Monday, January 25, 2010
Dr. Copper, General Moly , US Gold & Barrick
It is 6:15 AM, the coffee is hot and it looks like we have a few colors coming at us from the west southwest on the NOAA weather radar. Copper is the color shining in the mineshaft this morning continuing its Friday rally after last week's 3-day trouncing in the broader markets.
The Colonel has added a Kitco Metals link to the Miner's Corner so you can easily access spot prices for the base metals. Here's how copper is doing in the early hours:
The beginning of a new year seems to always have at least two mining camps of thought about markets; "everything is going to hell" and "everything is going to be better than last year." Copper has been our steadfast canary in the global recovery mineshaft since last March and she seems to be proudly flying over the second camp. For a different and (humorous) opinion about the near term fate of our little bird, here is a link to "mercenary" geologist Mickey Fulp's contrarian view from the first camp:
A Contrarian's Comment on Commodities: The Curious Case of Copper (Kitco Metals, 1/22/2010)
Although Mr. Fulp is bullish on commodities in the long run, he is nervous about what may be coming at us shortly:
"Although I remain convinced we are in the early stages of a secular bull market for commodities, basic supply and demand fundamentals for copper are currently negative and the evidence for a pending correction in the price of copper is strong. In my opinion, a long overdue correction in the S&P 500 Index will result in a significant drop in the price of copper for the short term."
Copper is also his test for upcoming events changing the metaphor from "canary" to "Doctor":
"Copper is often referred to by commodities traders as 'Dr. Copper' because it is the only metal with a 'Ph.D. in Economics'. In other words, the supply, demand, and price of copper are accurate indicators of the state of the world’s industrial economy."
This is similar to the Dennis Gartman, the "Commodity King", version which attributes the 'Ph.D. in Economics' title to the collective behavior of the base metals. Whatever the case, Dr. Copper seems to be a happy camper today.
How about our local miners? In markets there is a saying, "find strength in weakness, find weakness in strength." Last Friday on a dismal market close, General Moly (GMO) and US Gold (UXG) finished strong, both up from the previous day. On the other hand, Barrick Gold (ABX) struggled at the open today as gold saw some welcome recovery. GMO and UXG are both up today. Let's see where these three stand with respect to their 200-day averages:
General Moly continues to hang in there above the average line; if GMO can stay north of $2.50 this quarter, I think we're in good shape. The gold miners, however, are suffering with UXG lingering below line and ABX just touching down. Since Barrick is so heavily bought and sold institutionally, it is interesting to note that the last times it has neared the 200-day line its share price has enjoyed a bounce back. Maybe today?... maybe not?
Enough running between mining camps, let's walk the walk:
4-WD is ON - the VIX or "fear index" remains above 25, rougher markets are expected (what's this?)
Yellow light is ON for possible adverse regulation/legislation: Cortez Hills & mercury emissions
Otherwise, all lights are green on the Eureka Outlook Dashboard (upper right, what's this?)
Oil is down $0.01 in early trading to $74.53 (March contract, most active); Gold is up $7.7 to $1097.4 (February contract, most active); Silver is up $0.138 to $17.070 (March contract); Copper is up $0.0430 to $3.3900 (March contract); Molybdenum is steady at $15.50
The DOW is up 23.35 points to 10196.33; the S&P 500 is up 5.03 points to 1096.79. The miners are mixed:
Barrick (ABX) $36.35 down 0.41%
Newmont (NEM) $44.50 up 0.16%
US Gold UXG) $2.38 up 0.42%
General Moly (Eureka Moly, LLC) (GMO) $2.74 up 4.58%
Thompson Creek (TC) $12.71 down 1.70%
Freeport McMoRan (FCX) $75.01 up 1.05% (a bellwether mining stock spanning gold, copper & molybdenum)
The Steels are up, (a "tell" for General Moly & Thompson Creek):
ArcelorMittal (MT) $42.61 up 2.45% - global steel producer
POSCO (PKX) $125.14 up 1.66% - South Korean integrated steel producer
The Eureka Miner's Grubstake Portfolio is is up 0.64% to $1,257,453.46 (what is this?).
Headline Photograph by Mariana Titus