"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.

Tuesday, June 15, 2010

Fear Recedes - LME Moly Gets a Bounce

Morning Miners!

It is 5:34 AM. Mother Nature brings us a new day in Diamond Valley wrapped in pink and gray silk scarves. I think we're going to have a good'un, pardner. There seems like there is a change of sentiment in the markets too. Copper, our battered canary in the global mineshaft, took a few passes above the $3/lb clouds this morning but couldn't quite keep her altitude. She's getting stronger every day and should be in the blue sky soon - that's a good sign for metals & miners. Here's copper spot prices this morning:

Oil is showing some resilience in the mid-$70/bbl range too. No one likes high priced oil (except oil traders) but, like copper, it is another good measure of global growth. Rising oil prices in this environment of concern about global recovery is a good sign.

In the May market doldrums, this Report suggested that 2010 may become a year of gold and currencies:

"In late November [2009], 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." (The Eureka Miner's Market Report, 5/27/2010)

There hasn't been much to challenge this assertion in recent news; almost every market headline lately has some mention of the euro, gold or the U.S. dollar. I thought it might be fun to test the relative value of copper with respect to the dollar, gold and a barrel of oil from its high of $3.5840/lb (COMEX intraday high) on 4/12 to this mornings price. Here are the results:

lbs of copper/ barrel of oil 24.00 (4/21) 25.38 (6/15 AM) up 5.7%
lbs of copper/ ounce of gold 326.3 (4/21) 413.3 (6/15 AM) up 26.6%
lbs of copper/ U.S. dollar 0.279 (4/21) 0.334 (6/15 AM) up 19.9%

What's all this blamed number crunching prove Colonel? OK, if you buy copper with greenbacks you can buy about 20% more these days than in April. If you happen to pack gold, there's a better deal - your buckboard will weigh in with more copper than that feller with all the dollars. You can both feel sorry for the guy toting all those barrels of oil. He can trade for just a little more copper than he did several months ago.

If you're buying commodities the dollar is strong, gold is stronger and oil has been beaten down in value with its global growth companion, copper. The tide may be turning now as fear is starting to leave the marketplace. Here's a chart of the VIX or "fear index" (what's this?) for this morning as we inch further below 30 at 27.4; still above a comfort level of 25 but much better than the harrowing days of the last several weeks. The broader markets are now open and it looks like the metals & miners are fixing to have a good'un too.

Miss Moly is showing some giddy-up-go at the London Metal Exchange (LME) with a reversal in her downward trend yesterday. The cash seller has moved up to $15.76 from $14,60; the 3-month seller, $15.88 from $14.74.

Enough talk, let's walk the walk:

Our newly minted Eureka Miner's Index (EMI - what's this?) steps up to 84.48 this morning, rebounding from last Monday's low of 50.7. Remember an EMI greater than 100 is good times for metals & miners - we're getting even closer!

4-WD is ON - rough roads in the marketplace; The VIX or "fear index" is below 30, still above our 25 level threshold; metals & miners remain remain on shaky timber with benchmark FCX in the mid-$60s well below its 200-day average of $76 (our new warning level), 10-year Treasurys are safely below 4% preserving a low-interest rate environment

The YELLOW light is turned on for Commodity Reflation with copper trading below $3/lb

The GREEN light is turned on for Stable Markets the VIX staying below the 30 level (what's this?)

The YELLOW light is turned back on for Investor Confidence with the possibility of a 20% correction in the broader markets appearing less likely

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 $0.77 in early trading to $75.89 (July contract, most active); Gold is up $2.5 to $1227.0 (August contract, most active); Silver is up $0.029 to $18.47040 (July contract); Copper is down $0.0130 to $2.9905 (July contract)

Western Molybdenum Oxide remains at $14.00; LME moly 3-month seller's contract is at $15.88, LME cash seller moves to $15.76, Euro moly oxide sits at $14.00.

The DOW is up 93.41 points to 10,284.30; the S&P 500 is up 10.94 to 1100.57. The miners are mostly happy:

Barrick (ABX) $41.98 down 0.05%
Newmont (NEM) $55.31 up 0.61%
US Gold (UXG) $4.30 up 1.18%
General Moly (Eureka Moly, LLC) (GMO) $3.69 up 2.78%
Thompson Creek (TC) $9.68 up 1.68%
Freeport-McMoRan (FCX) $65.75 up 0.75% (a bellwether mining stock spanning copper, gols & molybdenum)

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

ArcelorMittal (MT) $30.39 up 2.15% - global steel producer
POSCO (PKX) $95.25 down 0.03% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 1.05% to $1,356,419,91 (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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