Wednesday, November 4, 2009
Gold Soars & a $34 Billion Dollar Bet on America
It is 5:29 AM, grab a strong cup of joe and let's marvel a bit at the events of the last 24 hours. Gold is on a tear hitting a new record high of $1088.5 on the COMEX yesterday and nearly hitting $1096 on the London Spot Market this morning. The ole Colonel recently said $1080 was probably tops for 2009, I don't mind being dead wrong. The other big news was billionaire investor Warren Buffett's announcement that he plans to buy the rest of Burlington Northern Santa Fe that he doesn't already own. The deal amounts to $34 Billion in cash and an additional $10 Billion in new debt. The "Sage of Omaha" calls it an "all-in wager on the future of the United States." That deserves a Colonel Yee-ha!
The third noteworthy event was a strong dollar on a gold rally day. It looks like the greenback is retreating some this morning pending the Federal Reserve announcement at 11:15 Am (PST) today after their policy meeting. Folks are looking for any monetary tightening in the winds; Australia raising interest rates a second time sent the U.S. buck flying yesterday.
Strong gold, strong dollar and a big railroad story makes my day any day pardner. It seems the BNSF deal is also a play on coal remaining a big player in our future energy needs. Here is a link to an article on that thought:
Buffett's Burlington Bid A Bet On Coal's Continued Role (Dow Jones, 3/3/2009)
So what's up with gold? The recent rally started when it was discovered that India quietly bought 200 tons of gold from the International Monetary Fund (IMF) last month. The IMF plans to sell a total of 403.3 tons of gold this year to increase its resources for lending to low-income countries. It is thought that the India buy is a move away from the U.S. dollar and an effort to shore up their gold reserves. Both China and India hold a lot of greenbacks and have much lower gold reserves than is typical for Western nations.
"China may be quietly building its own reserves anyway through purchasing domestically mined gold - it is now the world's top producer. It may also make sense for other countries - mainly in the Far East and Middle East, where gold has always been an important element in wealth preservation among monied individuals, to follow suit - not only by buying from the IMF, but also building holdings by small and steady purchases in the open market. This may already be happening given the considerable support being seen for gold every time it dips back a little from its recently much higher levels." (MineWeb, 11/3/2009)
Here are links to two articles on the India purchase:
India dumps dollars for IMF gold - is China next in line? (MineWeb, 11/3/2009)
India buys 200 tonnes of IMF gold (London Telegraph, 11/3/2009)
Strange times indeed Buckaroos. Stay tuned. Looks like we have an up market today.
Enough talk, let's walk the walk:
4-WD is ON - the VIX or "fear index" is still above 25, off-road market conditions are expected to continue (what's this?)
Yellow light is ON our Fuel Gauge as oil bumps back up over $80 (although it just dropped a thin flat washer lower, it is still too close for my comfort!).
Yellow light is ON for possible adverse regulation/legislation (mercury emissions)
Otherwise, all lights are green on the Eureka Outlook Dashboard (upper right, what's this?)
Oil is up $0.28 in early trading to $79.88 (December contract); Gold is up $6.5 to $1091.4 (December contract, most active); Silver is up $0.280 to $17.460 (December contract); Copper is up $.0415 to $2.9975(December contract); Molybdenum is steady at $11.75.
The DOW is up 57.13 points to 9829.04; the S&P 500 is up 6.99 points to 1052.40. The miners are in La-La land:
Barrick (ABX) $39.68 up 1.30%
Newmont (NEM) $47.23 up 1.61%
General Moly (Eureka Moly, LLC) (GMO) $2.58 up 9.07%
Freeport McMoran (FCX) $78.78 up 2.60% (a bellwether mining stock spanning gold, copper & molybdenum)
Steel stocks are pouring metal, (a "tell" for General Moly):
Nucor (NUE) $39.34 up 0.77% - domestic steel manufacturing
ArcelorMittal (MT) $34.80 up 2.62% - global steel producer
POSCO (PKX) $107.56 up 2.81% - South Korean integrated steel producer
The Eureka Miner's Grubstake Portfolio is is up 2.28% to $1,217,750.74 (what is this?).
Headline Photograph by Mariana Titus