Monday, April 27, 2009
Lower Propane Bills and More Gold in China
It is 6:00am and our new coffee pot will be brew-ready in a minute! We have two new pieces in the jigsaw puzzle of global recovery to talk about: lower propane bills in Eureka and more gold in China. Our jigsaw is far from complete, but more pieces appear on the table every day. The recent rally in stocks may be approaching an end as concerns about swine flu emerge. For mining interests, copper dropping below the 2-buck benchmark and a Financial Times reporting that ArcelorMittal (MT) is contemplating permanent cuts in steel output are troubling new developments.
Nuts! Let's talk about some good news, your propane bill should be easier on you than last year! The ole Colonel watches five commodities in considerable detail: gold, silver, copper, oil and natural gas (see my charts at the bottom of this blog). I noticed last week that natural gas was hitting 6 1/2-year lows and wondered if propane prices were doing the same. Propane is a derivative product of oil and gas production and indeed follows the latter pretty closely in wholesale price:
2008 PROPANE peak price $1.95/gal (6/08)
2008 PROPANE May contract $1.85/gal
2009 PROPANE May contract $0.64/gal
I filled my propane tank on Christmas Eve for $3/gal (retail, single fill) and one of my faithful readers reports his yearly contract price is $2.50 (July/August renewal). If wholesale prices have fallen 67% from their 2008 peak and 65% on the May contract, I'm going to assume things should get a lot cheaper soon. Propane distributors probably hedge their fuel contracts like airlines so it is difficult to predict actual savings for Eureka. Let the ole Colonel know what you experience.
Our second item today brings us back to China. The Report learned this weekend that China has considerably more gold reserves than originally thought:
"State-run news agency Xinhua quoted Hu Xiaolian, the head of China's foreign-exchange agency, as saying that China's gold reserves had risen by 454 metric tons since 2003 to 1,054 tons, the first public acknowledgment in years that its reserves had changed. Official Chinese data at the end of March had shown the country's gold reserves at 600 tons." (WSJ, 4/25/09)
This puts China on par with present investor holdings in the gold ETF, GLD (1,105 metric tons as of 4/22) and number seven in the gold reserve list (the United states is still number one at 8,133 tons). So now, the awaking dragon is not only the world's largest gold producing country but has also been putting it away on the sly. The good news is that China demand supports gold prices and may offset the potential volatility of large investor holdings. Phew, lot's to think about buckaroos!
Here's a daily reminder of the first quarter conference calls for the big mines in our area:
Barrick (ABX) Wednesday, 4/29 before market open
Newmont (NEM) Thursday, 4/30 10:00am (ET)
General Moly (GMO) not scheduled
Enough talk, let's walk the walk:
Oil dove $2.76 in early trading to $51.19(June contract). The dollar ("Dixie" or .DXY) is up .54% to 85.253. The commodity index (.CRB) is down a big 2.87% to 219.99.
Gold fell back $5.5 to $908.6 (June contract); Silver is up $.070 to $12.990; Copper is down $.710 to $1.9795; Molybdenum is still asleep below $8.
The DOW is down 17 points to 8059.32; the S&P 500, down 4 points to 862.06. Miners are looking so-so:
Barrick (ABX) $30.365 down 0.44%
Newmont (NEM) $41.56 up 0.27%
General Moly (GMO) $1.48 down 0.12%
Freeport McMoran (FCX) $39.78 down 1.15% (a bellwether mining stock spanning gold, copper & molybdenum)
Steel stocks are down today (a "tell" for General Moly):
Nucor (NUE) 39.54 down 1.00% - domestic steel manufacturing
ArcelorMittal (MT) 25.88 down 1.35% - global steel producer