Thursday, March 4, 2010
Moly Breaks $18, Silver Headed for $20?
It is 6:11 AM and there is no lack of news on the wires. Grab a cup and let's sort through the headlines. Since sovereign debt issues have weighed on the metals and miners, it was encouraging that a Greek debt auction of 10-year notes went well. The government aimed to raise €5 billion from the offering but it was heavily oversubscribed attracting around €14.5 billion ($19.86 billion) in bids. Somebody loves them. If this auction had gone poorly we may have seen a sharp retreat in commodities.
Miss Moly is attracting new bids too after the molybdenum launch last week on the London Metal Exchange (LME). Western Moly Oxide gained another 75 cents yesterday to $18.25/lb with the 3-month and 15-month LME futures contracts both closing $18.82/lb. European Moly Oxide sits at $17.98/lb. The rise in moly prices has been good for General Moly (GMO) share price which jumped over 2.5% to $2.72 in early trading on an otherwise mixed day for miners. General Moly is expected to report Fiscal Year 2009 results tomorrow, 3/5. Stay tuned.
Although pulling back some today, gold has gained momentum this week. On Tuesday, I picked $1120/oz as a nominal price for this month (The Colonel's Outlook for March). Yesterday the COMEX closed at $1143.3/oz (April contract). There is an excellent interview with Brien Lundin of Jefferson Financial in Mineweb this morning on what may happen next for gold and perhaps as importantly, silver:
Gold still looking good but silver, even better (Mineweb, The Gold Report, 03/04/2010)
The Report has been signaling that silver appears cheap with respect to gold since last November (Why is Silver So Cheap?). Mr. Lunden argues that $1250 is a key level for gold, if it breaks that resistance silver may head for $20. Here is an excerpt from The Gold Report (TGR) interview:
TGR: Going back to what you said earlier about [how you] see gold up to $1,250 in the next six to eight weeks, if that's the case could silver have a run to, say, $20?
BL: Oh, absolutely, to $19 at least. The gold-silver ratio has gotten out of whack once again and silver's just due for a bounce. I may have seemed a bit pessimistic on gold. I am worried about it, but over the last couple of weeks it seems to me that gold has exhibited a real desire to take off. All that's really kept it back have been headlines here and there about tightening in China, etc. That's exacerbating the volatility in speculative, derivative gold -speculators going in and out of the futures markets. Overseas and worldwide outside the U.S., we've seen very strong physical demand and some of the commercials have begun rolling back their short positions. So from a technical standpoint, gold looks fairly positive in the short term.
How does this square with the ole Colonel's latest models?
For Gold = $1120 (The Colonel's nominal price for March)
The fair value of silver is $17.184 in a range of $15.944 to $18.423
For Gold = $1250 (Brien Lunden's key level)
The fair value of silver is $20.697 in a range of $19.458 to $21.937
Hmmm...looks like Mr. Lunden and I are on the same page. How about a bet for the Colonel's Beer Derby (lower right column of this blog)?
Silver will break $19 before Memorial Day
How's that for putting my money (or beer) where my mouth is?
Enough idle gambling, let's 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 above $74 (what is this?)
The YELLOW light has returned 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 down $0.63 in early trading to $80.24 (April contract, most active); Gold is down $6.9 to $1136.4 (April contract, most active); Silver is down $0.049 to $17.280 (May contract); Copper is down $$0.0430 to $3.3920 (May contract); Western Molybdenum Oxide is up to $18.25, LME Moly 3-month (seller) sits at $18.82
The DOW is up 40.43 points to 10437.19; the S&P 500 is up 3.46 1122.25. The miners are mixed:
Barrick (ABX) $40.10 down 0.11%
Newmont (NEM) $51.32 down 1.20%
US Gold UXG) $2.68 down 4.63%
General Moly (Eureka Moly, LLC) (GMO) $2.72 up 2.72%
Thompson Creek (TC) $14.25 down 0.35%
Freeport-McMoRan (FCX) $79.00 down 0.31% (a bellwether mining stock spanning gold, copper & molybdenum)
The Steels are up, (a "tell" for General Moly & Thompson Creek):
ArcelorMittal (MT) $41.14 up 1.07% - global steel producer
POSCO (PKX) $118.68 up 1.26% - South Korean integrated steel producer
The Eureka Miner's Grubstake Portfolio is is up 0.05% to $1,315,013.25 (what is this?).
Headline photograph by Mariana Titus