Wednesday, June 9, 2010
The Long & Short View - Euro Moly Drops
It is 5:55 AM. I hope you have some binoculars in the truck as well as those favorite dime store reading glasses hanging around your neck. Let me pour you a cup as we take the long and short view on these crazy markets. Mariana and I traveled to Elko the other day to stock up and she, as usual, took a zillion photos on the way. Somewhere north of Garden Pass, Mariana saw something of interest in the power lines (headline photo) - the long view. We stopped and caught a crow taking the short view of a much larger bird's nest (below).
This Report hopefully provides you with both the long and short view so you can better understand how events far-far away can have a significant impact on the mines in our backyard. Here's an example: last October the U.S. dollar was plumbing new depths against other currencies - the US Dollar Index (.DXY or "Dixie") was in the mid-70s after nearly breaking 90 during the stock market lows of March 2009 and there was much talk about the global community abandoning the dollar to price such commodities as oil.
The euro comprises nearly 58% of the Dixie and was the new rock star on the world stage. We had to endure much bombast from across the pond on how the euro was rapidly becoming the favored reserve currency and the overall superiority of the European economic system compared to ours. At that time Tony Blair, former U.K. Prime Minister, was thought by some to have a good shot at the European Union (EU) leadership. The Colonel wrote:
"Even though on paper the EU is a larger economy now than the United States, do we really believe that 27 disparate countries in Europe (possibly) led by Tony Blair will outstrip American innovation and productivity?" (Whistling Dixie... What is a Weak Dollar?, Eureka Miner's Market Report, 10/14/2009)
Mr. Blair didn't get the head honcho seat but I doubt it would have influenced the fate of the euro much, good or bad. This one-year chart of the U.S. Dollar Index (blue line) and COMEX gold (orange line) tells the story of what happened next.
The U.S. dollar hit bottom and gold peaked in early December 2009 just as the Dubai debt crisis unfolded. That was followed by all the sovereign debt worries in Europe starting with profligate Greece. Gold initially fell but then gold and the U.S. dollar trended up together as things worsened in Europe. The Dixie is now back in the mid-80s and gold is hitting new highs; in 12-months the greenback moved up 10% and gold, 27%. This morning the euro is strengthening some against the dollar struggling above the key $1.20 level ($1.2040) but there is belief by some that it still may fall to parity with greenback. C'est la vie.
Other than gold miners, the European sovereign debt crisis has been devastating to metals & miners given concerns that this could be the monkey wrench that breaks the global growth story. Perhaps not. Have faith buckaroos - yesterday was a pretty decent rally for rock busters and this morning looks pretty good too.
Euro moly oxide did drop to $14/lb increasing the spread with its western cousin from one to two-bucks (Western moly oxide steady at $16/lb). The LME futures prices seem to be holding up at $15.06/lb for cash sellers and $15.20/lb for the 3-month futures contract. Closing this spread in a positive direction would be a very good sign that things are on the mend. Stay tuned, keep the long and short view pardner.
Our newly minted Eureka Miner's Index (EMI - what's this?) is up sharply to 63.6 from Monday's low of 50.7. Remember an EMI greater than 100 is good times for metals & miners - at least we're moving in the right direction again.
Enough talk, let's walk the walk:
4-WD is ON - rough roads in the marketplace; The VIX or "fear index" moves to the low-30s, still above our 25 level threshold; metals & miners remain remain on shaky timber with benchmark FCX in the low $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 YELLOW light remains on for Stable Markets with the VIX above the 30 level (what's this?)
The ORANGE light remains on for Investor Confidence the possibility of a 20% 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 $1.84 in early trading to $73.83 (July contract, most active); Gold is down $11.1 to $1234.5 (August contract, most active); Silver is down $0.192 to $18.285 (July contract); Copper is up $0.0810 to $2.8605 (July contract)
Western Molybdenum Oxide is at $16.00; LME moly 3-month seller's contract remains at $15.20, LME cash seller moves up to $15.06, Euro moly oxide drops to $14.00.
The DOW is up 28.27 points to 9,968.25; the S&P 500 is up 3.48 to 1065.48. The miners are happy except the gold folks:
Barrick (ABX) $43.09 down 0.58%
Newmont (NEM) $55.99 down 0.81%
US Gold (UXG) $3.95 down 1.99%
General Moly (Eureka Moly, LLC) (GMO) $3.40 up 1.19%
Thompson Creek (TC) $8.84 up 0.91%
Freeport-McMoRan (FCX) $62.98 up 2.44% (a bellwether mining stock spanning copper, gols & molybdenum)
The Steels are mixed, (a "tell" for General Moly & Thompson Creek):
ArcelorMittal (MT) $27.79 up 2.39% - global steel producer
POSCO (PKX) $90.65 down 1.67% - South Korean integrated steel producer
The Eureka Miner's Grubstake Portfolio is is up 0.37% to $1,301,053.52 (what's this?).
Write Colonel Possum at email@example.com for answers to your questions or to request e-mail updates on the market
Headline and other photographs by Mariana Titus