A Silver Lining for the Silver State?

Morning Miners!

It is 5:53 AM, nothing like starting a new week with new records for precious metals! Continued dollar weakness sent gold past $1130 on the London spot market this morning and lifted platinum and palladium to new 12-month highs. Last week, the Report noted that silver appeared fairly cheap compared to its precious metal cousins but that may change soon. It has participated in the rally but still lags gold by a margin inconsistent with historical behavior. There had been some buzz that the supply/demand picture for silver was not rosy and contributed to its recent lack luster performance. There is a good counterpoint to this argument in an article posted on MineWeb this morning:

Silver Prices to Hit New Highs in 2010 (MineWeb, 11/15/2009)

For reasons we'll explore in a moment, the author reports silver could see $25/oz next year. This morning silver spot popped to $18.25 which is terrific but still lags gold. The ole Colonel ran his most recent gold/silver model this morning and this is where silver price should trade based on the last 3-months of COMEX futures data:

For $1130/oz gold the fair value of silver is $20.081 in a range of $19.311 to $20.850


Hmm...that's something to think about buckaroos. The MineWeb article sees a positive outlook for industrial silver demand next year with improving economic conditions. One of the most intriguing areas is a rising popularity of silver as a "high-tech" metal. Chintan Parikh, a commodity analyst at the CPM Group, says:

"Another key driver for 2010 will be the advent of new market places for silver, including pent-up demand for silver-zinc batteries in ‘smart' automobiles and an array of portable electronic devices..." (MineWeb, 11/15/2009)

The Report readers may remember articles we did on lithium and vanadium as potentially key metals in the next generation for electric cars; let's add silver to our list. The great news is that all three metals are abundant in our own State (e.g, lithium carbonate from Kings Valley, Humboldt County and vanadium from Gibellini, Eureka County)

The Next Big Thing in Northern Nevada (The Eureka Miner's Market Report, 10/23/2009)

A Big Step into the Future for Eureka County (The Eureka Miner's Market Report, 9/28/2009)

It is important to remember these are long plays and the demand ramp up for lithium, vanadium and silver for electric car applications is some years away. It is always good to keep your eye on the future, pardner:

"...silver-zinc batteries are destined to generate major market share as they are said to be much safer, more environmentally-friendly and far more energy-efficient than lithium-ion batteries (which currently dominate the markets for smart cars and portable electronics)." (MineWeb, 11/15/2009)

The Report will look at advanced battery technologies in a followup piece, stay tuned.

By the by, POSCO, a major investor in our Mt. Hope project, hit new 52-week highs this morning. Looks like a good week for everyone.

Enough talk, let's walk the walk:

4-WD is OFF - the VIX or "fear index" is below 25, smoother road market conditions expected (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 up 1.98 in early trading to $78.33 (December contract); Gold is up $15.4 to $1132.1 (December contract, most active); Silver is up $0.820 to $18.200 (December contract); Copper is up $.1035 to $3.0760 (December contract); Molybdenum is steady at $12.00

The DOW is up 134.07 points to 10404.54; the S&P 500 is up 16.80 points to 1110.28. The miners are rockin':

Barrick (ABX) $43.85 up 2.24%
Newmont (NEM) $52.19 up 2.35%
General Moly (Eureka Moly, LLC) (GMO) $2.39 unchanged
Freeport McMoran (FCX) $83.96 up 2.93% (a bellwether mining stock spanning gold, copper & molybdenum)

Steel stocks are happy too, (a "tell" for General Moly):

Nucor (NUE) $41.79 up 2.35% - domestic steel manufacturing
ArcelorMittal (MT) $38.92 up 4.71% - global steel producer
POSCO (PKX) $122.24 up 3.80% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 2.85% to $1,293,043.16 (what is this?).

Cheers,

Colonel Possum

Headline Photograph by Mariana Titus