Tuesday, September 8, 2009
Gold Breaks $1007, Attack of the Ninja Miners (& EPA)
It is 5:39 AM, grab a cup and welcome back. I hope you had a relaxing Labor Day because there is a pile of stuff in our in-basket. To start a long haul with new tires, we've got a precious metal rally buckaroos! By mid morning London time gold broke $1007, silver danced with $16.80 and platinum leapt to $1,285. That deserves a Colonel Yee-ha! The question for the morning is whether gold can hold above the elusive $1000 mark. We'll close on that thought in a moment.
Let's do something fun to get back in shape. A faithful reader sent a link to a time lapse drive through Austin on YouTube. This will take your breath away and it's set to music to get your feet a'tappin':
Austin Nevada Timelapse Drive
By the by, if you hear this music coming out of your supervisor's office you don't need to worry about that lousy Friday report you cobbled together to get out of the office early.
For some entertaining reading on your break check out the "Ninja Miners" courtesy of Mineweb and NPR:
A 21st-century gold rush is taking place in Mongolia (Mineweb: NPR, 9/8/2009)
The Report has covered Mongolia before (Dondog's Find in Oyo Tolgoi) and it is clearly the new Wild West (Wild East?) for gold miners. There is a short video and 11 photographs of the most basic gold mining you can imagine. Former goat herders are tearing at the landscape in ways that remind me of our own gold rush days in early California. There is a picture of miners playing pool in front of their yurts that proves miners are a crazy lot no matter where you find them on our globe!
On a more serious note, the Las Vegas Sun carried an article on mercury emissions last week:
Feds consider taking lead on mercury emissions (Las Vegas Sun, 9/03/2009)
This is a story that has been around for a long time but the chilling new turn is a focus on Nevada gold mines by a re-energized Environmental Protection Agency (EPA). The EPA is moving forward with the nation’s first-ever regulation of mercury emissions from gold mines and the agency’s top administrator vows stricter monitoring of the toxin — which continues to accumulate in streams, air and fish. It is feared that the new Federal approach will be at odds with our State's own efforts to control mercury emissions. An EPA on steroids could have a serious impact on the mining future of Eureka County. The Colonel will keep his eyes open on this one.
Nuts, just when we were having fun. Let's close on a positive. We've crossed $1000 on gold before only to see it fall down the mineshaft faster than it came up in the elevator. What might be different this time? Here is a brief summary:
1) Dollar strength - The US dollar is seen by many as weak with unemployment continuing to increase and serious concerns being expressed over the economic path taken by the administration. The ole Colonel has hedged his gold position by buying the dollar (i.e., Exchange Traded Fund UUP) which takes the opposite side of this trade. I agree the dollar should continue to weaken next year but believe a dollar rally is in the cards if there is a market dipsy-doodle-down this Fall. In that event we might see the dollar and gold rise together.
3) Supply-side - global production continues to fall
4) China factor - Chinese domestic gold holdings are increasing together with a Chinese government that continues to boost its own gold holdings to hedge their massive US dollar reserves.
5) Investment safe-haven - If buying in the U.S. and Europe continues this time gold may hold its higher level and $1,000 could be the platform for further growth in price.
There are of course downsides such as reduced jewelry buying in India due to the economic impact of drought and the high price of gold. Jewelry buying tends to be seasonal (now is the beginning of peak India demand) and the expected decrease is dwarfed by the safe-haven investment demand seen so far this year.
Looks pretty honky dory for sustaining gold price buckaroos. Let's walk the walk:
CAUTION: 4-WD ON, Off-Road Market Conditions Ahead
Otherwise, all lights are green on the Eureka Outlook Dashboard (upper right, what's this?)
Oil is up $2.11 in early trading to $70.13 (October contract); Gold is up $6.8 to $1003.5 (8:26 AM update, December contract, most active); Silver is up $0.445 to $16.730 (December contract); Copper is up $0.1030 to $2.9730 (December contract); Molybdenum dropped to the magic number $16.50 (what's this?). Further drops from this level will trigger a yellow light on the Dashboard.
The DOW is up 54,56 points to 9495.83; the S&P 500, up 8.25 points to 1024.65. The miners are rocking:
Barrick (ABX) $41.35 up 3.27%
Newmont (NEM) $47.39 up 2.51%
General Moly (Eureka Moly, LLC) (GMO) $2.86 up 1.78%
Freeport McMoran (FCX) $68.57 up 3.89% (a bellwether mining stock spanning gold, copper & molybdenum)
Steel stocks are happy-pappy too, (a "tell" for General Moly):
Nucor (NUE) $44.96 up 1.79% - domestic steel manufacturing
ArcelorMittal (MT) $37.23 up 4.02% - global steel producer
POSCO (PKX) $93.75 up 0.39% - South Korean integrated steel producer
The Eureka Miner's Grubstake Portfolio is up a big 2.49% to $1,167,598.68(what is this?).
Headline Photograph by Mariana Titus: Pete Damele and Horse, Ackerman Ranch