Wednesday, April 28, 2010
Euro Gold Hits New High - The Good, The Bad & The Ugly
*** BREAKING NEWS **** Thanks to a faithful reader's timely input, here's what's cooking in Utah: (AMM) Kennecott to boost moly output with $340m autoclave facility
It is 6:06 AM. Pour yourself you a cup of joe and let's do a little post-game on yesterday - the Good, the Bad and the Ugly. We got disgusted with the markets early in the morning and things only got worse as the day rolled on (Stiff Britches Day for Metals & Miners). The Goldman kids were publicly spanked in Washington and the euro hit a 12-month low against our dollar as doubts about the Greece bailout intensified and some eyes fell on Portugal as the next in line for a trip to the sovereign-debt woodshed. The market "fear index" or VIX (what's this?) exploded to 23.14 at the close, up more than 30% from Monday. A VIX level above 25 and the Colonel heads for a cave south of town. Yikes.
Is the world really coming to an end (again)? Probably not, the London Metal Exchange opened with metals coming off yesterday's lows, most commodities are up and we'll see in a minute how the broader markets fare. Not everything went bad Tuesday and there are actually some encouraging signs in the wreckage.
The big winner was gold hitting a new high in euros. The Eureka Miner's Grubstake Portfolio (what's this?) dumped more than $43,000 in value but of the twelve companies that (directly or indirectly) affect Eureka, two registered gains - Barrick (ABX) and Newmont (NEM).
It is no mystery that gold is a safe haven for investors on scary market days but it hasn't played this role in some time. For most of the latter part of last year and this year, gold has been associated with the so-called "risk-trade". This includes commodities like copper and miners like Freeport McMoRan (FCX) that benefit form from easy money when the world looks rosy and become unloved orphans when things go bad.
Yesterday morning gold dropped with copper but then rallied as the fear index blew out. The big gold miners ran with their glitter out the escape hatch and FCX plunged to just a buck and change above our danger level of $75. As a bellwether mining stock, this Report regards this level as a harbinger for bad times in the mining sector. Here's a quick list of some yesterday's winners and losers:
The U.S. dollar, "Dixie" (U.S. dollar index) 82.36 intraday high
Gold €890 a troy ounce, up from its old high of around €868 earlier in the week
COMEX Gold (June contract) $1173.4/oz intraday high
10-year U.S. Treasury, German Bund
Barrick (ABX) up 0.52%
Newmont (NEM) up 0.13%
The euro fell below the key $1.32 level, down more than 1.5% against the dollar and over 2.3% against the yen
The Canadian loonie lost nearly 1.5% against the dollar
The Australian aussie slipped more than 1.2%
S&P 500 1183.71 down 2.34%
DOW Jones (DJIA) 10991.99 down 1.90%
COMEX Oil (June contract) $81.79 intraday low
COMEX Copper (May contract) $3.3485/lb intraday low
COMEX Silver (May contract) $18.060/oz intraday low
Freeport-McMoran (FCX) down 5.29%
Thompson Creek (TC) down 5.07%
General Moly (GMO) down 6.63%
US Gold (UXG) down 0.31%
AcerlorMittal (MT) down 4.50%
POSCO (PKX) down 5.10%
Caterpillar (CAT) down 4.35%
OK Colonel, what's the takeaway? The loonie and aussie, closely tied to global growth, dropped sharply against our dollar. Just a few days the tables were turned as the loonie broke parity with the greenback. Gold re-emerged as a safe haven play together with U.S. Treasurys and the German Bund and our larger gold miners followed.
Just about everything else went down the mineshaft - the broader markets, commodities, metal miners, steel producers and industrial stocks with international exposure like Caterpillar. The Good? When times get tough, the U.S. remains the shelter for the world in currency and Treasurys and gold has not lost its luster. The Bad? Just about anything associated with the global growth story. The Ugly? It ain't over til' its over buckaroos. The sovereign debt story will be with us for a long, long time. Who wins in the end? I'm still an optimist; S&P 1252 here we come but it might be rough and tough as we trod back to the range gate of the bull pasture (S&P 1252 is 20% down from the October high of 2007, a level considered by some to be the beginning of the Great Recession Bear Market).
OK, the broader markets are open and all of our favorite miners are in the green. I guess global growth still has some legs, pardner.
Enough talk, let's walk the walk:
4-WD is ON - rough roads in the marketplace; the VIX or "fear index" is in 21 country too close to 25 for my comfort; metals & miners are feeling pressure with benchmark FCX still less than two-bucks above $75 (our new warning level), 10-year Treasurys are safely below 4% preserving a low-interest rate environment (what's this?)
The YELLOW light is switched back on our fuel gauge with oil above $80
A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, Miner's claim fee, Miner taxation, Cortez Hills, mercury emissions &
General Moly Mt. Hope Water Rights
Otherwise, all lights are green on the Eureka Outlook Dashboard (upper right, what's this?)
NYMEX/COMEX: Oil is up $0.35 in early trading to $82.79 (June contract, most active); Gold is up $2.2 to $1164.4 (June contract, most active); Silver is down $0.124 to $17.995 (May contract); Copper is down $0.0500 to $3.3630 (May contract); Western Molybdenum Oxide sits at $17.75, LME moly 3-month seller's contract remains at $18.14
The DOW is up 55.92 points to 11047.91; the S&P 500 is up 7.66 to 1191.37. The miners are up:
Barrick (ABX) $42.53 up 4.57%%
Newmont (NEM) $43.78 up 3.85%
US Gold (UXG) $3.18 unchanged
General Moly (Eureka Moly, LLC) (GMO) $3.45 up 2.07%
Thompson Creek (TC) $12.23 up 1.07%
Freeport-McMoRan (FCX) $76.98 up 1.08% (a bellwether mining stock spanning copper, gols & molybdenum)
The Steels are up, (a "tell" for General Moly & Thompson Creek):
ArcelorMittal (MT) $41.02 up 0.10% - global steel producer
POSCO (PKX) $115.97 up 0.64% - South Korean integrated steel producer
The Eureka Miner's Grubstake Portfolio is is up 1.20% to $1,412,149.36 (what's this?).
Write Colonel Possum at firstname.lastname@example.org for answers to your questions or to request e-mail updates on the market
Headline photograph by Mariana Titus