Tuesday, July 13, 2010
Biscuits in Mumbai - Metals & Miners Rally
It is 6:04 AM. Let me pour you a cup of joe to start your Tuesday. Before we see what's cooking in India let's do a little followup.
Earnings season kicked off with flagship aluminum producer Alcoa reporting after the bell yesterday. Although expectations were low, this Report hoped for a slightly less gloomy outlook on global growth and we got it. The aluminum giant's top and bottom line improved with a 12% uptick in demand from the automobile and airplane sectors. The expectation was 10% and one analyst on CNBC Business News stated that "15% would have been great". But that's not the world we live in now, pardner - if 12% allows Alcoa to muddle along that's probably fine in the "new normal" we discussed yesterday (A "New Normal" for Metals & Miners?).
The proof will be the market reaction today and things are already looking positive with oil and copper moving up with gold and not in bearish opposition. Here is the mid-day jump in London spot gold & silver:
Now don't start putting up the party banners just yet because a bad earnings report or headline from Europe could easily reverse this rally. A little up, a little down would be fine for the ole Colonel - sideways progress in a stable market sure beats a deeper correction in my world. It's like driving in sage to avoid spring mud - as long as you're moving forward you'll get home, stop and it's handyman time in the muck and mire.
OK, the broader markets are open and our favorite miners have got some traction. Here's how the Wall Street Journal reports it:
NEW YORK—U.S. stocks jumped, as strong earnings reports from early bellwethers buoyed hopes that the global business environment continues to strengthen.
Better-than-expected results from Alcoa boosted optimism for second-quarter earnings, starting the Dow Jones Industrial Average on track for its sixth straight winning session. The aluminum giant, the first of the Dow components to release earnings, rose 4% after reporting a $136 million profit on stronger-than-anticipated 22% revenue growth and hiked its global aluminum consumption forecast. (WSJ, 7/13/2010)
There, isn't that terrific for a Tuesday? If you want a good laugh you can read about the popularity of gold biscuits in Mumbai, India as reported this morning in MineWeb:
Gold 'biscuits' selling like hotcakes in Mumbai (Shivom Seth, MineWeb, 7/13/2010)
These small gold bars or "biscuits" are quite popular in India as demand picks up during a normally slow period in Asia. Some of the reasons behind this trend are explained by one of this Report's favorite gold bugs, Lawrence Williams (at least when he's not predicting the collapse of Western World economies):
Demand for gold remains positive at current lower prices (Lawrence Williams, MineWeb, 7/13/2010)
I'm still impressed by the magnitude of gold investment as evidenced by the ever popular exchange-traded fund (ETF) - SPDR Gold (GLD). This morning's price is $118.86/share backed up by physical gold stored in a London bank. Let's do a quick calculation to see what that deposit is worth today.
For 433,400,000 shares outstanding:
$118.86 X (433,400,000) = $51,513,924,000
$51 billion dollars of gold investment from mom and pops' retirement savings to holders as large as China, the GLD is a monster. I would hazard to guess that the weight of this deposit has brought London several millimeters closer to sea level. Here is how the GLD has fared for one-year (share price tracks the value of its underlying asset):
The SPDR GLD ETF along with the iShares ETF for silver (SLV) have been two of the twelve investments in the Eureka Miner's Grubstake Portfolio since inception.
Enough glitter talk, let's walk the walk:
Our newly minted Eureka Miner's Index (EMI - what's this?) remains above-par at 106.58, slightly down from yesterday's 110.55 and a big improvement from the 6/7/10 low of 50.7. Remember an EMI greater than 100 is good times for metals & miners.
4-WD is ON - rough but improving roads in the marketplace; The VIX or "fear index" is below 25; metals & miners remain on shaky timber with benchmark FCX trading in the 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 GREEN light is turned back on for Commodity Reflation with copper trading above $3/lb
The GREEN light is turned on for Stable Markets the VIX below the 30 level (what's this?)
The YELLOW light is on Investor Confidence as further market corrections are possible but 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 $1.61 in early trading to $76.56 (August contract, most active); Gold is up $18.4 to $1217.1 (August contract, most active); Silver is up $0.368 to $18.285 (July contract, most active); Copper is up $0.0165 to $3.0255 (September contract, most active)
Western Molybdenum Oxide drops to $14.00; European Molybdenum Oxide is at $14.00; LME moly 3-month seller's contract is $14.11, LME cash seller is $13.88
The DOW is up 126.1 points to 10,342.88; the S&P 500 is up 12.14 to 1090.89. The miners are having a good day:
Barrick (ABX) $44.01 up 1.01%
Newmont (NEM) $62.38 up 1.30%
US Gold (UXG) $4.83 up 3.87%
General Moly (Eureka Moly, LLC) (GMO) $3.12 up 1.63%
Thompson Creek (TC) $9.55 up 0.84%
Freeport-McMoRan (FCX) $63.54 up 0.99% (a bellwether mining stock spanning copper, gold & molybdenum)
The Steels are up, (a "tell" for General Moly & Thompson Creek):
ArcelorMittal (MT) $30.37 up 3.40% - global steel producer
POSCO (PKX) $103.84 up 0.49% - South Korean integrated steel producer
The Eureka Miner's Grubstake Portfolio is is up 1.83% to $1,376,459.55 (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
Photo of gold biscuits by www.usagold.com