Thursday, August 6, 2009
Jobs, Gold, Moly and Mnogovershinnoye
It is 5:44 AM and Becky Quick of CNBC just left the break room. She grabbed a cup and left off the initial job claims report. Gold bounced in London and the ole Colonel just found Ruby Hill's sister in Mnogovershinnoye, Russia. If I can digest all this news and put it in a few words before your first cup, The Report has accomplished its mission. Let's start with jobs. Once a month the private-sector and government release employment reports. The playbill is the ADP report yesterday, new claims for state jobless benefits today and the unemployment report tomorrow. Like a rock concert; the first two are warm up bands, the unemployment report is the BIG headliner. All three are important in understanding where we are in the recession.
The private-sector ADP report based on payrolls showed private employers cut 371,000 jobs during the month of July. This is not great but better than the 473,000 jobs lost in the previous month. It's also the best number by ADP since the Lehman bankruptcy disrupted the economy in the second half of 2008.
CNBC reported that the number of workers filing new claims for state jobless benefits fell 38,000 to 550,000 last week, providing another glimmer of hope that the economy may be on the road to recovery. If tomorrow's numbers are "less worse" too, some talking heads are declaring the recession may already be behind us. How is this possible? The government Einsteins that figured out that the recession began in December 2007 will be the ones to have the final say. Their estimate is months away even if turns out that June 2009 marked the end. I'm sure glad none of these people work for the fire department. The truth is that lots of folks are still getting the axe and most of us won't feel a lot better until there are signs of job growth.
In the meantime gold and silver continue to rally and that is great news! I checked my numbers last night to find that oil, copper and gold have the highest positive correlation for the entire year. Correlation gives us a sense for how the price of different things move in relation to each other. For example the dollar often has a negative correlation relative to gold. If one goes up the other goes down. A tight positive correlation implies that prices are all moving together up, up and away. Dr. Doom predicts a reversal in this trend this year and then a second move up in 2010 (Moly Hits Magic Number, Dr. Doom Speaks to Miners). Stay tuned...oops, spot gold just slipped a bit.
Molybdenum seems to be riding the same train with oil, copper and gold. It sits at a new summer high of $18.25. Good Golly Miss Moly!
To close, I'd like to propose a "sister" mine in Russia for our own Ruby Hill. Although Highland Gold is a Russian operation, Barrick Gold is a not an insignificant shareholder (as the Canadians might say in a double-negative way). Highland's Mnogovershinnoye mine located in the aevsk area of the Khabarovsk Territory in the far-east of the Russian Federation has produced about 900,000 ounces of gold so far. This puts it behind Ruby's recent million mark but in the same league. The ole Colonel just loves the name; if you can say "Mnogovershinnoye", I'll buy you a beer. Here's another Russian word that's a bit easier to say. If you asked me today how things were going, I'd say:
Отлично! - (pronounced "Otlichno" for EXCELLENT!)
Oh, who's the woman in the funny hat? Mine security, of course!
Enough sisterhood, let's walk the walk:
Oil is down $1.73 to $70.24 in early trading (September contract); Gold is up $1.3 to $967.6 (December contract, most active); Silver is up $0.085 to $14.845 (September contract); Copper is up 0.0715 to $2.7405 (September contract); Molybdenum rests on a perch at $18.25.
The DOW is down 35.52 points to 9245.45; the S&P 500, down 5.94 points to 996.78. The miners are down today:
Barrick (ABX) $35.83 down 0.56%
Newmont (NEM) $41.34 down 1.36%
General Moly (Eureka Moly, LLC) (GMO) $2.78 down 1.77%
Freeport McMoran (FCX) $63.82 up 0.99% (a bellwether mining stock spanning gold, copper & molybdenum)
Steel stocks are mixed today, (a "tell" for General Moly):
Nucor (NUE) $48.24 up 0.56% - domestic steel manufacturing
ArcelorMittal (MT) $37.34 down 2.37% - global steel producer
POSCO (PKX) $102.59 up 1.69%- South Korean integrated steel producer
The Eureka Miner's Grubstake Portfolio is down 0.54% to $1,130,681.68