151,000 jobs added (180,00 expected), unemployment unchanged at 4.9% . A sobering statistic remains that, "Employment in mining continued to trend down in August (-4,000). Since reaching a peak in September 2014, employment in mining has declined by 223,000, with losses concentrated in support activities for mining." In this context, mining includes all folks that extract wealth from the earth including those in the oil patch. It will be a good day for mining when this trend reverses.

Here's a positive, "In August, average hourly earnings for all employees on private nonfarm payrolls rose by 3 cents to $25.73. Over the year, average hourly earnings have risen by 2.4 percent. Average hourly earnings of private-sector production and nonsupervisory employees increased by 4 cents to $21.64 in August."

My input to this morning's Weekly Kitco Gold Survey:

This week included the end of a very docile August and the NFP drama of a new month - important for what didn't happen as for what did, at least for gold. Remarkably, the S&P 500 scored less volatility in August than key commodities and major currencies. Gold volatility was in the middle of the pack swinging perilously close to the key $1,300 per ounce-level on Wednesday and Thursday than bouncing up to a more bullish $1,340 this morning on a worse-than-expected U.S. jobs report. Importantly, not breaking $1,300 with commodities in a downtrend since mid-August validates my belief that central banks have established a solid price floor whether or not the Fed raises rates in September or December.*

Bigger gold price surprises could come from the Bank of Japan reacting to a very strong currency when they meet later this month. Gold has recovered nicely this week in yen terms. After initially losing ground to the Japanese currency and falling within less than 9% above its 2013 low, gold has again broken a downtrend that began January 2015. This is important because the yen and gold compete for investor safe haven. Although Japan's monetary policy options are quite limited, a move to say "helicopter money" could give gold a real boost. In the meantime, gold will likely fall back to $1,320 next week. My vote is down.

$1,300 remains very substantial floor for gold; and $1,400, a high hurdle for 2016 prices.

Target price for gold is $1,320; target for silver, $19.1

* Continued thesis: Gold finds itself pulled in two directions; a stronger dollar is a headwind but monetary policy divergence between the U.S. and other central banks establishes a solid price floor around $1,300 per ounce. Negative interest rates around the world should maintain strong demand for U.S. Treasurys keeping the long end of the yield curve down even when the Fed raises short-term rates. This flattening should buffer gold somewhat from the curse of rising interest rates in a low inflation environment and keeping $1,400 still in sight for 2016.

Friday, August 26, 2016 AM

Comex gold $1,332.7 per troy ounce
Comex silver $18.805 per troy ounce
Comex copper $2.0815 per pound

Gold awaits Janet Yellen's speech at Jackson Hole. My input to this morning's Weekly Kitco Gold Survey:

With [Federal Reserve Chairwoman] Janet Yellen's prepared remarks on the wire, I don't think there will be much more to expect from her speech later today: "...an increase in the federal funds rate has strengthened in recent months..." and affirmation that gradual increases in the federal funds rate are the most likely trajectory. Not particularly earth shaking news.

Gold finds itself pulled in two directions; a stronger dollar is a headwind but monetary policy divergence between the U.S. and other central banks establishes a solid price floor around $1,300 per ounce. Negative interest rates around the world should maintain strong demand for U.S. Treasurys keeping the long end of the yield curve down even when the Fed raises short-term rates. This flattening should buffer gold somewhat from the curse of rising interest rates [in a low inflation environment] keeping $1,400 still in sight for 2016.

I think bigger gold price September surprises could come from the Bank of Japan reacting to a very strong currency and/or the continued slide of copper prices. Even though the yellow metal has outpaced the five major currencies this year (USD, yen, euro, pound sterling and by 10/1, the Chinese yuan), it has lost ground recently to the yen. Presently gold in yen terms is less than 10% above its 2013 low falling back to a downtrend that began January 2015. Although Japan's monetary policy options are quite limited, a move to say "helicopter money" could give gold a real boost.

The copper story reminds us of the "commodital force of gravity" which can pull gold down with other declining commodity prices - especially metals like copper. The gold-to-copper ratio this morning with copper at $2.08 is very near all-time record highs - one ounce buys an incredible 640 pounds of the red metal. I don't believe higher ratios or even this level are sustainable. Therefore, if copper drops lower, gold will probably follow...it's just physics. In any case, $1,300 will remain a very substantial floor; and $1,400, a high hurdle for 2016 prices. My vote is down.

Target price for gold is $1,320; target for silver, $18.4

(more commentary below...)

Summer Edition 2016 - Mining Quarterly

The Summer Edition 2016 of Mining Quarterly is a good'un. Fall Edition coming soon!

Marianne Kobak McKown has done another outstanding job of getting the Mining Quarterly in step with this year's Mining Expo! There are excellent columns on Silver Strand's Marigold Mine, Newmont's conservation efforts at IL ranch, Jerritt canyon safety improvements, Barrick' Goldstrike and much, much more.

My column on silver's good year was also carried in the Elko Daily Free Press:

Hi Ho Silver away! Silver steps out from gold's shadow (June 12, 2106)

(Click on this link for the online Mining Quarterly)

Happy reading!

Numbers used for analysis (August 26 early AM prices):

Goldman Sachs Commodity Index

S&P GSCI 361.58, 09/16 contract (intraday low 279.25 1/20/2015)

Nymex/Comex (most active contracts)

Nymex oil (WTI) $47.48 per barrel

Brent crude $ 49.75 per barrel

Comex copper $2.0815 per pound

Comex gold $1,332.7 per troy ounce

Comex silver $18.805 per troy ounce

Latest Nevada gasoline prices

Remembering Atlas Gold Bar Mine

Eureka, Nevada

September Gold Surprise?

The Colonel remains bullish on gold

Morning Miners!

As I mention in my Kitco News brief (above), one or two surprises may await gold in September whether or not the Federal Reserve decides to raise rates.

The first is the potential for a desperate action by the Bank of Japan to combat a stubbornly strong yen. The Japanese currency is presently at 100 USD/JPY and has been there for nearly a month. The venerable market seer Mark Mobius predicts that if it strengthens to 90, the BoJ will make an unprecedented move:

Mobius Says Helicopter Money Will Be Japan’s Next Big Experiment (8/24/2016, Bloomberg News)

Helicopter money is coming, says Mark Mobius, even as soon as next month. The 80-year-old investment veteran is outlining how he expects central banks to respond to sluggish economic growth. For Mobius, executive chairman of Templeton Emerging Markets Group, traditional easing measures have just made people save instead of spend or borrow. Combined with a stronger yen, he says that’s going to force the Bank of Japan governor to contemplate a policy he’s repeatedly ruled out. “They’re really beginning to think what ammunition they have,” he said in an interview on a visit to a typhoon-struck Tokyo this week. “The first reaction is to say, OK, let’s go for helicopter money, let’s get money directly into the hands of consumers,” he said. “I think that would probably be the next step.”

I talk about "helicopter money" in the upcoming issue of the Mining Quarterly. This is the most outlandish money printing scheme yet envisioned, literally money falling from Central Bank heavens. BoJ Governor Haruhiko Kuroda’s recent remark that there was no need for “helicopter money” have led some to believe it’s just around the corner for Japan – they’ve tried everything else.

The Lustrous One loves talk of money printing especially in a currency that competes with it for safe haven

On a more bearish side is the steady decline of copper prices. This morning's $2.08 per pound is not that far from June's low-point of $2.05 or January's $1.94. Goldman Sachs predicted earlier this month that the red metal could fall to $4,000 per tonne ($1.81 per pound) in the next 12 months - ouch!

Goldman Warns ‘Supply Storm’ to Engulf Global Copper Market (8/4/2016, Bloomberg Market News)

Presently gold has a positive 1- and 3-month correlation with copper (+0.75, +0.54) so it may very well travel down the shaft with its metallic friend. However, there is solid support for gold at the $1,300 per ounce level of the mine thanks to global money printers. Between central bankers and miners, September could be an exciting high-wire act (with thankfully a safety net in place).

Stay tuned, pardner.

Bob Dinwiddie at Eureka'tiques

(courtesy Barbara Dale)

Eureka, Nevada

Bob Dinwiddie - A Good Man Passes

Sadly, my good friend and neighbor Bob Dinwiddie passed away last Saturday in Elko of heart complications. Mr. Dinwiddie had just turned 85 in July and was a real miner's miner. He worked for years at Kennecott's massive copper mine outside Ely before coming to Eureka in the 1980s. He became the Mill Superintendent of the Atlas Gold Bar Mine north of Eureka and delighted in telling stories of the good ole days when mining was a lot about wit n' grit and getting the job done with the supplies and crew available (which often included getting that crew to work on time!). This 2009 report described some of those "Wild West" times:

Johnny Horton and Atlas Mine Memories (November 2, 2009, Eureka Miner's Market Report)

The Atlas mining years spanned 1986 to 1990 although stockpiled refractory ore continued to be processed in the mill for some time after mining ceased.

Bob could make just about anything from metal including a beautiful western-style iron works entrance to his driveway proudly displaying his namesake. He was an accomplished machinist and after retiring from the mines, operated Dinwiddie's Machine Shop at the same address.

Barbara Dale, proprietor of "Eureka'tiques," posted a heartfelt tribute on her facebook page that says it all:

Rest in Peace Mr Bob Dinwiddie..Extraordinary Gentleman, Machinist, BBQ Master, Husband and Father..very dear friend and favorite "old fart"...Bob in the photo after installing the open sign hardware [above picture]..we will all miss you dearly..xo

I will never forget Bob's terrific sense of humor. During local mining's darkest time in recent years, Bob reflected on Eureka's new top-o-the-line fire station and high school gymnasium, "We're going to soon become Nevada's most modern ghost town!"

Always a positive spirit, I'm sure Bob found great comfort in this year's gold price recovery and an upturn in local mining prospects. McEwen Mining is currently in the process of re-opening the Gold Bar Mine with mine construction planned to begin next year.

Bob Dinwiddie will be remembered with great honor in this town. A service will be held Saturday, September 10 at the Eureka Opera House. His wife, Bobbie Dinwiddie, plans to move to Texas to be with the kids and grandkids.

The best to Bobbie and family! - Colonel

Photos by Mariana Titus if not otherwise noted

Friday, August 19, 2016

Gold $1,350 - Are There Golden Trout in Jackson Hole?

Ackerman Ranch (2006)

Lander County, Nevada

Friday, August 19, 2016 AM

Comex gold $1,348.5 per troy ounce
Comex silver $19.365 per troy ounce
Comex copper $2.1655 per pound

Gold pulls back on U.S. dollar bounce. My input to this morning's Weekly Kitco Gold Survey:

[U.K.] Prime Minister Theresa May's Friday announcement that she wants to leave Europe as "painlessly and quickly as possible" should remind investors that markets are still in a strong U.S dollar environment. This news and a hawkish take on what may transpire at the Jackson Hole meeting of Federal Reserve chiefs next week bounced the greenback sharply from its 7-week low.

Gold finds itself pulled in two directions; a stronger dollar is a headwind but monetary policy divergence between the U.S. and other central banks establishes a solid price floor around $1,300 per ounce. Negative interest rates around the world should maintain strong demand for [positive-yielding] U.S. Treasurys keeping the long end of the yield curve down even if the Fed raises short-term rates. This flattening should buffer gold somewhat from the curse of rising interest rates [in a low inflation environment] keeping $1,400 still in sight for 2016.

Against this backdrop, the yellow metal's relation to equities remains the key gold ratio to watch [see chart below]. If further rallies in domestic equities continue, a ratio below 0.6 is a bearish flag relative to the S&P 500. This morning's retreat of stocks and gold price finds that ratio at a shallow 0.62. This ratio was a strong 1.2 when Ben Bernanke gave his Jackson Hole speech 4 years ago presaging gold's painful downdraft in 2013. The ratio hit bottom at 0.5 in December 2015 as investors much preferred equities over gold. The ratio has since reversed but now shows some weakness.

On the bullish side for the yellow metal are continued macro-uncertainties which include the U.S. presidential election in November.

My vote is down. Target price for gold is $1,340; target for silver, $19.2

(more commentary below...)

Summer Edition 2016 - Mining Quarterly

The Summer Edition 2016 of Mining Quarterly is a good'un. Fall Edition coming soon!

My column on silver's good year was also carried in the Elko Daily Free Press:

Hi Ho Silver away! Silver steps out from gold's shadow (June 12, 2106)

(Click on this link for the online Mining Quarterly)

Happy reading!

Numbers used for analysis (August 5 early AM prices):

Goldman Sachs Commodity Index

S&P GSCI 369.5, 08/16 contract (intraday low 279.25 1/20/2015)

Nymex/Comex (most active contracts)

Nymex oil (WTI) $47.98 per barrel

Brent crude $ 50.47 per barrel

Comex copper $2.1655 per pound

Comex gold $1,348.5 per troy ounce

Comex silver $19.365 per troy ounce

Latest Nevada gasoline prices

Main Street (2006)

Eureka, Nevada

Gold $1,350 - Are There Golden Trout in Jackson Hole?

The Colonel remains bullish on gold

Morning Miners!

As I mentioned in my Kitco News brief (above), gold is being pulled in two directions. The return of a strong U.S. dollar (it never really left) and threat of higher interest rates in the U.S. puts a downer on gold prices going forward...

BUT...(and this is a big butt, pardner)...

Central bankers of major economies continue to apply increasingly desperate monetary policies to spur growth and re-ignite inflation. One outcome has been negative-yielding bonds which now comprise nearly 30% of global debt - a real windfall for gold. I explain this golden paradox in the upcoming fall edition of the Mining Quarterly - in my view, net bullish for gold.

Sneak preview: the annual get-together of central bankers is next week at Jackson Hole, Wyoming and there may indeed be some golden trout left in those high mountain lakes.

Gold has outpaced all five major currencies (U.S. dollar, Japanese yen, euro, British pound sterling and Chinese yuan) in 2016. It is also up with good margin from its lowest price in all five during the commodity bust that started with the China slowdown in 2011. If nothing else, the yellow metal has proved to be a very effective currency hedge. With all the currency volatility before us, this condition should not change for quite sometime.

Secondly, gold's multi-year decline relative to stocks reversed this year. Although U.S. equities are making all-time highs, gold has still not lost its edge as shown in this chart of the gold-to-S&P500 ratio (AUSP):

(Click on plot for larger size)

The plot illustrates the importance of gold staying above the 0.6 level as mentioned in the above gold survey. Falling below this level would break the 2016 upward trend (dashed green line). Stay tuned.

Another Chart to Watch

Gold price margins from 2013 lows (euro, yen)

A disturbing aspect of gold's 2015 decline in USD was the concurrent collapse in euro and yen terms.

Fortunately. the yellow metal has stayed above its 2013 lows in terms of both currencies. The percent margin above those bottoms peaked in late January 2015 and then trended down with the divergence of US monetary policy from the policies of Europe and Japan, and the associated rise of the US dollar. (click on chart for larger image, an earlier version of this chart appears in Spring 2016 Mining Quarterly ):

(Click on plot for larger size)

Declining value of gold relative to a devalued currency is a red flag. January witnessed a key reversal in this downtrend for both euro and yen and it has mostly been up and away ever since - a very bullish turn for gold in 2016.

Although gold price in euros has surpassed its 2015 high, price in yen terms has returned to a downward trend. No alarm bells yet but the divergence of these two plots with a strengthening yen is troubling.

2013 lows:

879.64 euros per ounce on 12/20/2013
122,443 yen per ounce on 6/28/2013

Friday AM (09/19/2016):

1,191.0 euros per ounce (+35.4% margin)
134,980.80 yen per ounce (+10.24% margin)

Have a fun weekend!

Cheers - Colonel

Photos by Mariana Titus if not otherwise noted

Friday, August 5, 2016

Gold Retreats to $1,345 on BTE Jobs; McEwen Mining (MUX) Reports - Gold Bar on Track

Eureka, Nevada

Friday, August 5, 2016 AM

Comex gold $1,345.3 per troy ounce
Comex silver $19.820 per troy ounce
Comex copper $2.1630 per pound

Gold pulls back on a much better-than-expected jobs report. My input to this morning's Weekly Kitco Gold Survey:

Divergence of central-banker policies from the future direction of the U.S. Federal Reserve is highlighted by this morning's much-better-than expected NFP [U.S. Labor Department Nonfarm Payroll] report. The latter increases the chances for a U.S. interest rate hike later this year, perhaps even September. The Bank of Japan moved in the opposite direction last Friday with more (albiet less-than-hoped-for) monetary accommodation followed this week by the Bank of England's "Brexit Bazooka" - a cut in interest rates and resumption of quantitative easing.

These developments will prolong an era of strong U.S. dollar and likely cap gold prices this year below $1,400 per ounce. On the other hand, negative interest rates in Japan, Europe and elsewhere put in a substantial floor for gold around $1,300 per ounce.

Against this backdrop, the yellow metal's relation to equities remains the key gold ratio to watch. If further rallies in domestic equities continue a ratio below 0.6 is a bearish flag relative to the S&P 500. This morning's stock rally and gold retreat find the ratio at 0.62.

On the bullish side are continued macro-uncertainties which now include the U.S. presidential election process. Unexpected catalysts like an expanding zika virus in the U.S. have a much lower likelihood but nonetheless remain in the darker corners of concern.

My vote is down. Target price for gold is $1,340; target for silver, $19.7

(more commentary below...)

Summer Edition 2016 - Mining Quarterly

The Summer Edition 2016 of Mining Quarterly is a good'un!

My column on silver's good year was also carried in the Elko Daily Free Press:

Hi Ho Silver away! Silver steps out from gold's shadow (June 12, 2106)

(Click on this link for the online Mining Quarterly)

Happy reading!

Numbers used for analysis (August 5 early AM prices):

Goldman Sachs Commodity Index

S&P GSCI 339.00, 08/16 contract (intraday low 279.25 1/20/2015)

Nymex/Comex (most active contracts)

Nymex oil (WTI) $41.54 per barrel

Brent crude $ 44.00 per barrel

Comex copper $2.1630 per pound

Comex gold $1,345.3 per troy ounce

Comex silver $19.820 per troy ounce

Latest Nevada gasoline prices

South Ranch

Eureka, Nevada

Gold Retreats to $1,345 on BTE Jobs Report

Morning Miners!

As I mentioned in my Kitco News brief (above) it appears a much-better-than expected jobs report put a dent in gold prices this morning. Let's dig a little deeper.

The Employment Situation Summary is released the first Friday of every month at 5:30 AM Eureka time. The report is jam-packed with statistics on the nonfarm payrolls of the previous month. The analyst's expectation was for 180,000 jobs added in July - the report number was a surprising 255,000 with headline unemployment remaining at 4.9%. There were also upward revisions to previous months.

Steve Liesman, the CNBC Business News economist and Fed watcher exclaimed, "It's something, huh?" Another commentator added, "It's good across the board!"

Well almost, employment in mining continued to trend down over the month dropping 6,000 additional jobs. Since reaching a peak in September 2014, employment for folks digging wealth from the earth (including our oil patch cousins) has fallen by 220,000, or 26 percent.

Most other sectors of the economy are much rosier with decent gains in professional and business services, health care, financial activities, leisure and hospitality.

Most encouraging was a 0.3% rise in average hourly employment raising that measure to 2.6% for the year. Stagnant wage growth has been a real downer for this recovery so an uptick is welcome.

Even though the participation rate is little changed at 62.8%, a rising 3-month average of 190,000 new jobs per month pretty much dampens recession fears. It also increase the chances that the Federal Reserve will raise interest rates this year, perhaps even this fall - a headwind for gold price.

The stock market reacted with glee with the S&P 500 setting new intraday highs as gold retreated more than $20 per ounce to $1,345.3.

For the reasons stated in my survey input (above), gold miners may actually be in a sweet spot for prices for the remainder of the year. If the yellow metal trades between $1,300 and $1,400, most miners can show a decent profit.

McEwen Mining (MUX) Reports - Gold bar on track

McEwen Mining reported yesterday including progress on their Gold Bar Advanced-Stage Project. For us old timers, this is the reactivation of the Atlas Gold Bar mine which kept Eureka jumping in the late-1980s & early-1990s:

McEwen Mining Q2 2016 Operating & Financial Results (Press release, 8/4/2016)

"As outlined in our Feasibility Study dated September 19, 2015, the Gold Bar asset, the upside case for Gold Bar at $1,300/oz gold provides improved economics over the original base case...The Company estimates that we will receive a permitting decision from the Bureau of Land Management during the first quarter of 2017. This final permit, once received, will allow us to begin construction of the mine, which we have estimated to take 12 months. Production is estimated to begin the following year in 2018. For 2016, we have budgeted approximately $4.7 million to be spent towards advancing the project closer to the production stage, of which $1.3 million has been spent during the six month period ended June 30, 2016. Mine permitting and engineering activities continue to advance at Gold Bar."

This could be very welcome news for Eureka in 2017 and beyond. The best of luck to the McEwen team!

Chart to Watch

(Click on plot for larger size)

Declining value of gold relative to a devalued currency is a red flag. January witnessed a key reversal in this downtrend for both euro and yen and it has mostly been up and away ever since - a very bullish turn for gold in 2016.

Although gold price in euros has surpassed its 2015 high, price in yen terms has returned to a downward trend. No alarm bells yet but the divergence of these two plots with a strengthening yen is troubling. Stay tuned.

2013 lows:

879.64 euros per ounce on 12/20/2013
122,443 yen per ounce on 6/28/2013

Friday AM (03/04/2016):

1,216.15 euros per ounce (+38.3% margin)
137,115.67 yen per ounce (+12.0% margin)

Have a fun weekend!

Cheers - Colonel

Photos by Mariana Titus if not otherwise noted

Friday, July 22, 2016

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

Eureka, Nevada at Dusk

Friday, July 22, 2016 AM (Update)

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

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

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

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

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

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

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

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

Gold's fortune's reversed to the upside this year!

(Click on chart for larger view)

Summer Edition 2016 - Mining Quarterly

The Summer Edition 2016 of Mining Quarterly is a good'un!

My column on silver's good year was also carried in the Elko Daily Free Press:

Hi Ho Silver away! Silver steps out from gold's shadow (June 12, 2106)

(Click on this link for the online Mining Quarterly)

Happy reading!

Numbers used for analysis (July 22 early AM prices):

Goldman Sachs Commodity Index

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

Nymex/Comex (most active contracts)

Nymex oil (WTI) $44.18 per barrel

Brent crude $ 45.61 per barrel

Comex copper $2.2650 per pound

Comex gold $1,320.4 per troy ounce

Comex silver $19.665 per troy ounce

Latest Nevada gasoline prices

Malarkey's - A tradition carries on

Eureka, Nevada

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

Morning Miners!

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

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

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

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

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

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

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

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

Cheers - Colonel

Photos by Mariana Titus if not otherwise noted

Friday, July 8, 2016

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

Eureka, Nevada

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

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

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

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

Friday, July 15, 2016 AM (Update)

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

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

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

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

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

May your weekend have more yang than yin!

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

Friday, July 8, 2016 AM

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

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

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

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

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

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

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

Chart for the Week

(Click on image for larger size)

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

Summer Edition 2016 - Mining Quarterly

The Summer Edition 2016 of Mining Quarterly is on the street!

My column on silver's good year was also carried in the Elko Daily Free Press:

Hi Ho Silver away! Silver steps out from gold's shadow (June 12, 2106)

(Click on this link for the online Mining Quarterly)

Happy reading!

Word from Adella Harding!

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

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

Goldman Sachs Commodity Index

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

Nymex/Comex (most active contracts)

Nymex oil (WTI) $45.65 per barrel

Brent crude $ 46.94 per barrel

Comex copper $2.1305 per pound

Comex gold $1,362.3 per troy ounce

Comex silver $19.930 per troy ounce

Latest Nevada gasoline prices

Flowers among Andesite

South Ranch, Eureka, Nevada

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

Morning Miners!

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

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

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

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

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

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

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

7 July 2016

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

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

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

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

A big shout out for Adella!

Cheers - Colonel

Photos by Mariana Titus if not otherwise noted