Friday, November 6, 2009
One-O-Point-Two...Ouch! Gold Breaks $1100
It is 6:08 AM, grab a strong cup of that good ole Raine's TGIF coffee, you may need it. The Colonel has been digesting the Commerce Department's monthly jobs report which just announced at 5:30 AM our time. Ouch. The new unemployment number is 10.2%, above expectations and a so-called "10% psychological level". Spot gold responded with a run up to $1098 and then broke $1100 a bit after the news.
The job loss for October was 190,000, also slightly higher than expected but the previous months were revised upward with 90,000 fewer jobs loss. What does all this gibberish mean? On the optimistic side it appears the trend line to positive growth in jobs has actually improved. You need a positive number to eventually reverse the unemployment number. The bubbly economists now think positive growth is no sooner than the spring of next year; gloom & doomers believe it may not occur until 2011. In either case it will take years to move from 10% plus to the 5-6% enjoyed during more prosperous times.
The Colonel watches the labor report announcement on CNBC Business News. Today's guest was David Malpass of Encima Global LLC, formerly chief economist at Bear Stearns. I like Malpass because he is a straight shooter and believes a strong dollar is central to maintaining our standard of living. This morning he called 10.2% an "ouch number" although acknowledged the gradual improvement in the job loss trend. He sees a widening gap between large companies that are now doing well (Caterpillar is a good example with strong overseas sales) and struggling small businesses facing tight credit. Healthy small companies are a major source of new jobs so we see the paradox of a rising stock market and dismal unemployment. Malpass pointed out that today's numbers will no doubt keep interest rates low, one of the few positives noted.
As the Report has stated in the past (Eureka is not Saginaw Michigan), Eureka is uniquely positioned in this economic turmoil. Lower interest rates will keep commodity prices up. Gold gets an added boost given its role both as an investor safe haven and a means to lower national dollar reserves (e.g., India, China, Middle East). Oil has backed off from $80 with this news so gold miners get a double-break; lower operating cost and higher gold price. For a Canadian company like Barrick there is a third positive; as the U.S. dollar falls against the loonie, labor costs in Nevada are reduced. Unless some adverse environmental regulations emerge, gold mining should remain one of the strong stabilizing influences for our County. Things are a lot rougher in places where manufacturing and services play a central role in their economies.
Here's some molybdenum lining to today's dark cloud: Moly price is up $0.25 to $12. This is the first increase in many weeks of falling price.
Enough talk, let's walk the walk:
4-WD is ON - the VIX or "fear index" is bobbing around 25, the Colonel still expects off-road market conditions ahead (what's this?)
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 down $2.11 in early trading to $77.51 (December contract); Gold is up $2.3 to $1091.6 (December contract, most active); Silver is down $0.055 to $17.355 (December contract); Copper is down $.0190 to $2.9380(December contract); Molybdenum popped up a little to $12.00 from $11.75.
The DOW is down 11.64 points to 9994.32; the S&P 500 is down 1.94 points to 1064.69. The miners are mixed:
Barrick (ABX) $41.69 up 2.41%
Newmont (NEM) $48.91 up 3.51%
General Moly (Eureka Moly, LLC) (GMO) $2.35 down 2.09%
Freeport McMoran (FCX) $78.81 down 0.87% (a bellwether mining stock spanning gold, copper & molybdenum)
Steel stocks are mixed, (a "tell" for General Moly):
Nucor (NUE) $39.38 down 1.01% - domestic steel manufacturing
ArcelorMittal (MT) $35.19 down 1.12% - global steel producer
POSCO (PKX) $111.89 up 2.19% - South Korean integrated steel producer
The Eureka Miner's Grubstake Portfolio is is up 0.24% to $1,227,375.75 (what is this?).
Headline Photograph by Mariana Titus, Ackerman Ranch