The Eureka Miner

Friday, October 24, 2014

Gold Resilient above $1,200 - Reasons to be Bullish (Mining too?)

Exploring the Ruby Hill Fault, Eureka, Nevada

Morning miners!

An abbreviated report this morning as I continue to prepare a column for the upcoming Winter Edition 2014 of the Mining Quarterly.

Do you want to feel better about mining's future? It has been a real bruiser lately, the Eureka Miner's Index (EMI) hit single digits October 15 - levels not seen since the 2008-2009 financial crisis. By comparison, the EMI scored 817 on January 4, 2011...ouch! (EMI tracking is in the column to your right near the bottom of the blog page).

Feeling better starts with knowing the worst is in the rear view mirror. The following video with JP Morgan analyst Ann Duignan gave me confidence that better times may indeed be ahead. Ms. Duignan is one of the biggest mining bears around so it is important to hear a her (slight) change of sentiment. Here is Ms. Duignan's CNBC Business news video interview following Caterpillar's blowout quarterly report (please excuse the ad at the beginning):

CAT analyst remains neutral (CNBC Business News, 10/23/2014)

When bears stop growling it's time for the bulls to make their long trek back to green pasture.

The bottom in gold may also be in, pardner - the full story will be in the upcoming Mining Quarterly!

Stay tuned.

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

My vote on next week's gold price:

Up. Target $1,239 per ounce

Discussion:

Although Thursday reversed the 3-week-uptrend in U.S. dollar price, there are good reasons to remain bullish about gold. Physical demand is up in both India and China and should continue through the Lunar New Year. There is also a fairly resilient risk premium given unresolved geopolitical conflicts, Sino-Euro growth prospects and the health of Europe's banking sector.

Given a backdrop of stronger U.S. dollar, this morning's Comex trading at $1,233.3 per ounce puts the yellow metal at less than 3% above last year's closing price. However, gold has fared much better against key commodities. Relative to Comex silver and copper it is up over 14% and nearly 25% compared to Nymex oil.

Even though gold has backed away from its value peaks (above chart, click for larger image), it still carries an imposing $140 per ounce premium against an aggregate of all three commodities (chart below, click for larger image). If gold can maintain this premium it should remain above last year's $1,180 closing low even though its commodity value is now below $1,100.

If gold can escape the declining value wedge (red dashed lines, above chart), there could be upward movement to $1,300 by early 2015. On the darker side, if its current safe-haven premium vanishes, gold USD price could go to $1,070 per ounce by years-end ( lower dashed line extended through December; gold approaches its commodity value).

Have a great weekend!

Cheers - Colonel

Headline photo by Mariana Titus

Friday, October 3, 2014

Gold Tests $1,190 on "Very Good" Jobs Report; King Dollar Surges

Ruby Hill Memories, Eureka, Nevada

*** BREAKING NEWS***

Since the analysis below, Comex gold has slipped further to an intraday low of $1,190.3 per ounce - it may go lower before the close...

*** Local Mining News ***

MIDWAY ADVANCES CONSTRUCTION AND MINING BEGINS AT PAN GOLD PROJECT, NEVADA (Press release, 9/15/2014)

MIDWAY GOLD FILES TECHNICAL REPORT FOR UPDATED RESOURCE AT SPRING VALLEY PROJECT, NEVADA (Press release, 9/9/2014)

Latest Nevada Gas Prices (click this link)

My latest column in Kitco News:

Oil, Copper & Gold on a Slippery Slope (Kitco News, August 25, 2014)

My latest column in the Fall 2014 Edition of the Mining Quarterly:

C.C. Goodwin, the Early Mines of Eureka (Fall 2014 Edition: online pages 76-83; printed pages 70-77)

Paintings by Mariana Titus, The Three Anas & The Three Moon Anas, are presently at Lafitte Guest House & Gallery, New Orleans

Mariana's fine art prints are featured in Fine Art America: Mariana Titus

Friday's AM prices used for this morning's early analysis (see note below):

COMEX Gold price = $1,192.2/oz (December contract most active)
COMEX Silver = $16.830/oz (Dec)
COMEX Copper = $3.0010/lb (Dec)

NYMEX WTI crude = $89.55/bbl (Nov)
ICE Brent crude = $91.67/bbl (Nov)

Eureka Miner’s Gold Value Index© (GVI) = 90.33 (gold value relative to a basket of commodities that include oil, copper and silver; 100 is a high gold value)
Value Adjusted Gold Price© (VAGP) = $1,102.8/oz
COMEX - VAGP = +89.4/oz; gold is trading at a premium to key commodities

As of 9:26 AM PDT:

Barrick Gold (ABX) = $14.19 down 3.47%
Newmont Mining (NEM) = $22.67 down 2.62%
Midway Gold (MDW) = $1.08 down 1.82%
General Moly (GMO) = $0.7394 down 0.08%
Timberline Resources (TLR) = $0.07 up 2.78%

S&P 500 = 1,967.08 up 1.12%

Morning Miners!

CNBC Business News commentator Larry Kudlow exclaimed, "Very good!" shortly after the release of this morning's jobs report. That's quite a remark from someone who has been skeptical of the U.S. economic recovery. Whether a Europe slipping into a triple-dip recession and a slowing China with Hong Kong demonstrators in the streets will change the momentum is yet to be seen - for now the U.S. is rolling with a full head of steam.

The Labor Department announced at 5:30 AM (PDT) that 238,000 nonfarm payroll jobs were added in September against economist's expectations of 215,000; previous months were revised upwardly too. Even more surprising, the headline unemployment rate fell to 5.9% - a number we haven't seen since July 2008! The increases were broad based across many sectors, even construction which added 18,000. The most inclusive and least reported measure of unemployment, called U6, dropped to 12.2% - not bad when we remember this was close to 20% during darker days (U6 includes the lazy bum son on the couch who's been living with mom and dad since college and has a $100,00 college loan to repay).

Good employment numbers pump more fuel to the racing U.S. dollar. Of course, dollarized commodities take it on the chin. Comex copper closed at $2.9985 per pound yesterday and is barely keeping its redhead above $3 in morning trading, presently $3.0010. Nymex light crude fell below $90 and is now trading at $89.68 per barrel - look for gas prices to fall further:

Latest Nevada Gas Prices (click this link)

And gold? The poor fallen hero hit the $1,200 per ounce level when I did my first analysis for Kitco News this morning. By the time that was done the yellow metal was at $1,192 - I threw all the analysis away and wrote my editor in Chicago (see full report below) with a wag at next week's gold price sans analysis - $1,185 per ounce? $1,180 is the key support level from last December's lows - will it hold?

There is a fairly simple way to view the ascendancy of the U.S. dollar and decline of gold price.

Presently, our central bank is moving in an opposite direction to those in Europe and Japan. Chairman Yellen is putting the brakes on monetary accommodation (albeit very gently) - the third phase of quantitative easing (printing money to buy bonds) ends this month and there are hints that the Fed funds rate will rise sooner than later (perhaps mid-2015). More "very good" employment reports are likely to accelerate this process.

By contrast, Europe is just beginning their peculiar approach to easing and Japan has been expanding their balance sheet at a tsunami pace for some time. In the currency world, the euro is falling dramatically (1.2514 low this morning) and the yen continues to weaken (punching through 110 this week, sitting just below that level now at 109.645). These distressed global reserve currencies propel the U.S. dollar higher.

Market anticipation of low inflation, rising interest rate environment (i.e. the Federal Reserve tightening) and soaring U.S. dollar are kryptonite to the super-metal price strength gold enjoyed in late-2011 when the Lustrous One flew over $1,900 tall buildings.

Today we find our metallic hero is back in the phone booth without a cape...

The slippery slope continues...

On August 25, I wrote a column on the dilemma gold and key commodities face:

Oil, Copper & Gold on a Slippery Slope (Kitco News, August 25, 2014)

I measure the "commodity value" of gold against a basket that includes Nymex oil, Comex copper and Comex silver as explained in this commentary and a similar piece in the Summer 2014 Mining Quarterly (p. 99-101 online edition). On August 14, gold carried a premium of $100 per ounce compared to this basket and it has slowly drifted down to $89. If the premium continues to decline, gold will follow commodities on a downhill slope in U.S. dollar price. Here's a chart from the Mining Quarterly column updated through this morning (click on the graph for a larger image):

Today's premium is the distance between the blue and red arrows. As you can see both the price of gold (blue line) and its commodity value (red line) are still trending lower (red dashed lines) as the premium declines. This morning, the commodity value of gold scored a new low of $1,102.8 per ounce, right at the bottom of the red dashed line.

It is instructive to note that today's gold price and associated commodity value are below the levels of December 02, 2009. On that day, the Lustrous one stepped out of the booth ready to fly setting a new all-time Comex record of $1,235.1 per ounce with a commodity value of $1,152.6.

Pardner we've now come full circle. If you see our metallic hero, buy him a cup of joe at the Owl Club - he needs the caffeine. A dash of brandy might help too, be ready for some war stories.

Keep the faith!

Fall 2014 Mining Quarterly

Make sure you checkout the latest Elko Daily Free Press Mining Quarterly!

Marianne Kobak McKown and her team have done another terrific job of capturing all the latest mining news in Northern Nevada including a special series of reports on how mining affects the environment, jobs and taxes. Public perception of mining is important as Marianne reminds us that this November voters will decide if the long-standing cap on mining stays or goes.

Here is the link to the online Fall 2014 Edition togther with past issues:

http://elkodaily.com/mining/special_sections/

The ole Colonel has a column on C.C. "Charlie" Goodwin, one of the early mining pioneers of the Eureka Mining District:

C.C. Goodwin, the Early Mines of Eureka (online pages 76-83; printed pages 70-77)

The Goodwin legacy teaches operators to match the best ores with the latest technology to maximize return on investment. He was also a trailblazer in vertical integration of mining operations from ore extraction to reduction as exemplified by his Ruby Hill Jackson Mine and Jackson Smelter in nearby Eureka. I hope you enjoy reading about his contributions to the Silver States on this Sesquicentennial. Hats off to Charlie Goodwin!

Kitco Gold Survey

Here is my input to the Weekly Kitco Gold Survey:

10/03/2014 (10:19 AM CDT)

Q. Where do you see gold’s price headed next week, up, down or unchanged?

A. Down. My target price is $1,185 per ounce.

Q. Why?

In lieu of lengthy analysis this morning this is what I emailed to Kitco Global Editor Debbie Carlson:

Morning Debbie,

I give up - did a load of analysis after the good jobs report when comex gold was $1,200.3 now its $1,192.2...threw it all away.

Big question is whether the $1,180 will hold. I'll say yes but we may bust that level before years-end.

So right now (could change in a few minutes but this is it!):

Down. Target $1,185.

No attachment - ha!

Cheers - Colonel

Photos by Mariana Titus

Please checkout bayoutales.com for books and book orders

Mariana's fine art prints are featured in Fine Art America: Mariana Titus

Paintings by Mariana Titus, The Three Anas, are presently at Lafitte Guest House & Gallery, New Orleans

Friday, September 19, 2014

Gold Tests $1,214 on Strong Dollar & Alibaba Propelled Stocks

Barbeque time at John Brown's, Eureka, Nevada

*** BREAKING NEWS***

Since the early morning analysis below, Comex gold has slipped further to an intraday low of $1,214.6 per ounce - it may go lower before the close...

*** Local Mining News ***

MIDWAY ADVANCES CONSTRUCTION AND MINING BEGINS AT PAN GOLD PROJECT, NEVADA (Press release, 9/15/2014)

MIDWAY GOLD FILES TECHNICAL REPORT FOR UPDATED RESOURCE AT SPRING VALLEY PROJECT, NEVADA (Press release, 9/9/2014)

Latest Nevada Gas Prices (click this link)

My latest column in Kitco News:

Oil, Copper & Gold on a Slippery Slope (Kitco News, August 25, 2014)

My latest column in the Fall 2014 Edition of the Mining Quarterly:

C.C. Goodwin, the Early Mines of Eureka (Fall 2014 Edition: online pages 76-83; printed pages 70-77)

Paintings by Mariana Titus, The Three Anas & The Three Moon Anas, are presently at Lafitte Guest House & Gallery, New Orleans

Mariana's fine art prints are featured in Fine Art America: Mariana Titus

Friday's AM prices used for this morning's early analysis:

COMEX Gold price = $1,224.6/oz (December contract most active)
COMEX Silver = $18.440/oz (Dec)
COMEX Copper = $3.0995/lb (Dec)

NYMEX WTI crude = $92.20/bbl (Nov)
ICE Brent crude = $98.23/bbl (Nov)

Eureka Miner’s Gold Value Index© (GVI) = 87.71 (gold value relative to a basket of commodities that include oil, copper and silver; 100 is a high gold value)
Value Adjusted Gold Price© (VAGP) = $1,166.6/oz
COMEX - VAGP = +58.02/oz; gold is trading at a premium to key commodities

As of 10:00 AM PDT:

Barrick Gold (ABX) = $15.66 down 2.13%
Newmont Mining (NEM) = $24.08 down 1.67%
Midway Gold (MDW) = $0.9877 down 2.21%
General Moly (GMO) = $0.8710 down 5.33%
Timberline Resources (TLR) = $0.0781 up 6.26%

S&P 500 = 2,009.22 down 0.11%

Morning Miners!

Another one of those action packed Friday mornings when it is hard keep up with falling gold prices.

The ole Colonel started the early morning analysis at $1,224 per ounce. Comex gold punched in a new intraday low of $1,214.6 as I sent that report to Kitco News. My target price at that time was $1,220 for next week. Kitco Global Editor Debbie Carlson quickly wrote me back for a sanity check noting the $10 drop. I sheepishly revised my target to $1,210 - No fun being a bear in gold country!

As summarized in my input to the Kitco News Weekly Gold Survey (full analysis below):

This has been an exciting week for markets with new FOMC projections on interest rates, Scotland’s referendum vote to stay united and this morning’s frenzy over the Alibaba IPO – the S&P 500 reacted by setting a new intraday high in morning trading.

By contrast, commodities are marching to the dull beat of broad decline. Brent crude oil, silver, copper and corn touched multi-month lows on futures exchanges this week. Not surprisingly, gold followed the pack scoring a new low in its dollarized commodity value ($1,166.6 per ounce) when compared to an aggregate of Nymex oil, Comex copper and Comex silver (see discussion below).

The primary driver this for these declines has been a stronger U.S. dollar boosted by a rise in the median projection for the federal funds rate at the end of 2015. The U.S. on a path to tighten monetary policy while other central backs provide additional accommodation propels the dollar higher. This puts pressure on dollarized commodities and makes gold more expensive to buy in other countries...

My target for next week is $1,210 per ounce.

Is the new gold orange?

The slippery slope continues...

On August 25, I wrote a column on the dilemma gold and key commodities face:

Oil, Copper & Gold on a Slippery Slope (Kitco News, August 25, 2014)

I measure the "commodity value" of gold against a basket that includes Nymex oil, Comex copper and Comex silver as explained in this commentary and a similar piece in the Summer 2014 Mining Quarterly (p. 99-101 online edition). On August 14, gold carried a premium of $100 per ounce compared to this basket and it has slowly drifted down to $58. If the premium continues to decline, gold will follow commodities on a downhill slope in U.S. dollar price. Here's a chart from the Mining Quarterly column updated through this morning (click on the graph for a larger image):

Today's premium is the distance between the green and red arrows. As you can see both the price of gold (blue line) and its commodity value (red line) are still trending lower (red dashed lines) as the premium declines. This morning, the commodity value of gold scored a new low of $1,166.6 per ounce - Ouch!

Fall 2014 Mining Quarterly

Make sure you checkout the latest Elko Daily Free Press Mining Quarterly!

Here is the link to the online Fall 2014 Edition togther with past issues:

http://elkodaily.com/mining/special_sections/

The ole Colonel has a column on C.C. "Charlie" Goodwin, one of the early mining pioneers of the Eureka Mining District:

C.C. Goodwin, the Early Mines of Eureka (online pages 76-83; printed pages 70-77)

Kitco Gold Survey

Here is my input to the Weekly Kitco Gold Survey:

09/19/2014 (10:43 AM CDT, revised later in the morning)

Q. Where do you see gold’s price headed next week, up, down or unchanged?

A. Down. My target price is $1,210 per ounce.

Q. Why?

This has been an exciting week for markets with new FOMC projections on interest rates, Scotland’s referendum vote to stay united and this morning’s frenzy over the Alibaba IPO – the S&P 500 reacted by setting a new intraday high in morning trading.

By contrast, commodities are marching to the dull beat of broad decline. Brent crude oil, silver, copper and corn touched multi-month lows on futures exchanges this week. Not surprisingly, gold followed the pack scoring a new low in its dollarized commodity value ($1,166.6 per ounce) when compared to an aggregate of Nymex oil, Comex copper and Comex silver.

On August 14, gold carried a premium of $100 per ounce compared to this basket which has slowly drifted down to $58. If the premium continues to decline, gold will follow commodities on a downhill slope in U.S. dollar price. In the above chart (click on plot for larger image), price (blue line) is converging with its commodity value (red line) as both move lower within the wedge indicated by red dashed lines.

The primary driver this for these declines has been a stronger U.S. dollar boosted by a rise in the median projection for the federal funds rate at the end of 2015. The U.S. on a path to tighten monetary policy while other central backs provide additional accommodation propels the dollar higher. This puts pressure on dollarized commodities and makes gold more expensive to buy in other countries.

The shared pain in the commodity house is exemplified by increasing positive correlation of the yellow metal with oil and copper (1- and 3-month correlations are all positive and greater than 0.5).

My target for next week is $1,210 per ounce.

For $1,210 gold we can expect to see silver in a statistically bounded range* of $18.2-$18.4 per ounce. Silver is expected to have a neutral bias with respect to a range mean of $18.311 per ounce. Copper price is in a statistical range* of $2.95-$3.09 per ounce. Copper is expected to have a positive bias with respect to a range mean of $3.0222 per pound.

(* +/- 2-standard deviations, 1-month basis: prices that fall outside this range likely signal a market-changing event. Bias from mean infers expected market direction from a 1-month gold ratio average)

The S&P 500 is presently on its way to setting new records, up 1.7% from last Friday’s close. Gold lost 2.2% in value compared to the S&P. The relation between the two is illustrated by a plot of the gold-to-S&P 500 ratio, or AUSP (click on graph for larger image):

The ratio slid into a descending channel mid-November 2012 as money rotated away from gold assets into the U.S. stock market. This trend transitioned to a sideways channel July 5, 2013 (dashed blue lines, AUSP=0.7431). The AUSP then broke decisively below the lower boundary for a second leg of descent (dashed red lines). This channel was bullishly broken to the upside in late-January and rose above the lower boundary of the sideways channel (middle blue dashed line) However, the recent trend down in gold price has bearishly created a third leg of descent (dashed red lines in the bottom-right corner) below the lower boundary of a second sideways channel. This morning’s gold price represents a loss of 52.3% of value relative to the November peak (AUSP=1.2710).

For the week, the yellow metal lost only marginal value to oil and some to copper; oil gained fractionally on the red metal. The chart below is a week-over-week valuation matrix. The first row is the current commodity price in the given currency. For all other rows, read “1 unit of row A buys X units of column B”; for example, “1 ounce of gold buys 395.1 pounds of copper.” Percentages are deltas over one week.

As measured by the Eureka Miner’s Gold Value Index (GVI, Ref 1), the value of gold relative to global commodities copper and oil and companion metal silver is 87.71, below the key-100 level and below the 1-month moving average of 88.27. The 2012 high was 103.73 on Nov. 13. The commodity price of gold sets a new low today at $1,166.6 per ounce or $58.02 discount to actual gold price (i.e. gold is still trading at a premium to a basket of key commodities).

Cheers,

Colonel Possum

Photos by Mariana Titus

Please checkout bayoutales.com for books and book orders

Mariana's fine art prints are featured in Fine Art America: Mariana Titus

Paintings by Mariana Titus, The Three Anas, are presently at Lafitte Guest House & Gallery, New Orleans

Friday, September 12, 2014

Gold Tests $1,228; C.C. Goodwin, the Early Mines of Eureka

McCoy Hill, McCoy Ridge & Goodwin Canyon, Eureka, Nevada

*** BREAKING NEWS***

Since the early morning analysis below, Comex gold has slipped further to an intraday low of $1,228 per ounce - it may go lower before the close...

*** Local Mining News ***

MIDWAY GOLD FILES TECHNICAL REPORT FOR UPDATED RESOURCE AT SPRING VALLEY PROJECT, NEVADA (Press release, 9/9/2014)

Latest Nevada Gas Prices (click this link)

My latest column in Kitco News:

Oil, Copper & Gold on a Slippery Slope (Kitco News, August 25, 2014)

My latest column in the Fall 2014 Edition of the Mining Quarterly:

C.C. Goodwin, the Early Mines of Eureka (Fall 2014 Edition: online pages 76-83; printed pages 70-77)

Paintings by Mariana Titus, The Three Anas & The Three Moon Anas, are presently at Lafitte Guest House & Gallery, New Orleans

Mariana's fine art prints are featured in Fine Art America: Mariana Titus

Friday's AM prices used for this morning's early analysis:

COMEX Gold price = $1,235.0/oz (December contract most active)
COMEX Silver = $18.580/oz (Dec)
COMEX Copper = $3.0930/lb (Dec)

NYMEX WTI crude = $92.62/bbl (Oct)
ICE Brent crude = $101.52/bbl (Nov)

Eureka Miner’s Gold Value Index© (GVI) = 88.15 (gold value relative to a basket of commodities that include oil, copper and silver; 100 is a high gold value)
Value Adjusted Gold Price© (VAGP) = $1,170.7/oz
COMEX - VAGP = +64.29/oz; gold is trading at a premium to key commodities

As of 10:00 AM PDT:

Barrick Gold (ABX) = $16.65 down 1.25%
Newmont Mining (NEM) = $25.26 down 1.33%
Midway Gold (MDW) = $0.9121 up 2.48%
General Moly (GMO) = $0.8999 up 2.26%
Timberline Resources (TLR) = $0.0782 up 11.71%

S&P 500 = 1,986.94 down 0.53%

Morning Miners!

Make sure you checkout the latest Elko Daily Free Press Mining Quarterly!

Here is the link to the online Fall 2014 Edition togther with past issues:

http://elkodaily.com/mining/special_sections/

The ole Colonel has a column on C.C. "Charlie" Goodwin, one of the early mining pioneers of the Eureka Mining District:

C.C. Goodwin, the Early Mines of Eureka (online pages 76-83; printed pages 70-77)

It has been a terrible week for gold and copper, both down more than 2% from last Friday’s close in morning trading: presently, $1,235.0 per ounce and 3.0930 per pound respectively. To put this in perspective, the mean gold and copper price since the Lehman Brothers’ bankruptcy is $1,341 per ounce and $3.33 per pound. Although well below their means, the gold-to-copper ratio is surprisingly close to its Lehman mean: 399 versus an average valuation of 403 pounds per ounce.

This suggests that gold price is following key commodities down in a broad decline. The S&P Goldman Sachs Commodity Index just plumbed a new 52-week low today. Although there are many drivers, the impressive U.S. dollar rally against the euro, yen and pound sterling coupled with weakening China demand for raw materials are major factors.

My sense is that U.S. dollar strength will weaken next week. Scotland will likely vote no to separation lifting the pound, and the yen and euro should moderate from their recent declines. This will provide needed relief to gold and the metal complex. My target for next week is $1,250 per ounce.

The slippery slope continues...

On August 25, I wrote a column on the dilemma gold and key commodities face:

Oil, Copper & Gold on a Slippery Slope (Kitco News, August 25, 2014)

I measure the "commodity value" of gold against a basket that includes Nymex oil, Comex copper and Comex silver as explained in this commentary and a similar piece in the Summer 2014 Mining Quarterly (p. 99-101 online edition). On August 14, gold carried a premium of $100 per ounce compared to this basket and it has slowly drifted down to $65. If the premium continues to decline, gold will follow commodities on a downhill slope in U.S. dollar price. Here's a chart from the Mining Quarterly column updated through this morning (click on the graph for a larger image):

Today's premium is the distance between the green and red arrows. As you can see both the price of gold (blue line) and its commodity value (red line) are still trending lower (red dashed lines) as the premium declines. On Tursday, September 11, the commodity value of gold scored a new low of $1,168.6 per ounce - Ouch!

Kitco Gold Survey

Here is my input to the Weekly Kitco Gold Survey:

09/12/2014 (10:42 AM CDT)

Q. Where do you see gold’s price headed next week, up, down or unchanged?

A. Up. My target price is $1,250 per ounce.

Q. Why?

It has been a terrible week for gold and copper both down more than 2% from last Friday’s close in morning trading: presently, $1,235.0 per ounce and 3.0930 per pound respectively. To put this in perspective, the mean gold and copper price since the Lehman Brothers’ bankruptcy is $1,341 per ounce and $3.33 per pound. Although well below their means, the gold-to-copper ratio is surprisingly close to its Lehman mean: 399 versus an average valuation of 403 pounds per ounce.

For $1,250 gold we can expect to see silver in a statistically bounded range* of $18.7-$19.1 per ounce. Silver is expected to have a neutral bias with respect to a range mean of $18.898 per ounce. Copper price is in a statistical range* of $2.94-$3.21 per ounce. Copper is expected to have a neutral bias with respect to a range mean of $3.0778 per pound.

The S&P 500 is presently only 0.8% below last Friday’s close. Gold continues to be much less resilient giving up 1.8% in value compared to the S&P. The relation between the two is illustrated by a plot of the gold-to-S&P 500 ratio, or AUSP (click on the graph for larger image):

The ratio slid into a descending channel mid-November 2012 as money rotated away from gold assets into the U.S. stock market. This trend transitioned to a sideways channel July 5, 2013 (dashed blue lines, AUSP=0.7431). The AUSP then broke decisively below the lower boundary for a second leg of descent (dashed red lines). This channel was bullishly broken to the upside in late-January and rose above the lower boundary of the sideways channel (blue dashed line) However, the recent trend down in gold price has bearishly created a third leg of descent (dashed red lines in the bottom-right corner) below the lower boundary of a second sideways channel. This morning’s gold price represents a loss of 51.2% of value relative to the November peak (AUSP=1.2710).

For the week, the yellow metal lost significant value to oil and some to copper; oil gained 1.75% on the red metal. The chart below is a week-over-week valuation matrix. The first row is the current commodity price in the given currency. For all other rows, read “1 unit of row A buys X units of column B”; for example, “1 ounce of gold buys 399.3 pounds of copper.” Percentages are deltas over one week.

As measured by the Eureka Miner’s Gold Value Index (GVI, Ref 1), the value of gold relative to global commodities copper and oil and companion metal silver is 88.15, below the key-100 level and below the 1-month moving average of 88.90. The 2012 high was 103.73 on Nov. 13. The commodity price of gold is $1,170.7 per ounce or $64.29 discount to actual gold price (i.e. gold is still trading at a premium to a basket of key commodities).

Cheers,

Colonel Possum

Photos by Mariana Titus

Please checkout bayoutales.com for books and book orders

Mariana's fine art prints are featured in Fine Art America: Mariana Titus

Paintings by Mariana Titus, The Three Anas, are presently at Lafitte Guest House & Gallery, New Orleans