Wednesday, March 17, 2010
Commodities Wear The Green for Saint Patrick's Day
It is 6:02 AM, grab a green mug and let's toast the Irish! It looks like even commodities are wearing the green for Saint Patrick's Day. The Report will take the morning off tomorrow and be back online Friday.
I don't know if Ben Bernanke has any Irish in him but his comments yesterday sparked a rally in commodities and put a bit of clover on the metals & miners. The U.S. Federal Reserve will continue to hold benchmark rates near zero and renewed a promise to keep them exceptionally low for an "extended period." This report's theme for 2010 is that money will flow to commodities as long as interest rates and the "fear index" (as measured by the .VIX, what's this?) are low. We may be bumped around by sovereign debt issues and China worries but the commodity uptrend should remain intact lacking any major negative developments for either (or some new global bugaboo).
The broader markets just opened on the upside with the .VIX in the sixteens, far below our trip level for concern of 25. To put this in perspective, exactly two years ago Bear Sterns collapsed causing the .VIX to break 35. This set off a financial crisis that peaked with fears of a run on the banks that October and a .VIX nearly hitting 100. Today's "fear levels" are indeed modest by comparison.
Copper, our faithful canary in the global recovery mineshaft, should remain a good test for the low interest rate/fear hypothesis. This morning COMEX copper is near the $3.40/lb level recovering almost all of its losses for March. Mineweb carries a good article on the connection between copper and the Fed's statement this morning:
US Fed statement boosts copper prices (Mineweb, 3/17/2010)
So don't worry, be happy and let's share a pint of Guinness on Lá Fhéile Pádraig!
Enough rolling in the clover, it's time to walk the walk:
4-WD is OFF - the VIX or "fear index" is below 25, improving broader markets are expected; metals & miners have a smoother road with FCX comfortably above $74 (what is this?)
The YELLOW light is switched on our fuel gauge with oil above $80
An ORANGE light is ON for possible adverse regulation/legislation: Miner's claim fee, Miner taxation, Cortez Hills & mercury emissions
Otherwise, all lights are green on the Eureka Outlook Dashboard (upper right, what's this?)
NYMEX/COMEX: Oil is up $$0.77 in early trading to $82.47 (April contract, most active); Gold is up $1.7 to $1124.2 (April contract, most active); Silver is up $0.036 to $17.390 (May contract); Copper is up $$0.0343 to $3.3995 (May contract); Western Molybdenum Oxide sits at $16.25, the LME 3-month and 15-month contracts (seller) remain at $18.14
The DOW is down 29.02 points to 10715.00; the S&P 500 is up 4.58 to 1164.04. The miners are heading to the pub:
Barrick (ABX) $40.26 up 0.42%
Newmont (NEM) $51.34 unchanged
US Gold UXG) $2.89 unchanged
General Moly (Eureka Moly, LLC) (GMO) $3.39 down 0.59%
Thompson Creek (TC) $13.61 unchanged
Freeport-McMoRan (FCX) $82.48 up 0.35% (a bellwether mining stock spanning gold, copper & molybdenum)
The Steels are already there, (a "tell" for General Moly & Thompson Creek):
ArcelorMittal (MT) $43.84 up 0.57% - global steel producer
POSCO (PKX) $123.25 up 1.49% - South Korean integrated steel producer
The Eureka Miner's Grubstake Portfolio is is up 0.20% to $1,369,545.77 (what is this?).
Headline photograph by Mariana Titus