"The history of Eureka lies in its future." - Lambert Molinelli, 1878


The author/editor of the Eureka Miner owns common shares of local mining stocks, General Moly (GMO) and Newmont Mining (NEM); together with benchmark miner Freeport-McMoRan (FCX). Please do your own research, markets can turn on you faster than a feral cat.

Wednesday, December 2, 2009

Silver Gets Its Giddy-Up Go!

Morning Miners!

It is 6:04 AM, have a cup and let's take a ride in the way-back machine. For us old timers that love trucks and the open road there is a special place in our hearts for Red Sovine's song "Giddy-Up Go" (1966). Red's song is spoken, rather than sung, by an old long-distance truck driver who rediscovers his long-lost son driving another truck on Route 66. I'll bet if you hear this one some rainy night on Highway 278 there will be more than water on the windshield to wipe away. Well pardner, I'm here to tell you with silver at $19.24 this morning, gold's poor cousin has found its own giddy-up go!

The Report has been puzzled lately about silver's lazy pace down the gold rally highway (Why is Silver So Cheap?). It looks like someone has finally put the hammer down. There is a Gold Report interview with financial adviser and market analyst Peter Grandich that offers a plausible explanation. Here is this morning's Mineweb link to the interview; the silver discussion appears near the end:

Silver's turn to shine (Mineweb, 12/2/2009)

"Silver has been overlooked, in part due to the onslaught of short positions by a select few major houses on the Comex. So far, that's suppressed silver from sharing in the major run-up we've seen in gold and platinum, but I think silver's turn to lead is near." (Peter Grandich)

Yesterday we said the fair value of silver was $18.98 in a range of 18.16 to $19.80 (A Barrick Surprise & The Colonel's December Predictions). In 24 hours, we've gone from an undervalued price to a trajectory headed for the upper bound. If gold continues to rally, the ole Colonel wouldn't be surprised to see silver with a twenty handle fairly soon. We can see this movement on my charts of COMEX silver versus gold (a larger, more readable version is included at the bottom of this blog page):

The large white arrow shows a 20-day average following gold in an undervalued state (the magenta line represents the fair value of silver compared to gold). The red arrow curving up is the most recent price movement which crosses the magenta line on a path to the upper bound (aqua line). Technically speaking, this is called giddy-up go buckaroos!

"Well, now the lines on the highway have got a much brighter glow,
As we go roaring down the road,
And we stare at that little sign that reads Giddy Up, Go."
(Giddy-up Go, Red Sovine)

Enough singing charts, let's walk the walk:

4-WD is OFF - the VIX or "fear index" remains below 25; smooth 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 down $0.53 in early trading to $77.84 (January contract, most active); Gold is up $9.1 to $1209.3 (February contract, most active); Silver is up $0.030 to $19.240(March contract); Copper is down $0.0020 to $3.2290 (March contract); Molybdenum is steady at $12.00

The DOW is up 1.51 points to 10473.09; the S&P 500 is up 1.75 points to 1110.61. The miners are up:

Barrick (ABX) $47.71 up 3.55%
Newmont (NEM) $56.20 up 0.97%
General Moly (Eureka Moly, LLC) (GMO) $2.32 up 1.75%
Freeport McMoran (FCX) $85.45 up 1.84% (a bellwether mining stock spanning gold, copper & molybdenum)

Steel are up, (a "tell" for General Moly):

Nucor (NUE) $44.16 up 2.01% - domestic steel manufacturing
ArcelorMittal (MT) $40.96 up 2.50% - global steel producer
POSCO (PKX) $126.58 up 1.54% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 1.33% to $1,330,282.74 (what is this?).


Colonel Possum

Headline photograph by Mariana Titus (Country Roads, HWY 278)

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