2010 - The Year of Gold & Currencies?

Morning Miners!

It is 5:25 AM and Mother Nature pulls back her gray cloud covers to bring us another day. Have a cup of Thor's java with the Colonel and checkout that smile of clear sky over the Diamond Mountains.

Will there be clear patch in the markets today? Maybe, NYMEX oil has a bounce in her step and our old friend copper is trying to gain some altitude over the $3/lb power line in her flight path. An early morning $3.11/lb clears the wires but not by much. The broader markets will be open soon and I'll bet we will be up today and down tomorrow for the long Memorial Day weekend. The Colonel will be at the High School Rodeo and happy to watch broncs go up and down instead of these infernal markets.

What's caused the latest change in sentiment? Same old actors - new scenes in the same old play. Here's yesterday's drama reported by Wall Street Journal story:

LONDON—China's denial of a story that it plans to avoid euro-zone assets has helped to trigger a rebound in the euro and other risky currencies in Europe...

The single currency had initially suffered late Wednesday in New York as a report in the Financial Times newspaper that China was discussing reducing exposure to the euro with senior bankers sent investors rushing for safe havens. (WSJ, 5/26/2010)

COMEX gold up $10 for the day to close at $1215 (August contract). Then this morning's news as we watch the markets open:

NEW YORK—U.S. stocks jumped Thursday as the market looked past slightly disappointing U.S. economic data to seize on signs that the euro zone's debt problems could be contained.

In the latest wave of volatile market swings tied to the oscillations of the euro, stocks jumped Thursday as news from China and Spain lifted sentiment and the euro reversed some of its recent losses. (WSJ, 5/27/2010)

COMEX gold down 5-bucks...this doesn't take a crystal ball, buckaroos. Here's a 3-month chart of gold (blue) and the euro (orange):


It's amazing to watch the eye of global financial storms slowly move over different waters. Last year China helped buffet the winds for metals & miners. Her voracious appetite for natural resources reflated commodities as the western developed world struggled to regain its footing from the Great Recession. Metals & miners rallied.

In late November, the storm center moved to the Sovereign Debt Sea with the emerging Dubai crisis. It rolled over Greece and entered the Gold & Currency Ocean as worries turned from the fiscal health of individual countries to the wisdom of central bank solutions and the potential adverse impact on their currencies; stronger gold, weaker currencies. Metals & miners pitched and rolled, volatility returned.

These are big waters, pardner, and we might be sailing in them for a long time. Looks like our boat is pitching up today with the steels, Freeport, Thompson Creek and General Moly all up more than 4%. Barrick, Newmont and US Gold are not up as much while gold tries to figure out which wave her currency partner is going to surf next. Watch for a down roll tomorrow then who cares? - it's rodeo time!

Enough sailing, let's walk the walk:

4-WD is ON - rough roads in the marketplace; The VIX or "fear index" has dropped to the low 30s, another improvement but still above our 25 level threshold; metals & miners are happier but remain on shaky timber with benchmark FCX still trading in the high 60s well below its 200-day average of $75 (our new warning level), 10-year Treasurys are safely below 4% preserving a low-interest rate environment

The GREEN light remains on for Commodity Reflation with copper trading just above $3/lb

The YELLOW light remains on for Stable Markets with the VIX slightly above the 30 level (what's this?)

The YELLOW light remains on for Investor Confidence with the possibility of a greater than 10% correction in the broader markets

The GREEN light remains turned on our Fuel Gauge with oil below $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 $1.46 in early trading to $72.97 (July contract, most active); Gold is down $4.5 to $1210.2 (August contract, most active); Silver is down $0.046 to $18.260 (July contract); Copper is up $0.0365 to $3.1170 (July contract)

Western Molybdenum Oxide is at $17.00; LME moly 3-month seller's contract is $17.24, LME cash seller is $17.14

The DOW is up 198.38 points to 10,172.83; the S&P 500 is up 24.23 to 1092.18. The miners are all happy:

Barrick (ABX) $42.59 up 1.87%
Newmont (NEM) $54.41 up 2.35%
US Gold (UXG) $4.04 up 2.02%
General Moly (Eureka Moly, LLC) (GMO) $3.56 up 4.40%
Thompson Creek (TC) $9.87 up 5.00%
Freeport-McMoRan (FCX) $66.70 up 4.67% (a bellwether mining stock spanning copper, gols & molybdenum)

The Steels are up, (a "tell" for General Moly & Thompson Creek):

ArcelorMittal (MT) $30.51 up 4.92% - global steel producer
POSCO (PKX) $96.50 up 5.35% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 3.12% to $1,341,908.63 (what's this?).

Cheers,

Colonel Possum

Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market

Headline and series photographs by Mariana Titus