"The history of Eureka lies in its future." - Lambert Molinelli, 1878


The author/editor of the Eureka Miner owns common shares of local mining stocks, General Moly (GMO) and Newmont Mining (NEM); together with benchmark miner Freeport-McMoRan (FCX). Please do your own research, markets can turn on you faster than a feral cat.

Wednesday, May 12, 2010

Gold Breaks $1245 - General Moly, Barrick & US Gold Rock

Morning Miners!

It is 5:57 AM. Have a cup of java with the ole Colonel and let's checkout the camel's humps. Last hump day COMEX gold was trading around $1160/oz when I wrote my morning article; today it broke $1245/oz in early trading. An $85 dollar move in a week is nothing to ignore. Of course we've been on a wild & woolly ride for a week with the market fear index topping levels not seen since the collapse of Bear Sterns and Lehman Brothers. A European sovereign debt crisis, their plummeting currency, a wobbly U.K. election outcome and an inexplicable glitch in the broader markets have shaken investors around the world. A safe haven rush to gold is certainly reasonable but there are some funnies between this camel's humps.

How has all this commotion affected our metals & miners? The broader markets have opened and The Eureka Miner's Grubstake Portfolio is presently up 4% from last Wednesday with General Moly GMO), Barrick (ABX) and US Gold (UXG) leading the pack one, two, three. If the Grubstake is a barometer for mining in our area, I'd say we're weathering this storm pretty durn well, pardner...or are we?

It is no surprise that gold miners are up on $1200+ gold but why is General Moly on fire? Interestingly, moly prices have been essentially unchanged through this period (spot & LME futures) while copper has stumbled. Giant copper miner Freeport-McMoRan (FCX) has had a horrible time but our benchmark moly producer Thompson Creek (TC) has suffered too even though moly price is high and stable. Here's a comparison of our two junior miners versus the seniors over a one month period:

Junior miners

General Moly (GMO) up 19%
US Gold (UXG) up 37%

Senior benchmark miners

Barrick (ABX) up 15%
Freeport McMoRan (FCX) down 14%
Thompson Creek (TC) down 20%

This is certainly a mixed bag and I'm more than a little nervous about what copper and Freeport might be signaling. The Colonel likes it when metal & miners move as a group and not a herd of camels. Taken all together our Grubstake barometer signals clear skies - we might want to go outside and check for gathering clouds.

I'll close with one last oddity. As the Report has pointed out before, gold and the US dollar index are trending up together. Defying their historic inverse relation, both are now both up 12% over the six months spanning the sovereign debt crisis which started in November with Dubai. Gold is the blue line; the U.S. Dollar Index, the orange line:

I'm starting to miss those simple days last spring when a dollar down meant metals & miners up! Stay tuned.

Enough talk, let's walk the walk:

4-WD is ON - rough roads in the marketplace; the VIX or "fear index" heading back down to our 25 level but still to high for me; metals & miners are looking better with benchmark FCX trading in the $70s but still 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 returns for Stable Markets with the VIX below the 30 level (what's this?)

The GREEN light returns for Investor Confidence with the possibility of a >10% correction in the broader markets possible but less likely

The GREEN light remains turned on our Fuel Gauge with oil below $80 (although this may only be a brief respite)

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 $0.05 in early trading to $76.42 (June contract, most active); Gold is up $16.4 to $1236.7 (June contract, most active); Silver is up $0.186 to $19.480 (July contract); Copper is down $0.0145 to $3.1920 (July contract)

Western Molybdenum Oxide sits at $17.75, LME moly 3-month seller's contract sits at $18.14

The DOW is up 48.78 points to 10795.04; the S&P 500 is up 5.19 to 1160.98. The miners are happy campers again:

Barrick (ABX) $47.11 up 2.69%
Newmont (NEM) $59.39 up 2.04%
US Gold (UXG) $4.11 up 3.53%
General Moly (Eureka Moly, LLC) (GMO) $4.23 up 2.92%
Thompson Creek (TC) $11.12 up 1.65%
Freeport-McMoRan (FCX) $72.21 up 2.80% (a bellwether mining stock spanning copper, gols & molybdenum)

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

ArcelorMittal (MT) $35.78 up 0.59% - global steel producer
POSCO (PKX) $101.40 down 1.35% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 1.83% to $1,452,987.01 (what's this?).


Colonel Possum

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

Headline photograph by Mariana Titus

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