Friday, August 28, 2009
Should You Care What Harmesh Arora Says?
It is 6:06 AM and that Raine's TGIF coffee is extra strong today. It looks like we may be able leave this week on a happy note. John Wayne and the Cavalry are taking a set break from the long dusty valley of global recovery. A few privates dropped in for a cup earlier this morning and said no more filming until Monday. Copper is just several pennies away from $3; the ole Colonel set that as a threshold several days ago for better times ahead. Gold and silver are also up nicely today, maybe the movie will be canceled. Oh-oh molybdenum dropped to $17.15...maybe there's a few more scenes to go (Is the Cavalry in the Long Dusty Valley?).
That's the funny thing about living in a town with a commodity-sensitive economy; your future relies on a fickle market with all sorts of world-wide actors and directors, few heros and lots of ne're-do-wells. Boom or bust on a global scale and that's the key. What's happening in Brazil, Russia, India or China can affect you in Eureka much more now than it did just a few years ago. Here's today's example: Harmesh Arora, vice president of the Bombay Bullion Association Ltd., said India gold purchases may drop to 250 metric tons from 396 tons in 2008. The reason given is India's extreme drought and the present high price of gold. Should I care or is this just a small wiggle in the supply/demand picture of a metal with a zillion other price pressures?
I did a rough back-of-the-envelope calculation to figure out what makes gold news and what doesn't. In Arora's case his reduction equates to about 0.4 tons of negative demand per day for 2009. Of course it doesn't spread out that evenly but just humor me for a moment. The massive gold ETF, GLD, made news this week because investors bought 1.0 ton in a single day, that's positive demand. Early this month, the European Central Banks(ECB) decided to limit sales of gold to 2,000 tons over five years starting this September. Their top ten signatories hold about 11,000 tons of the yeller stuff and don't want to cause price swings in the markets by overselling. The new limit equates to about 1.1 tons per day on the supply-side.
OK, enough. What's my point? I think for ballpark numbers any supply or demand input around 1 ton/day gets a news story. Even though India is the largest consumer of gold for jewelry, Harmesh Aurora's estimate just makes press and isn't going to crash the gold market. If the European bankers can shed an average exceeding one ton-a-day and sleep at night, Arora's 0.4 tons isn't even a good haul back load buckaroos. Now if global investors dump a few tons overnight, I'll be knocking on your bunk door!
All that glitters is not cause for worry, let's walk the walk:
All lights are green on the Eureka Outlook Dashboard (upper right, what is this?)
Oil is up$0.51 in early trading to $73.00 (October contract); Gold is up $12.9 to $960.2 (December contract, most active); Silver is up $0.549 to $14.800 (September contract); Copper is up $0.1055 to $2.9775 (September contract); Molybdenum drops to $17.15.
The DOW is down 28.12 points to 9552.51; the S&P 500, down 0.12 points to 1030.86. The miners are happy:
Barrick (ABX) $35.13 up 1.59%
Newmont (NEM) $41.06 up 1.21%
General Moly (Eureka Moly, LLC) (GMO) $2.85 up 2.52%
Freeport McMoran (FCX) $65.72 up 2.27% (a bellwether mining stock spanning gold, copper & molybdenum)
Steel stocks are mixed, (a "tell" for General Moly):
Nucor (NUE) $45.65 up 1.76% - domestic steel manufacturing
ArcelorMittal (MT) $36.76 down 0.32% - global steel producer
POSCO (PKX) $94.61 down 1.22% - South Korean integrated steel producer
The Eureka Miner's Grubstake Portfolio is up 1.02% to $1,119,677.73 (what is this?).