The Colonel's Friday Thoughts on Gold, Silver & Copper; Positive Jobs Report

A Tub of Memories

*** BREAKING NEWS *** COMEX gold reversed a downward slide and posted an intraday high of $1,714.9 per ounce at 10:50 AM ET. The Colonel remains cautious on gold and silver (see below).

Latest Nevada Fuel Prices (click this link)

NEW FORMAT for 2012

Morning Commentary
Daily Market Roundup
- Gold & Silver Report
- Copper & Molybdenum Report
- Oil Watch
- Debt Crisis Watch
- Stock Market Morning Update
- Eureka Miner's Million Dollar Grubstake Portfolio

My latest Kitco commentary: Silver & Copper 2012 - A Tale of Two Metals (03/05/2012)

My Latest International Business Times commentary: Silver to Gold, “Whither Thou Goest…” (02/27/2011)

This morning's...
COMEX Gold price = $1,683.0/oz (April contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 88.55 (gold value trending down)
Value Adjusted Gold Price© (VAGP) = $1,588.2/oz
COMEX - VAGP = $94.8/oz; gold is trading at a declining premium to key commodities; the gold-to-copper ratio is below its 3-month average (Cu bullish)


Morning Miners!

It is 5:44 AM. Have a cup of delicious Raine's Red label TGIF. Old Miner Woden probably won't speak to me next week but I've turned cautious on gold and silver prices for the near-term. Ruby T will be delighted the ole Colonel is optimistic for the red metal going forward. Today's monthly Employment Situation Report added 227,000 nonfarm jobs and upwardly revised January's number to 284,000. Headline unemployment stubbornly remains at 8.3%. All-in-all, another good jobs report.

Markets around the world are in rally mode and our Debt Crisis Index (DCI) pegs 74.7,a record low since its inception in late-July of last year (see below).

Have a great weekend and remember St.Patrick's Day is on a Saturday and is now only 8 days away. I'm Welsh-Irish-Norwegian...so THREE CHEERS!

The Colonel's Friday Thoughts on Gold, Silver & Copper

Here is my input to the Weekly Kitco Gold Survey:

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

A. Down, $1,650 per ounce target assuming no further deterioration of Persian Gulf tensions.

Q. Why?

A. The effects of the dramatic Feb. 29 sell-off of gold and silver still cast a shadow on both and the yellow metal could return to mid-$1,650 per ounce territory by next week. Although real negative rates and the possibility of escalating tensions in the Persian Gulf remain bullish for gold, the list of downward pressures grows. This morning’s positive U.S. jobs report diminishes the prospects for further quantitative easing, a stabilizing Europe with hard default avoided for Greece and the U.S. dollar trending stronger against both the euro and the yen are all near-term bearish for gold although the long-term bullish trend is still intact. Falling gold and rising copper prices are a bullish sign for the red metal which has recently demonstrated resilience compared to precious metals. A key metric to watch is the gold-to-copper ratio; compression below the 400 pound per ounce level would be notably bullish for the red metal. Silver’s high correlation with gold and increasing relative volatility do not bode well for the white metal.

For $1,650/oz gold we can expect to see oil (WTI) in a range of $99-$104/bbl; silver, $32-$33/oz; and copper, $3.7-$3.9/lb.

Background Notes:

1. My Gold Value Index© (GVI) equals 88.55 this morning down 19.5% from the Oct. 4 high of 109.97, and at levels of early August, 2011.
2. The GVI, which has been oscillating up and down about its average, is now trending lower which is bullish for key commodities.
3. The gold-to-copper ratio today is 442.5 pounds per ounce and below its 3-month moving average of 457.1 pounds per ounce. Remaining below this average is bullish for copper going forward. 3-month relative volatility is 1.5X gold; 1-month is 0.97X gold
4. The gold-to-silver ratio is near historic norms at 50.5; 3-month rolling correlation is +0.957, relative volatility is 2.01X gold and price sensitivity (beta) is 1.954

Daily Market Roundup

Mining Report

This morning's mining stocks...

Barrick (ABX) $45.89 down 0.35%
Newmont (NEM) $56.96 up 0.02%
McEwen Mining (MUX) 5.17 up 4.66% (formerly US Gold, UXG)
General Moly (Eureka Moly, LLC) (GMO) $3.46 up 4.85%
Thompson Creek (TC) $7.21 up 1.12%
Freeport-McMoRan (FCX) $39.83 up 0.84% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $n/a
Timberline Resources (TLR) $0.51 down 5.56%

The Steels  (a "tell" for General Moly & Thompson Creek):

ArcelorMittal (MT) $19.75 down 0.20% - global steel producer
POSCO (PKX) $89.36 up 0.07% - South Korean integrated steel producer

The Eureka Miner's Index© (EMI) was re-calibrated 2/8 to reflect current 200-day moving averages for benchmark miners.

The EMI is above-par at 191.10, up from last report's 168.03 and below the 1-month moving average of 223.90. The 1-month average is falling but still above the key 100-level.

The EMI gives us the market temperature for the factors that have the greatest impact on mining in Eureka County. The record 2010-2012 high for the EMI is 816.78 set 01/04/2011; the low was set 10/4/2011 at 22.88. An EMI of 100 is the boundary between hot and cold markets for the metals & miners.

Gold & Silver Report

This morning's...

COMEX gold is down $15.7/oz at $1,683.0/oz (April contract, most active)

COMEX silver is down $0.536/oz at $33.295/oz (May contract, most active)

The gold-to-silver ratio (Au:Ag) is 50.548 oz/oz

Silver 1-month CRS© is 2.06% (bullish level); CRS© weakly divergent, (Ag neutral)

The Eureka Miner’s Gold Value Index© (GVI) is below-par at 88.55, down from last report's 89.03 and below its 1-month average of 90.75. Gold value is now trending down after briefly trending up mid-month. The record high for 2010-2012 is 109.97 set on Oct. 4, 2011.

The Value Adjusted Gold Price© (VAGP) is $1,588.2/oz which is only $94.8/oz below the current COMEX gold price.

The GVI gauges the value of gold in relation to oil, copper and silver independent of currency. These three commodities were chosen for relative value comparison because 1) oil derivatives are a common cost element for all miners, 2) copper has proven to be a reliable proxy for global growth and 3) silver is a precious and industrial metal that now competes with gold for investment and as a hedge against fiat currencies.

The Value Adjusted Gold Price (VAGP) is a level that supports current oil, copper & oil prices based on historical commodity norms. If the daily COMEX price is less than the VAGP, then gold is undervalued; if above, overvalued.

Copper & Molybdenum Report

This morning's...

COMEX copper is up 0.0120/lb at $3.8035/lb (May contract, most active)

The gold-to-copper ratio is 442.49 lb/oz; ratios in excess of 400 lb/oz are considered "recession levels"; the ratio is below its 3-month moving average of 457.10 (Cu bullish trend emerging in Price Domain B)

Copper 1-month CRS© is 2.02% (bullish level); CRS© convergence with ratio compression (Cu bullish)

The latest molybdenum oxide spot and futures prices (courtesy of Thompson Creek Metals):

Metals Week Average:
US$14.40
As of March 12, 2012
(updated weekly)

Ryan's Notes Average:
US$14.45
As of March 6, 2012
(updated twice weekly)

European Molybdenum Oxide (Bloomberg average price, updated Wednesday & Friday):
US$14.35/lb

London metal Exchange (LME) molybdenum 3-month seller's contract:

US$14.52/lb (US$32,000/metric ton)

Daily Oil Watch

Latest Nevada Fuel Prices (click this link)

On February 1st, 2011, we identified North Sea Brent crude oil as a good barometer for the crises in the Middle East and North Africa (MENA). The next conflict could be in the Persian Gulf. Brent remains above $120/bbl maintaining a spread above the North American benchmark, Western Texas Intermediate or "Texas light sweet crude", traded on the NYMEX.

Here are the key front-month contracts this morning:

NYMEX light sweet crude $106.50
ICE North Sea Brent crude $124.92
Spread (ICE- NYMEX) = $18.42 (last report, $18.79)

Here are the June contracts* with a narrower spread:

NYMEX light sweet crude $107.45
ICE North Sea Brent crude $123.99
Spread (ICE- NYMEX) = $16.54 (last report, $16.55)

* NYMEX futures contracts have rolled forward, we now show April and June for a 2-month look-ahead

NYMEX WTI 1-month CRS© is 3.64% (neutral level); CRS© weak divergence (Oil neutral)

Prices are near highs for 2012, we have $120+ Brent and $105+ NYMEX in June favoring high oil prices this spring into summer. A front-month spread between Brent and WTI >$20/bbl is a trouble sign, OK for now.

Daily Debt Crisis Watch

July 26th we introduced the Debt Crisis Index (DCI). The DCI is computed in the mornings and at the market close Friday in much the same way we do the EMI and GVI indices. Today, the DCI has a new record low at 74.7 down from last report's 82.6. A level above 200 is time for serious concern. We are now well below that level. The highest level recorded since inception was 271.0 Aug. 9, 2011; the lowest level is 74.7 on Mar. 9, 2012

Global sovereign debt issues have been an overhang on markets for many, many months starting with the Dubai crisis in late November, 2009 and spreading to the euro-zone in 2010-2011 and continuing into 2012.

Stock Market Morning Update

The DOW is up 49.54 to 12,957.48; the S&P 500 is up 8.14 points at 1,374.05

The Eureka Miner's Grubstake Portfolio is up 1.15% at $1,521,205.19 (what's this?).

Cheers,

Colonel Possum

Headline photograph by Mariana Titus

Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market

Crow Moon - Red Metal Revival? Moly Stable, Miners Up

March 6 Diesel $4.37, Regular $3.99, E-Z Stop Eureka
Photo by Eric Pastorino

Latest Nevada Fuel Prices (click this link)

NEW FORMAT for 2012

Morning Commentary
Daily Market Roundup
- Gold & Silver Report
- Copper & Molybdenum Report
- Oil Watch
- Debt Crisis Watch
- Stock Market Morning Update
- Eureka Miner's Million Dollar Grubstake Portfolio

My latest Kitco commentary: Silver & Copper 2012 - A Tale of Two Metals (03/05/2012)

My Latest International Business Times commentary: Silver to Gold, “Whither Thou Goest…” (02/27/2011)

This morning's...
COMEX Gold price = $1,695.0/oz (April contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 89.03 (gold value trending down)
Value Adjusted Gold Price© (VAGP) = $1,590.0/oz
COMEX - VAGP = $104.1/oz; gold is trading at a declining premium to key commodities; the gold-to-copper ratio is not far below its 3-month average again (Cu cautious)


Þūnresdæg
Morning Miners!

It is 5:44 AM. Have a thunderous cup of Thor's Storm Chaser. It looks like our favorite Norseman has chased the big storms away for now. That certainly wasn't the situation several days ago as shown in the headline photo of the E-Z Stop sent in by Eric Pastorino. He reported Regular prices a thin flat washer below $4.00 per gallon at $3.99 on March 6. Today the Nevada average price is falling slightly to $3.812 per gallon compared to the national average of $3.717 per gallon. This morning NYMEX West Texas Intermediate is up a quarter at $ 106.39 per barrel; global benchmark Brent crude is $125.18. Looks like higher prices are with us for a while pardner. Let's see how some other of our favorite commodities are doing...

Crow Moon - Red Metal Revival? Moly Stable, Miners Up

It is a full Crow moon today amid the first wave of a fairly major solar flare (the first particles traveling 4 million miles per hour hit Eureka at 4 AM this morning and will continue until 8AM). That apparently was enough to lift 18 of 20 global markets, most mining stocks, gold, copper and silver into the green which is welcome relief for an otherwise rough market week. Oh, progress in the Greek debt restructuring process preceding the fateful March 20 date may have something to do with this morning's burst of optimism too.

The ole Colonel thinks we're at a critical inflection point for the metals & miners after an excellent January-February start. March has certainly been more sobering and I'd look to copper to understand where things head next. One interesting fact is that the London metal Exchange inventories are at 2 1/2-year lows while the Shanghai warehouses are showing only so-so demand. Here's a 30-day chart of the LME copper inventory that is showing no signs of bottoming at 283,575 metric tons:

If Europe can muddle along and the U.S. economy continues with better-than-expected growth, demand softness in China for the red metal is mitigated to some degree. That's a tall order since the dragon consumes 40% of the world's copper. These aren't bullish times for base metals but more periods of crashing prices as in 2011 could be avoided. This report intends to track copper like a bulldog in the coming weeks. As copper goes, so go the metals & miners, so go the broader markets in my world.

If we can stay above $3.62 per pound ($8,000 per metric ton), there's hope for this coming spring. This morning COMEX copper is trading up $2.8 cents at $3.7950 per pound. Here's how London Reuters saw the morning:

METALS-Copper rises on Greek debt deal hopes, weaker dollar (Silvia Antonioli, London reuters, Thu Mar 8, 2012 1:18pm GMT)

Euro-moly notched down 2% to $14.52 per pound putting it exactly at the LME 3-month seller contract. Western moly oxide is presently selling at $14.45-$14.70 per pound. Not great but stable and that's good enough for me (full reports below).

Looks like the miners, except for Newmont, are having a good Thursday morning...

Daily Market Roundup

Mining Report

This morning's mining stocks...

Barrick (ABX) $45.96 up 0.35%
Newmont (NEM) $56.26 down 0.74%
McEwen Mining (MUX) 4.88 up 2.09% (formerly US Gold, UXG)
General Moly (Eureka Moly, LLC) (GMO) $3.30 up 1.54%
Thompson Creek (TC) $7.02 up 1.59%
Freeport-McMoRan (FCX) $39.47 up 1.23% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $n/a
Timberline Resources (TLR) $0.54 down 1.82%

The Steels  (a "tell" for General Moly & Thompson Creek):

ArcelorMittal (MT) $19.62 up 2.83% - global steel producer
POSCO (PKX) $89.15 up 0.07% - South Korean integrated steel producer

The Eureka Miner's Index© (EMI) was re-calibrated 2/8 to reflect current 200-day moving averages for benchmark miners.

The EMI is above-par at 168.03, down from last report's 153.07 and below the 1-month moving average of 225.02. The 1-month average is falling but still above the key 100-level.

The EMI gives us the market temperature for the factors that have the greatest impact on mining in Eureka County. The record 2010-2012 high for the EMI is 816.78 set 01/04/2011; the low was set 10/4/2011 at 22.88. An EMI of 100 is the boundary between hot and cold markets for the metals & miners.

Gold & Silver Report

This morning's...

COMEX gold is up $11.1/oz at $1,695.0/oz (April contract, most active)

COMEX silver is up $0.145/oz at $33.730/oz (May contract, most active)

The gold-to-silver ratio (Au:Ag) is 50.252 oz/oz

Silver 1-month CRS© is 2.01% (bullish level); CRS© divergent, ratio compression in question again (Ag neutral)

The Eureka Miner’s Gold Value Index© (GVI) is below-par at 89.03, down from last report's 89.04 and below its 1-month average of 91.00. Gold value is now trending down after briefly trending up mid-month. The record high for 2010-2012 is 109.97 set on Oct. 4, 2011.

The Value Adjusted Gold Price© (VAGP) is $1,590.9/oz which is only $104.1/oz below the current COMEX gold price.

The GVI gauges the value of gold in relation to oil, copper and silver independent of currency. These three commodities were chosen for relative value comparison because 1) oil derivatives are a common cost element for all miners, 2) copper has proven to be a reliable proxy for global growth and 3) silver is a precious and industrial metal that now competes with gold for investment and as a hedge against fiat currencies.

The Value Adjusted Gold Price (VAGP) is a level that supports current oil, copper & oil prices based on historical commodity norms. If the daily COMEX price is less than the VAGP, then gold is undervalued; if above, overvalued.

Copper & Molybdenum Report

This morning's...

COMEX copper is up 0.0280/lb at $3.7950/lb (May contract, most active)

The gold-to-copper ratio is 446.64 lb/oz; ratios in excess of 400 lb/oz are considered "recession levels"; the ratio is below its 3-month moving average of 457.72 (Cu neutral in Price Domain B)

Copper 1-month CRS© is 2.02% (bullish level); CRS© convergence(Cu bullish)

The latest molybdenum oxide spot and futures prices (courtesy of Thompson Creek Metals):

Metals Week Average:
US$14.70
As of March 5, 2012
(updated weekly)

Ryan's Notes Average:
US$14.45
As of March 6, 2012
(updated twice weekly)

European Molybdenum Oxide (Bloomberg average price, updated Wednesday & Friday):
US$14.52/lb

London metal Exchange (LME) molybdenum 3-month seller's contract:

US$14.52/lb (US$32,000/metric ton)

Daily Oil Watch

Latest Nevada Fuel Prices (click this link)

On February 1st, 2011, we identified North Sea Brent crude oil as a good barometer for the crises in the Middle East and North Africa (MENA). The next conflict could be in the Persian Gulf. Brent remains above $120/bbl maintaining a spread above the North American benchmark, Western Texas Intermediate or "Texas light sweet crude", traded on the NYMEX.

Here are the key front-month contracts this morning:

NYMEX light sweet crude $106.39
ICE North Sea Brent crude $125.36
Spread (ICE- NYMEX) = $18.79 (last report, $17.06)

Here are the June contracts* with a narrower spread:

NYMEX light sweet crude $107.36
ICE North Sea Brent crude $123.91
Spread (ICE- NYMEX) = $16.55 (last report, $14.36)

* NYMEX futures contracts have rolled forward, we now show April and June for a 2-month look-ahead

NYMEX WTI 1-month CRS© is 3.64% (neutral level); CRS© weak divergence (Oil neutral)

Prices are near highs for 2012, we have $120+ Brent and $105+ NYMEX in June favoring high oil prices this spring into summer. A front-month spread between Brent and WTI >$20/bbl is a trouble sign, OK for now.

Daily Debt Crisis Watch

July 26th we introduced the Debt Crisis Index (DCI). The DCI is computed in the mornings and at the market close Friday in much the same way we do the EMI and GVI indices. Today, the DCI has a value of 82.6 down from last report's 87.9. A level above 200 is time for serious concern. We are now well below that level. The highest level recorded since inception was 271.0 Aug. 9, 2011; the lowest level is 74.8 on Mar. 2, 2012

Global sovereign debt issues have been an overhang on markets for many, many months starting with the Dubai crisis in late November, 2009 and spreading to the euro-zone in 2010-2011 and continuing into 2012.

Stock Market Morning Update

The DOW is up 35.23 to 12,872.56; the S&P 500 is up 6.01 points at 1,358.64

The Eureka Miner's Grubstake Portfolio is up 0.77% at $1,494,470.35 (what's this?).

Cheers,

Colonel Possum

Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market

SPECIAL REPORT: General Moly (GMO) - A Call from Good Neighbors

Morning Miners!

It is 6:52 AM. The ole Colonel is interrupting his planned two-day hiatus from the Eureka Miner to bring you this special report. We will return to our normal format tomorrow. Grab a cup of Joe and let's see who's on the phone...

General Moly (GMO) - A Call from from Good Neighbors

Yesterday afternoon I received a call from Zach Spencer of Eureka Moly LLC (our local subsidiary of General Moly). He wanted to set up a conference call with Chief Operations Officer Bob Pennington to give the Eureka Miner an update from the Eureka County Commissioner meeting held yesterday. They called me back about 3:00 PM following this press release which hit the wires at 1:32 PM:

General Moly Presents Good Neighbor Offer to Eureka Stakeholders (Press Release)

Mining Editor Adella Harding did an excellent follow-up piece in the Elko Daily Free Press:

General Moly offers $12 million settlement (ADELLA HARDING Mining Editor, Elko Daily Free Press, Tuesday, March 6, 2012 5:51 pm)

I encourage you to read the press release but essentially General Moly has presented the Eureka Commissioners with a $12 million global settlement offer to resolve the outstanding water rights appeal, "The Offer is comprised of $3 million immediately upon signing of an agreement and dismissal of all appeals before the Nevada District Court and $5 million contributed over time to the Diamond Valley Sustainability Trust. The funds would augment the existing $4 million Diamond Valley Sustainability Trust announced in August 2010, and bring the total commitment to $12 million."

Zach and Bob informed me that the timeline going forward is a second Commissioner's meeting planned for March 20 for public comment followed by a March 30 deadline for acceptance. If the offer is not accepted it's back to district court with Judge Papez April 3 and probably another 3-month "consideration cycle."

To accept the offer the Eureka Commissioners and all co-appellants must agree to sign on. From my view this appears to be a fair offer and the Monitoring Mitigation & Management Plan (the "3M Plan" that's currently under development) appears a reasonable process to close a loop around any unforeseen water depletion issues in the Diamond Valley.

The Eureka Miner respects the views of all miners, farmers and ranchers and their valuable contribution to the future of Eureka County. I hope this offer will provide an equitable path forward for all.

Chief Executive Officer Bruce Hansen concludes the press release saying, "2012 is expected to be a year full of significant milestones for this Company. We anticipate all our State and Federal permits to be issued in the second or third quarter of this year, anticipate closing over $800 million in financing shortly following the BLM's issuance of the ROD, and hope to be constructing our facility before the end of the year. We want to resolve these disputes over our water permits quickly and prepare ourselves, our team, and the Eureka Community for its exciting future. I feel this Offer is more than fair to all stakeholders involved in our project and hope this Offer can allow us to move on with our project."

On a lighter note, Bob said the ole Colonel could "train up" on their CAT 793 simulator so I'll be ready to rock and roll in a CAT 793 haul truck when the first ones arrive at Mt. Hope. Yee-ha!

The best of luck to all!

Cheers,

Colonel Possum

Silver & Copper 2012 - A Tale of Two Metals; Miners in Trouble?

Kitchen's Fence

Latest Nevada Fuel Prices (click this link)

NEW FORMAT for 2012

Morning Commentary
Daily Market Roundup
- Gold & Silver Report
- Copper & Molybdenum Report
- Oil Watch
- Debt Crisis Watch
- Stock Market Morning Update
- Eureka Miner's Million Dollar Grubstake Portfolio

My latest Kitco commentary: Silver & Copper 2012 - A Tale of Two Metals (03/05/2012)

My Latest International Business Times commentary: Silver to Gold, “Whither Thou Goest…” (02/27/2011)

This morning's...
COMEX Gold price = $1,708.2/oz (April contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 88.46 (gold value trending down)
Value Adjusted Gold Price© (VAGP) = $1,613.5/oz
COMEX - VAGP = $94.7.0/oz; gold is trading at a declining premium to key commodities; the gold-to-copper ratio is falling away from its 3-month average (Cu bullish)

Morning Miners!

It is 6:09 AM. Have a cup of Monday Ether, time to start that diesel up. The Report will be off the air Tuesday and Wednesday but will return bright and early Thursday. The big news this week will be the globally monitored U.S. unemployment report on Friday - hopefully, the markets won't explode or implode during my brief hiatus. A downgrade of China's GDP from 9.0% to 8.5% has whacked the metals and miners this morning...

Silver & Copper 2012 - A Tale of Two Metals

Kitco posted my latest thoughts on silver and copper this morning, Silver & Copper 2012 - A Tale of Two Metals. It discusses some of the aftermath from last Wednesday's horrific sell-off of gold and the potential consequences for silver and copper.

Central to this analysis is the stability of their gold-referenced ratios, gold-to-silver (GSR) and gold-to-copper (GCR). Both the white and red metal appear to be on the verge of breaking an improving stability trend from October, 2011 to the close last Friday as shown in this plot:

Monday's COMEX data doesn't materially alter this thesis.

If your day is too busy for much reading, the Colonel's punch line is:

Although both ratios are presently still “very stable” at the 2%-level, each is poised to break above their respective trend lines (gray and red-brown arrows) suggesting divergence may soon return. If it is gradual and compressive, copper may yet return to bull territory...On the other hand, an escalating conflict in the Persian Gulf could send gold and oil prices soaring and trigger divergent behavior of both the GSR and GCR to bearish levels.

And,

In October 2011 when then CRS© showed high divergence, silver price was 2.5-to-3.2 times more volatile than gold on a 1-month basis. By Friday’s close, silver relative volatility returned to the 2.0-level from a more modest 1.4 recorded at week earlier. By contrast copper volatility scores a low 1.3. Given the resilience of copper price and persistent low volatility, I’m placing a bullish bet on the working class red metal but the aristocrats may be in for further trouble as markets price in a brighter future.


Miners in Trouble?

With bellwether Freeport-McMoRan (FCX) falling precipitously ($40.72 down 3.12%, this morning) below all its major trend lines (200-day, 400-day and 600-day moving averages), it is not unreasonable to wonder if other mining stocks will soon be headed down the mineshaft too. Here is a plot of the Eureka Miner's Index© (EMI) at the close last Friday (a larger and more readable chart can be found at the bottom of this blog page):

The index includes copper benchmark Freeport-McMoran as well as benchmark miners Barrick (ABX) for gold and Thompson Creek (TC) for molybdenum. As can be seen from the above plot, miners have done a great job this year rising above the key 100-level. Unfortunately the EMI has fallen below its 1-month moving average for several days and the average is now taking a turn south on this morning's data (see below).

As long as the EMI stays above the dotted lower trend line, it is not time to panic - it is time to tread carefully and closely monitor the EMI for further degradation.

The same can be said for gold prices as COMEX gold dipped to $1,695.50 per ounce in the wee hours before recovering. COMEX gold is presently down $1.6 at $1,708.2 per ounce.

Daily Market Roundup

Mining Report

This morning's mining stocks...

Barrick (ABX) $47.06 down 0.76%
Newmont (NEM) $58.57 down 0.66%
McEwen Mining (MUX) 5.10 down 2.30% (formerly US Gold, UXG)
General Moly (Eureka Moly, LLC) (GMO) $3.45 up 1.47%
Thompson Creek (TC) $7.24 down 0.55%
Freeport-McMoRan (FCX) $40.72 down 3.12% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $15.07 up 0.07%
Timberline Resources (TLR) $0.53 unchanged

The Steels  (a "tell" for General Moly & Thompson Creek):

ArcelorMittal (MT) $20.48 down 2.24% - global steel producer
POSCO (PKX) $93.60 down 0.49% - South Korean integrated steel producer

The Eureka Miner's Index© (EMI) was re-calibrated 2/8 to reflect current 200-day moving averages for benchmark miners.

The EMI is above-par at 184.46, down from last report's 212.58 and below the 1-month moving average of 234.42. The 1-month average is safely above the key 100-level.

The EMI gives us the market temperature for the factors that have the greatest impact on mining in Eureka County. The record 2010-2012 high for the EMI is 816.78 set 01/04/2011; the low was set 10/4/2011 at 22.88. An EMI of 100 is the boundary between hot and cold markets for the metals & miners.

Gold & Silver Report

This morning's...

COMEX gold is down $1.6/oz at $1,708.2/oz (April contract, most active)

COMEX silver is up $0.185/oz at $34.170/oz (May contract, most active)

The gold-to-silver ratio (Au:Ag) is 49.991 oz/oz

Silver 1-month CRS© is 2.05% (bullish level); CRS© divergent, ratio compression in question again (Ag neutral)

The Eureka Miner’s Gold Value Index© (GVI) is below-par at 88.46, up from last report's 88.21 and below its 1-month average of 91.66. Gold value is now trending down after briefly trending up mid-month. The record high for 2010-2012 is 109.97 set on Oct. 4, 2011.

The Value Adjusted Gold Price© (VAGP) is $1,613.5/oz which is only $94.7.0/oz below the current COMEX gold price.

The GVI gauges the value of gold in relation to oil, copper and silver independent of currency. These three commodities were chosen for relative value comparison because 1) oil derivatives are a common cost element for all miners, 2) copper has proven to be a reliable proxy for global growth and 3) silver is a precious and industrial metal that now competes with gold for investment and as a hedge against fiat currencies.

The Value Adjusted Gold Price (VAGP) is a level that supports current oil, copper & oil prices based on historical commodity norms. If the daily COMEX price is less than the VAGP, then gold is undervalued; if above, overvalued.

Copper & Molybdenum Report

This morning's...

COMEX copper is down $0.0280/lb at $3.8750/lb (May contract, most active)

The gold-to-copper ratio is 440.83 lb/oz; ratios in excess of 400 lb/oz are considered "recession levels"; the ratio is below its 3-month moving average of 459.53 (Cu bullish in Price Domain B)

Copper 1-month CRS© is 2.05% (bullish level); CRS© weak convergence, ratio compression (Cu bullish)

The latest molybdenum oxide spot and futures prices (courtesy of Thompson Creek Metals):

Metals Week Average:
US$14.70
As of March 5, 2012
(updated weekly)

Ryan's Notes Average:
US$14.45
As of March 2, 2012
(updated twice weekly)

European Molybdenum Oxide (Bloomberg average price, updated Wednesday & Friday):
US$14.82/lb

London metal Exchange (LME) molybdenum 3-month seller's contract:

US$14.52/lb (US$32,000/metric ton)

Daily Oil Watch

Latest Nevada Fuel Prices (click this link)

On February 1st, 2011, we identified North Sea Brent crude oil as a good barometer for the crises in the Middle East and North Africa (MENA). The next conflict could be in the Persian Gulf. Brent remains above $120/bbl maintaining a spread above the North American benchmark, Western Texas Intermediate or "Texas light sweet crude", traded on the NYMEX.

Here are the key front-month contracts this morning:

NYMEX light sweet crude $107.15
ICE North Sea Brent crude $124.21
Spread (ICE- NYMEX) = $17.06 (last report, $16.77)

Here are the June contracts* with a narrower spread:

NYMEX light sweet crude $108.08
ICE North Sea Brent crude $122.44
Spread (ICE- NYMEX) = $14.36 (last report, $14.00)

* NYMEX futures contracts have rolled forward, we now show April and June for a 2-month look-ahead

NYMEX WTI 1-month CRS© is 3.83% (neutral level); CRS© divergence (Oil neutral)

Prices are near highs for 2012, we have $120+ Brent and $105+ NYMEX in June favoring high oil prices this spring into summer. A front-month spread between Brent and WTI >$20/bbl is a trouble sign, OK for now.

Daily Debt Crisis Watch

July 26th we introduced the Debt Crisis Index (DCI). The DCI is computed in the mornings and at the market close Friday in much the same way we do the EMI and GVI indices. Today, the DCI has a value of 81.9 up from last report's 74.8. A level above 200 is time for serious concern. We are now well below that level. The highest level recorded since inception was 271.0 Aug. 9, 2011; the lowest level is 74.8 on Mar. 2, 2012

Global sovereign debt issues have been an overhang on markets for many, many months starting with the Dubai crisis in late November, 2009 and spreading to the euro-zone in 2010-2011 and continuing into 2012.

Stock Market Morning Update

The DOW is down 47.34 to 12,930.23; the S&P 500 is down 6.77 points at 1,362.86

The Eureka Miner's Grubstake Portfolio is down 0.85% at $1,534,598.48 (what's this?).

Cheers,

Colonel Possum


Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market

The Colonel's Friday Thoughts on Gold, Silver & Copper; GMO Follow-up

Big Sky Bow Tie

Latest Nevada Fuel Prices (click this link)

NEW FORMAT for 2012

Morning Commentary
Daily Market Roundup
- Gold & Silver Report
- Copper & Molybdenum Report
- Oil Watch
- Debt Crisis Watch
- Stock Market Morning Update
- Eureka Miner's Million Dollar Grubstake Portfolio

My Latest International Business Times commentary: Silver to Gold, “Whither Thou Goest…” (02/27/2011)

My latest Kitco commentary: A Foreboding Alignment in the Copper-Gold Firmament (02/21/2012)

This morning's...
COMEX Gold price = $1,712.6/oz (April contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 87.44 (gold value trending down)
Value Adjusted Gold Price© (VAGP) = $1,636.6/oz
COMEX - VAGP = $76.0/oz; gold is trading at a declining premium to key commodities; the gold-to-copper ratio is falling away from its 3-month average (Cu bullish)


Morning Miners!

It is 7:56 AM and the ole Colonel just completed his weekly Kitco gold survey - some surveys are easier than others, given Wednesday's sell-off this one was a doozy. Let me pour you a welcome cup of Raine's delicious Red Label TGIF java.

One thing to note this morning is that the Report's Debt Crisis Index (DCI) is at its lowest level since its inception in late July, 2011 (see report below). That can't be all bad, pardner.

Have a great weekend and remember St.Patrick's Day is on a Saturday and only 15 days away, I'm Welsh-Irish-Norwegian...so...THREE CHEERS!

The Colonel's Friday Thoughts on Gold, Silver & Copper

Here is my input to the Weekly Kitco Gold Survey:

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

A. Up a bit, $1,730+ per ounce target assuming no major escalation of Persian Gulf tensions for the time being.

Q. Why?

A. Wednesday’s dramatic sell-off of gold and silver has changed the landscape. Although both U.S. dollar prices for both have recovered some, lowered expectations for further quantitative easing in the U.S. and additional LTROs in Europe plus better-than-expected recovery in the United States have put pressure on gold prices. With the U.S. dollar now showing strength against both the euro and yen, gold prices will likely only ascend at a modest pace.

The significant remaining driver for gold is escalation of tensions in the Persian Gulf which could spike both precious metal and oil prices materially above present levels. Gold is presently losing relative value relative to oil, copper and silver, albeit modestly. Copper has shown good relative strength throughout the week stepping back from bearish trends. A key metric to watch is the gold-to-copper ratio; compression below the 400 pound per ounce level would be notably bullish for the red metal.

For $1,730/oz gold we can expect to see oil (WTI) in a range of $105-$109/bbl; silver, $33-$36/oz; and copper, $3.7-$4.0/lb.

Background Notes:

1. My Gold Value Index© (GVI) equals 87.44 this morning down 20.5% from the Oct. 4 high of 109.97, down from last week (GVI =90.63, 2/24/2012) and at levels not since early August, 2011.

2. The GVI, which has been oscillating up and down about its average, is now trending lower which is bullish for key commodities.

3. The gold-to-copper ratio today is 436.1 pounds per ounce and below its 3-month moving average of 460.3 pounds per ounce. Remaining below this average is bullish for copper going forward

GMO Follow-up

I haven't yet received an anticipated input from a faithful follower of this report on the General Moly's quarterly and year-end report but Editor Adella harding posted a nice summary in the Elko daily Free Press last night:

General Moly posts $2.9 million loss (ADELLA HARDING Mining Editor, Elko Daily Free Press, Posted: Thursday, March 1, 2012 3:51 pm)

As long as the CAT 793s are ordered and the BLM does indeed issue a record of decision in the third quarter - the ole Colonel isn't too worried about nut'in.

But if...aw, nuts - it's a Friday, pardner!

Daily Market Roundup

Mining Report

This morning's mining stocks...

Barrick (ABX) $47.85 down 0.40%
Newmont (NEM) $59.17 down 0.84%
McEwen Mining (MUX) 5.34 down 2.20% (formerly US Gold, UXG)
General Moly (Eureka Moly, LLC) (GMO) $3.60 up 1.69%
Thompson Creek (TC) $7.34 up 0.69%
Freeport-McMoRan (FCX) $42.65 down 0.61% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $15.17 up 0.07%
Timberline Resources (TLR) $0.56 unchanged

The Steels  (a "tell" for General Moly & Thompson Creek):

ArcelorMittal (MT) $21.11 down 1.12% - global steel producer
POSCO (PKX) $95.18 up 2.72% - South Korean integrated steel producer

The Eureka Miner's Index© (EMI) was re-calibrated 2/8 to reflect current 200-day moving averages for benchmark miners.

The EMI is above-par at 220.30, up from last report's 209.22 and below the 1-month moving average of 235.40. The 1-month average is safely above the key 100-level.

The EMI gives us the market temperature for the factors that have the greatest impact on mining in Eureka County. The record 2010-2012 high for the EMI is 816.78 set 01/04/2011; the low was set 10/4/2011 at 22.88. An EMI of 100 is the boundary between hot and cold markets for the metals & miners.

Gold & Silver Report

This morning's...

COMEX gold is down $9.6/oz at $1,712.6/oz (April contract, most active)

COMEX silver is down $0.646/oz at $35.015/oz (May contract, most active)

The gold-to-silver ratio (Au:Ag) is 48.910 oz/oz

Silver 1-month CRS© is 2.04% (bullish level); CRS© weak convergence, ratio compression (Ag bullish)

The Eureka Miner’s Gold Value Index© (GVI) is below-par at 87.44, down from last report's 87.63 and below its 1-month average of 91.88. Gold value is now trending down after briefly trending up mid-month. The record high for 2010-2012 is 109.97 set on Oct. 4, 2011.

The Value Adjusted Gold Price© (VAGP) is $1,636.6/oz which is only $76.0/oz below the current COMEX gold price.

The GVI gauges the value of gold in relation to oil, copper and silver independent of currency. These three commodities were chosen for relative value comparison because 1) oil derivatives are a common cost element for all miners, 2) copper has proven to be a reliable proxy for global growth and 3) silver is a precious and industrial metal that now competes with gold for investment and as a hedge against fiat currencies.

The Value Adjusted Gold Price (VAGP) is a level that supports current oil, copper & oil prices based on historical commodity norms. If the daily COMEX price is less than the VAGP, then gold is undervalued; if above, overvalued.

Copper & Molybdenum Report

This morning's...

COMEX copper is down $0.0045/lb at $3.9270/lb (May contract, most active)

The gold-to-copper ratio is 436.11 lb/oz; ratios in excess of 400 lb/oz are considered "recession levels"; the ratio is now falling away quickly from its 3-month moving average of 460.27 (Cu bullish in Price Domain B)

Copper 1-month CRS© is 1.87% (bullish level); CRS© weak convergence, ratio compression (Cu bullish)

The latest molybdenum oxide spot and futures prices (courtesy of Thompson Creek Metals):

Metals Week Average:
US$14.70
As of March 5, 2012
(updated weekly)

Ryan's Notes Average:
US$14.70
As of February 28, 2012
(updated twice weekly)

European Molybdenum Oxide (Bloomberg average price, updated Wednesday & Friday):
US$14.82/lb

London metal Exchange (LME) molybdenum 3-month seller's contract:

US$14.74/lb (US$32,500/metric ton)

Daily Oil Watch

Latest Nevada Fuel Prices (click this link)

On February 1st, 2011, we identified North Sea Brent crude oil as a good barometer for the crises in the Middle East and North Africa (MENA). The next conflict could be in the Persian Gulf. Brent remains above $120/bbl maintaining a spread above the North American benchmark, Western Texas Intermediate or "Texas light sweet crude", traded on the NYMEX.

Here are the key front-month contracts this morning:

NYMEX light sweet crude $108.10
ICE North Sea Brent crude $124.87
Spread (ICE- NYMEX) = $16.77 (last report, $16.10)

Here are the June contracts* with a narrower spread:

NYMEX light sweet crude $108.94
ICE North Sea Brent crude $122.94
Spread (ICE- NYMEX) = $14.00(last report, $13.29)

* NYMEX futures contracts have rolled forward, we now show April and June for a 2-month look-ahead

NYMEX WTI 1-month CRS© is 3.19% (bullish level); CRS© weak divergence (Oil neutral)

Prices are near highs for 2012, we have $120+ Brent and $105+ NYMEX in June favoring high oil prices this spring into summer. A front-month spread between Brent and WTI >$20/bbl is a trouble sign, OK for now.

Daily Debt Crisis Watch

July 26th we introduced the Debt Crisis Index (DCI). The DCI is computed in the mornings and at the market close Friday in much the same way we do the EMI and GVI indices. Today, the DCI has a value of 74.8 down from last report's 80.3. A level above 200 is time for serious concern. We are now well below that level. The highest level recorded since inception was 271.0 Aug. 9, 2011; the lowest level is 74.8 on Mar. 2, 2012

Global sovereign debt issues have been an overhang on markets for many, many months starting with the Dubai crisis in late November, 2009 and spreading to the euro-zone in 2010-2011 and continuing into 2012.

Stock Market Morning Update

The DOW is down 18.77 to 12,961.53; the S&P 500 is down 3.03 points at 1,371.09

The Eureka Miner's Grubstake Portfolio is down 0.30% at $1,570,409.65 (what's this?).

Cheers,

Colonel Possum


Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market

What a Bad Day It Was; Better Day & Copper Bullish; GMO Reports

General Store, Eureka, Nevada

NEW FORMAT for 2012

Morning Commentary
Daily Market Roundup
- Gold & Silver Report
- Copper & Molybdenum Report
- Oil Watch
- Debt Crisis Watch
- Stock Market Morning Update
- Eureka Miner's Million Dollar Grubstake Portfolio

My Latest International Business Times commentary: Silver to Gold, “Whither Thou Goest…” (02/27/2011)

My latest Kitco commentary: A Foreboding Alignment in the Copper-Gold Firmament (02/21/2012)

Latest Nevada Fuel Prices (click this link)

This morning's...
COMEX Gold price = $1,714.3/oz (April contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 89.00 (gold value weakly trending down)
Value Adjusted Gold Price© (VAGP) = $1,634.6/oz
COMEX - VAGP = $79.6/oz; gold is trading at a declining premium to key commodities; the gold-to-copper ratio is falling away from its 3-month average (Cu bullish)


Þūnresdæg
Morning Miners!

It is 6:46 AM. Have a hot cup of Thor's famous Thunder Blunder. Our favorite Norseman's big blunder yesterday was missing all the market chaos; he loves calamity - pillage the village! Yesterday, it was pillage precious metal investors. Instead of joining in the terror, our semi-retired thunder god was up at Cashman's trying to convince the dealer to let him test drive a CAT 793. That would be calamity - fortunately he was shown the door instead.

What a Bad Day It Was

I started Thursday reading Dennis Gartman's daily, "The Gartman Letter." The Commodity King gets up even earlier than us folks in the break room, usually penning his eponymous market missives sometime past midnight eastern time to catch all the action in global markets well ahead of the U.S. open.

The King captures the terror of yesterday with the following quotes:

"A day few will forget; certainly we shall not" Gartman was sitting on a major gold/yen position

"Breath taking in its swiftness and violence" Gold and silver went down the mineshaft minutes after Fed Chairman Bernanke began his semiannual 2-day testimony to the House Financial Committee at 10:00 AM ET as reported yesterday. Gold dropped $90/oz, "...a true, unmitigated 2 x 4 to the head."

This report has been bullish on silver since Christmas and the opening Bernanke words fortunately triggered a sell order to protect profits. The iShares Silver Trust (SLV) lost a frightening 10% from a high at 9:56 AM ET to an intraday low at 11:28 AM ET.

So what caused all the chaos? The postmortem seems to be more about what the Chairman didn't say about the possibility of further quantitative easing, commonly referred to as QE III. In Europe, the consensus is that the second 530B euro Long Term Refinancing Operation (LTRO) was probably it, sufficient to firewall the banks at least in the near term and no more euro-style QE in the wings. The thought of monetary easing policies winding down caused panic selling in precious metals, notably gold and silver. The Wall Street Journal reported yesterday that:

At 10:48 a.m., a flurry of big sell orders came in. Almost 11,000 gold contracts worth $1.8 billion changed hands in about one minute, a large amount for such a short time frame. Gold ended the day down 4.3%, or $77.10 a troy ounce, the fourth-largest dollar loss in the metal's history, to $1,709.90. Silver tumbled 6.9%.
The declines triggered a halt in gold, silver and copper trading for 10 seconds. (JACOB BUNGE, MATT PHILLIPS and CAROLYN CUI, WSJ, 2/29/2012)

As Gartman said, "A day few will forget."

Better Day & Copper Bullish

After some of the smoke cleared this report picked up a few shares of SPDR Gold Trust (GLD) and Freeport-McMoRan (FCX) near their lows for the day. The Colonel's thoughts were that $1,700/oz was probably a pretty solid floor for gold price and I had heard from my colleague in Mumbai that he was buying gold. Debbie Carlson, my editor at Kitco News, also confirmed the floor and the extent of the end-of-the-month profit taking. Although down for the day copper showed considerable strength compared to the precious metals and I reversed my bearish stance on the red metal adding to an FCX position that I've been holding on to with dear life.

The ole Colonel plans to write a Kitco commentary this weekend on both silver and copper. This Reuter's report this morning appears to confirm copper's brighter prospects with a better-than-expected China PMI release this morning:

China Feb PMI rises as export orders bounce (Susan Thomas, Reuters London, 3/1/2012)

Currently this morning gold, silver and copper are all rebounding some after yesterday's carnage (see below reports). This report's Value Adjusted Gold Price© (VAGP) is $1,634.6/oz, only $79.6/oz below the current COMEX gold price. This is the first time this premium has fallen to double-digits since Aug. 4, 2011. The Eureka Miner’s Gold Value Index© (GVI) has also dropped below the 90-level for the second day (see below); the last time we were in the 80s was Aug. 5, 2011. A fall in gold premium and value is typically bullish for the metals & miners.

Please do your own research, the ole Colonel could be dead wrong about the future of precious and base metals. Reassuringly, Dennis Gartman bravely held on to his gold/yen position yesterday.

General Moly (GMO) Reports

General Moly (GMO) has just posted its 4Q and full year 2011 report. Quite honestly I've been too busy with the metals to read it yet. Fortunately, a faithful contributor and GMO investor has volunteered to editorialize on the data; I will plan to post it tomorrow:

General Moly Announces Fourth Quarter and Full Year 2011 Results (Press release, 3/1/2012)

Daily Market Roundup

Mining Report

This morning's mining stocks...

Barrick (ABX) $47.70 down 0.06%
Newmont (NEM) $59.66 up 0.39%
McEwen Mining (MUX) 5.47 up 4.59% (formerly US Gold, UXG)
General Moly (Eureka Moly, LLC) (GMO) $3.71 up 2.77%
Thompson Creek (TC) $7.16 down 1.65%
Freeport-McMoRan (FCX) $42.96 up 0.94% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $15.18 down 0.07%
Timberline Resources (TLR) $0.58 up 1.75%

The Steels  (a "tell" for General Moly & Thompson Creek):

ArcelorMittal (MT) $21.12 up 0.14% - global steel producer
POSCO (PKX) $92.99 up 0.53% - South Korean integrated steel producer

The Eureka Miner's Index© (EMI) was re-calibrated 2/8 to reflect current 200-day moving averages for benchmark miners.

The EMI is above-par at 209.22, down slightly from last report's 209.85 and below the 1-month moving average of 234.09. The 1-month average is safely above the key 100-level.

The EMI gives us the market temperature for the factors that have the greatest impact on mining in Eureka County. The record 2010-2012 high for the EMI is 816.78 set 01/04/2011; the low was set 10/4/2011 at 22.88. An EMI of 100 is the boundary between hot and cold markets for the metals & miners.

Gold & Silver Report

This morning's...

COMEX gold is up $3.0/oz at $1,714.3/oz (April contract, most active)

COMEX silver is up $0.303/oz at $34.945/oz (May contract, most active)

The gold-to-silver ratio (Au:Ag) is 49.057 oz/oz

Silver 1-month CRS© is 2.00% (bullish level); CRS© divergent (Ag neutral)

The Eureka Miner’s Gold Value Index© (GVI) is below-par at 87.63, down from last report's 89.00 and below its 1-month average of 92.12. Gold value is now strongly trending down after briefly trending up mid-month. The record high for 2010-2012 is 109.97 set on Oct. 4, 2011.

The Value Adjusted Gold Price© (VAGP) is $1,634.6/oz which is $79.6/oz below the current COMEX gold price.

The GVI gauges the value of gold in relation to oil, copper and silver independent of currency. These three commodities were chosen for relative value comparison because 1) oil derivatives are a common cost element for all miners, 2) copper has proven to be a reliable proxy for global growth and 3) silver is a precious and industrial metal that now competes with gold for investment and as a hedge against fiat currencies.

The Value Adjusted Gold Price (VAGP) is a level that supports current oil, copper & oil prices based on historical commodity norms. If the daily COMEX price is less than the VAGP, then gold is undervalued; if above, overvalued.

Copper & Molybdenum Report

This morning's...

COMEX copper is up $0.0560/lb at $3.9355/lb (May contract, most active)

The gold-to-copper ratio is 435.60 lb/oz; ratios in excess of 400 lb/oz are considered "recession levels"; the ratio is now falling away quickly from its 3-month moving average of 461.18 (Cu bullish in Price Domain B)

Copper 1-month CRS© is 1.87% (bullish level); CRS© weak convergence, ratio compression (Cu bullish)

The latest molybdenum oxide spot and futures prices (courtesy of Thompson Creek Metals):

Metals Week Average:
US$14.775
As of February 27, 2012
(updated weekly)

Ryan's Notes Average:
US$14.70
As of February 28, 2012
(updated twice weekly)

European Molybdenum Oxide (Bloomberg average price, updated Wednesday & Friday):
US$14.82/lb

London metal Exchange (LME) molybdenum 3-month seller's contract:

US$14.74/lb (US$32,500/metric ton)

Daily Oil Watch

Latest Nevada Fuel Prices (click this link)

On February 1st, 2011, we identified North Sea Brent crude oil as a good barometer for the crises in the Middle East and North Africa (MENA). The next conflict could be in the Persian Gulf. Brent remains above $120/bbl maintaining a spread above the North American benchmark, Western Texas Intermediate or "Texas light sweet crude", traded on the NYMEX.

Here are the key front-month contracts this morning:

NYMEX light sweet crude $107.61
ICE North Sea Brent crude $123.71
Spread (ICE- NYMEX) = $16.10 (last report, $16.25)

Here are the June contracts* with a narrower spread:

NYMEX light sweet crude $108.41
ICE North Sea Brent crude $121.75
Spread (ICE- NYMEX) = $13.29(last report, $13.57)

* NYMEX futures contracts have rolled forward, we now show April and June for a 2-month look-ahead

NYMEX WTI 1-month CRS© is 3.19% (bullish level); CRS© weak divergence (Oil neutral)

Prices are near highs for 2012, we have $120+ Brent and $105+ NYMEX in June favoring high oil prices this spring into summer. A front-month spread >$20/bbl is a trouble sign, OK for now.

Daily Debt Crisis Watch

July 26th we introduced the Debt Crisis Index (DCI). The DCI is computed in the mornings and at the market close Friday in much the same way we do the EMI and GVI indices. Today, the DCI has a value of 80.3 down from last report's 81.1. A level above 200 is time for serious concern. We are now well below that level.

Global sovereign debt issues have been an overhang on markets for many, many months starting with the Dubai crisis in late November, 2009 and spreading to the euro-zone in 2010-2011 and continuing into 2012.

Stock Market Morning Update

The DOW is up 31.86 to 12,983.93; the S&P 500 is up 3.93 points at 1,368.99

The Eureka Miner's Grubstake Portfolio is up 1.25% at $1,581,426.58 (what's this?).

Cheers,

Colonel Possum


Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market

Yo-Yo Gold Drops $70; General Moly Places Haul Truck Fleet Order

CAT 793s out for a spin

NEW FORMAT for 2012

Morning Commentary
Daily Market Roundup
- Gold & Silver Report
- Copper & Molybdenum Report
- Oil Watch
- Debt Crisis Watch
- Stock Market Morning Update
- Eureka Miner's Million Dollar Grubstake Portfolio

My Latest International Business Times commentary: Silver to Gold, “Whither Thou Goest…” (02/27/2011)

My latest Kitco commentary: A Foreboding Alignment in the Copper-Gold Firmament (02/21/2012)

Latest Nevada Fuel Prices (click this link)

This morning's...
COMEX Gold price = $1,736.1/oz (April contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 89.00 (gold value weakly trending down)
Value Adjusted Gold Price© (VAGP) = $1,629.9/oz
COMEX - VAGP = $106.2/oz; gold is trading at a premium to key commodities; the gold-to-copper ratio is falling away from its 3-month average (Cu bullish)


Wōdnesdæg
Morning Miners!

It is 7:31 AM. Happy Leap Day! Have a cup of CAT 793 Java, you might need two hands to pick up that big yellow cup. Old Miner Woden and I have been been up for a long time trying to digest all the news that is pushing gold around like a yo-yo.

The European Central Bank announced their second Long Term Refinancing Operation (LTRO or "lee-tro") in the wee hours. These are more 3-year loans to firewall the European banks from sovereign debt Armageddon. A few hours later the Commerce Department revised higher its estimate for U.S. GDP in the fourth quarter last year to 3.0%, from an initial estimate of 2.8%. At least all appears quiet in the Persian Gulf for the time being as oil prices continue to fall.

Our last news event started at 7:00 AM PT when Federal Reserve Chairman Ben Bernanke began his semiannual 2-day testimony to the House Financial Committee. This is on CNBC Business News while I'm typing this report. Whatever he is saying seems to have turned another rally in the broader markets to the downside and gold in the can. Before we try to analyze all this let's start with some good news...

General Moly Places Haul Truck Fleet Order with Caterpillar

General Moly (GMO) announced yesterday afternoon that they placed an order for "18 Caterpillar 793 Haul Trucks (250 tons of payload capacity each) through Caterpillar's Nevada-based dealer, Cashman Equipment Company. All 18 trucks will be delivered to and commissioned at the Mt. Hope site beginning in late 2013 and early 2014 to complete mine pre-operation development. The total value of the Caterpillar order, including support equipment, is anticipated to be approximately $75 million."

Here's a link to the entire press release:

General Moly Places Haul Truck Fleet Order with Caterpillar (Press release, 2/29/2012)

If you want to appreciate the size and power of the CAT 793 monster truck, checkout this YouTube video presumably filmed in Australia:

Monster Truck

Pretty awesome, where did you park your pickup?

Gold Yo-Yo

This morning was a terrific example of what headlines do to the price of gold. There are two parts to this commentary:

PART I - Written before Bernanke testimony, this is what the Colonel observed:

Two events and one nonevent this morning tell the gold story:

1. ECB LTRO near consensus (529.5B versus 500B euros) wiggled gold but price swings ended up fairly neutral:

5:30 AM high $1,789.4/oz
LTRO announcement
5:45 AM low 1,782.2/oz
then roughly $1,787/oz which is where it was earlier in the morning trading

2. Better-than-expected U.S. GDP revision for 4Q11

8:30 AM gold drops to $1,779.5
then comes back to $1,783.2/oz within $4/oz of where it was after LTRO news settled out.

3. Nonevent = Persian Gulf relatively calm today

I continue to believe the Persian Gulf situation is the greatest potential gold driver driver and it has quieted down some with WTI & Brent off their highs.

Conclusion: Europe news is fairly gold neutral (so far); U.S. doing better is slightly gold negative

With respect to key commodities:

Silver continues to strengthen relative to gold
Copper no longer appears to be on the brink of bearish correction
Gold:oil rolling correlation is continuing to strengthen on a 3-month basis (+0.46) supporting my Persian Gulf thesis.

PART II - Written after Bernanke begins his testimony...

Chairman Bernanke started talking at 7:00 AM and COMEX Gold DROPPED $67/oz by 7:50 AM to $1,720.20/oz. He's still talking and gold has come up up a bit to trade presently at $1,736.1/oz. Silver took a pretty good hit presently down $1.225/oz at $35.980/oz (the Colonel's stop limit on silver triggered minutes after Bernanke began speaking fortunately preserving recent white metal profits).

So what is Uncle Ben saying? Apparently some market participants believe his comments so far have diminished greatly another round of quantitative easing (i.e. additional QE is generally perceived to be bullish for gold and commodities). The other force is end-of-month profit-taking that may have started regardless of the Fed chairman’s remarks. Personally, I haven't heard anything too earth shattering coming from the television other than he thinks gas prices will settle back down and the employment picture is getting better than expected.

Go figure...yo-yo gold on Leap Day. Looks like the miners are getting hammered too (see below). By-the-by, my observations above remain materially unchanged:

Gold with respect to key commodities:

Silver continues to strengthen relative to gold
Copper no longer appears to be on the brink of bearish correction
Gold:oil rolling correlation is continuing to strengthen on a 3-month basis (+0.45 vs 0.46 reported above)

Stay tuned, pardner. Let's go fire up a 793...

Daily Market Roundup

Mining Report

This morning's mining stocks...

Barrick (ABX) $47.84 down 3.28%
Newmont (NEM) $59.66 down 3.77%
McEwen Mining (MUX) 5.42 down 4.75% (formerly US Gold, UXG)
General Moly (Eureka Moly, LLC) (GMO) $3.50 down 1.69%
Thompson Creek (TC) $7.18 down 2.45%
Freeport-McMoRan (FCX) $42.72 down 2.15% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $15.18 up 0.13%
Timberline Resources (TLR) $0.58 down 3.33%

The Steels  (a "tell" for General Moly & Thompson Creek):

ArcelorMittal (MT) $21.15 down 2.40% - global steel producer
POSCO (PKX) $92.30 up 0.05% - South Korean integrated steel producer

The Eureka Miner's Index© (EMI) was re-calibrated 2/8 to reflect current 200-day moving averages for benchmark miners.

The EMI is above-par at 209.85, down from last report's 226.61 and below the 1-month moving average of 232.41. The 1-month average is safely above the key 100-level.

The EMI gives us the market temperature for the factors that have the greatest impact on mining in Eureka County. The record 2010-2012 high for the EMI is 816.78 set 01/04/2011; the low was set 10/4/2011 at 22.88. An EMI of 100 is the boundary between hot and cold markets for the metals & miners.

Gold & Silver Report

This morning's...

COMEX gold is down $52.3/oz at $1,736.1/oz (April contract, most active)

COMEX silver is down $1.225/oz at $35.980/oz (May contract, most active)

The gold-to-silver ratio (Au:Ag) is 48.252 oz/oz

Silver 1-month CRS© is 1.83% (bullish level); CRS© divergent (bullish compression)

The Eureka Miner’s Gold Value Index© (GVI) is below-par at 89.00, down from last report's 90.37 and below its 1-month average of 92.38. Gold value is now weakly trending down after briefly trending up mid-month. The record high for 2010-2012 is 109.97 set on Oct. 4, 2011.

The Value Adjusted Gold Price© (VAGP) is $1,629.9/oz which is $106.2/oz below the current COMEX gold price.

The GVI gauges the value of gold in relation to oil, copper and silver independent of currency. These three commodities were chosen for relative value comparison because 1) oil derivatives are a common cost element for all miners, 2) copper has proven to be a reliable proxy for global growth and 3) silver is a precious and industrial metal that now competes with gold for investment and as a hedge against fiat currencies.

The Value Adjusted Gold Price (VAGP) is a level that supports current oil, copper & oil prices based on historical commodity norms. If the daily COMEX price is less than the VAGP, then gold is undervalued; if above, overvalued.

Copper & Molybdenum Report

This morning's...

COMEX copper is down $0.0145/lb at $3.9070/lb (May contract, most active)

The gold-to-copper ratio is 444.36 lb/oz; ratios in excess of 400 lb/oz are considered "recession levels"; the ratio is now falling away from its 3-month moving average of 462.16 (Cu bullish in Price Domain B)

Copper 1-month CRS© is 1.67% (bullish level); CRS© convergence (Cu bullish)

The latest molybdenum oxide spot and futures prices (courtesy of Thompson Creek Metals):

Metals Week Average:
US$14.775
As of February 27, 2012
(updated weekly)

Ryan's Notes Average:
US$14.70
As of February 28, 2012
(updated twice weekly)

European Molybdenum Oxide (Bloomberg average price, updated Wednesday & Friday):
US$14.82/lb

London metal Exchange (LME) molybdenum 3-month seller's contract:

US$14.82/lb (US$32,500/metric ton)

Daily Oil Watch

Latest Nevada Fuel Prices (click this link)

On February 1st, 2011, we identified North Sea Brent crude oil as a good barometer for the crises in the Middle East and North Africa (MENA). The next conflict could be in the Persian Gulf. Brent remains above $120/bbl maintaining a spread above the North American benchmark, Western Texas Intermediate or "Texas light sweet crude", traded on the NYMEX.

Here are the key front-month contracts this morning:

NYMEX light sweet crude $105.82
ICE North Sea Brent crude $122.07
Spread (ICE- NYMEX) = $16.25 (last report, $15.17)

Here are the June contracts* with a narrower spread:

NYMEX light sweet crude $106.71
ICE North Sea Brent crude $120.28
Spread (ICE- NYMEX) = $13.57(last report, $12.20)

* NYMEX futures contracts have rolled forward, we now show April and June for a 2-month look-ahead

NYMEX WTI 1-month CRS© is 3.19% (bullish level); CRS© weak divergence (Oil neutral)

Prices are near highs for 2012, we have $120+ Brent and $105+ NYMEX in June favoring high oil prices this spring into summer. A front-month spread >$20/bbl is a trouble sign, OK for now.

Daily Debt Crisis Watch

July 26th we introduced the Debt Crisis Index (DCI). The DCI is computed in the mornings and at the market close Friday in much the same way we do the EMI and GVI indices. Today, the DCI has a value of 81.1 up from last report's 79.1. A level above 200 is time for serious concern. We are now well below that level.

Global sovereign debt issues have been an overhang on markets for many, many months starting with the Dubai crisis in late November, 2009 and spreading to the euro-zone in 2010-2011 and continuing into 2012.

Stock Market Morning Update

The DOW is down 40.41 to 12,964.71; the S&P 500 is down 3.94 points at 1,368.24

The Eureka Miner's Grubstake Portfolio is down 3.20% at $1,563,666.35 (what's this?).

Cheers,

Colonel Possum


Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market