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

DISCLOSURE

The author/editor of the Eureka Miner owns common shares of local mining stocks, General Moly (GMO), McEwen Ming (MUX) 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.

Thursday, September 30, 2010

Gold & Silver New Highs, Base Metals Stall, Moly Soft



Þūnresdæg
Morning Miners!

It is 6:00 AM sharp. Have a cup of Thor's Thunderous September Brew. Our favorite Norseman's alarm clock didn't sound and the poor ole Colonel had to kick start Thursday by himself. Thor's up now grumbling that I didn't get the sun angle just right or some such nonsense. Anyway, happy "Thor's Day!"

Gold & Silver New Highs

You can just about bet on a new-record-per-day with the U.S. dollar falling again against major currencies and reaching a 5 1/2-month low with the euro ($1.366). Gold & silver pegged new highs in the early morning:

COMEX gold $1317.5/oz 08:55:00 ET December contract, most active - record
COMEX silver $22.125/oz 06:25:00 ET December contract, most active - 30-yr high

It is important to note that the much watched gold/silver ratio (Au:Ag ratio) is now sub-60 at 59.71. In calmer times this ratio was in a range of 50-56 prior to Lehman Brother's collapse; afterwords, it shot up north of 80. A smaller number can infer less fear in the marketplace, here is a 3-year chart:



Base Metals Stall - Moly Soft

The base metals are taking a breather letting yesterday's best number for copper (since April) stand:

COMEX copper $3.6735/lb 11:40:00 ET (9/29/10) December contract, most active - April high: $3.68/lb 4/12/2010

Our dear gals in London remain quite bullish on copper outlook given a falling dollar, contracting inventories and a copper deficit now projected for this year and next (125,000 tons 2010; 255,000 tons 2011). Copper is an important proxy for global growth:

Copper Heads for Its Largest Quarterly Climb in a Year on Weakening Dollar (By Anna Stablum, edited by Claudia Carpenter, London Bloomberg, 9/30/10)

There appears to be more downward pressure on LME moly futures with the cash seller falling below $15/lb at $14.70 and the 3-month seller at $14.97. Both are still comfortably within a trading range that has been quite stable for most of 2010. The Colonel's mid-range target is $15.71/lb. The Report will keep an eye on spot prices, there will be a European Moly update tomorrow.

Strongest September Rally Since 1939

The broader markets are now open and the Wall Street Journal reports that this will be the strongest September rally since 1939 for the Dow Jones Industrial Average. We can be proud that Caterpillar (CAT) has been the measure's strongest performer in the third quarter, climbing 33%. CAT is one of the twelve stocks in the Eureka Miner's Grubstake Portfolio. The Grubstake is hitting new highs today too at $1,535,113. If dividends are included, the Report readers have made $536,756.62 since its kickoff on 5/09/2009. That's a return of 53.7%, not too bad buckaroos.

Daily Market Roundup

Enough talk, let's walk the walk:

The Eureka Miner's Index(EMI) is above-par at 258.11, down from yesterday's 260.25 and a long way from the 6/7/10 low of 50.7. Today's number is just below the lower trend level of 258.46 and very comfortably above support at 186.51. The 1-month moving average is 206.34. The new 2010 record high for the EMI is 274.66 set Friday, 9/24/2010. Remember an EMI greater than 100 is good times (or at least better times) for the metals & miners relevant to Eureka County.

Eureka Outlook Dashboard

4-WD is OFF - improving roads in the marketplace; The VIX or "fear index" is below 25; metals & miners are on firm timber with bellwether Freeport-McMoRan (FCX) in the mid-$80s above its 200-day average of $74.48 (our new warning level, 9/03 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment but there is still some deflationary caution now that we are sub-3%.

The YELLOW light is turned back on for Commodity Reflation. Although copper is trading above $3/lb, the 10-yr T-Note is below 3.00%

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

The YELLOW light is turned on for Inflation/Deflation Watch as the Federal Reserve resumes buying back Treasurys and the 10-yr T-Note remains below 3.00%

The GREEN light is turned back on for Investor Confidence as investment returns to the equity markets but the bond markets still signal trouble ahead

The GREEN light is 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, U.S. House committee debates miner workplace safety bill

Otherwise, all lights are green on the Eureka Outlook Dashboard (upper right, what's this?)

Commodity Market Morning Update

NYMEX/COMEX: Oil is up $1.34 in early trading at $79.20 (November contract, most active); Gold is up $3.7 to $1314.0 (December contract, most active); Silver is up 0.053 to $22.005 (December contract, most active); Copper is down $0.0080 to $3.6535 (December contract, most active)

Western Molybdenum Oxide is $15.00; European Molybdenum Oxide is $15.05; LME moly 3-month seller's contract is $14.97, LME cash seller is $14.70

Stock Market Morning Update

The DOW is up 60.85 points to 10896.13; the S&P 500 is up 7.24 to 1151.97. Miners are mixed:

Barrick (ABX) $46.46 down 1.06%
Newmont (NEM) $63.85 down 0.08%
US Gold (UXG) $5.13 unchanged
General Moly (Eureka Moly, LLC) (GMO) $3.68 up 1.94%
Thompson Creek (TC) $10.94 up 0.82%
Freeport-McMoRan (FCX) $86.34 up 0.16% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $33.63 up 2.06% - global steel producer
POSCO (PKX) $114.02 up 1.38% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.51% to $1,535,113.00 (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 photograph by Mariana Titus

Wednesday, September 29, 2010

Gold, Silver, Copper New Highs - Are We Near the Top?



*** BREAKING NEWS *** New high - COMEX copper $3.6735/lb 11:40:00 ET December contract, most active - closing on April high: $3.68/lb 4/12/2010


Wōdnesdæg
Morning Miners!

It is 5:46 AM. Grab a cup a cup of hump day java, I'm over here at the break room sink. Old Miner Woden and the Colonel have had a standing bet on who would have the next "senior moment" between us. He won and I'm tasked with washing his winter long johns. It looks like I forgot some folks on distribution for this Monday's weekly roundup, Barrick $1500+ Gold for 2011 - Metals & Miners Weekly Roundup. If you missed it there's a good article on Barrick's gold outlook and a Cortez Hills update. Sorry, it happens to us old timers.

Here's a picture of Woden in long johns when he joined an Aussie expeditionary force many moons ago. He's the one with the mustache, right front row.



More new highs for gold, silver & copper

Another record breaking day. There are so many folks trying to access commodity price data that my link has been freezing up (InteractiveData) - it took 20 minutes to fetch the latest new highs:

COMEX gold $1314.8/oz 02:45:00 ET December contract, most active - record
COMEX silver $22.075/oz 02:45:00 ET December contract, most active - 30-yr high
COMEX copper $3.658/lb 03:15:00 ET December contract, most active - since 4/12/10 $3.68/lb

The new highs are lifted by a U.S. dollar that continues to fall (USD dollar index .DXY at 78.767 down again from yesterday's close at 79.014) while the euro pegs 1.3606. We are nearing the intervention level for the yen (USD/JPY 83.76 vs 83) and wait to see if Japan will try to weaken their currency further. This is a "race to debase" national currencies with our own Fed threatening to provide more quantitative easing to help our struggling economy.

Precious metals thrive on fiat currency instability as evidenced by the daily string of new highs. Japan is trying to help their exporters with a weaker sovereign currency while our Federal Reserve strives to introduce a "little" inflation to ward of the perceived horrors of deflation.

Tight supply and a weaker dollar is a perfect environment for dollarized commodities from cotton to copper. The inventories of all the primary base metals except nickel continue to decline at the London Metal Exchange (LME). Here is a chart for copper which saw inventory highs north of 550,000 tons in February.


According to my favorite London correspondents, copper sits at 375,100 tons, the lowest level since November 4, 2009. Here is their morning Bloomberg article on copper by Anna Stablum, edited by Claudia Carpenter:

Copper Climbs, Advances Above $8,000 a Ton for the First Time Since April (Anna Stablum, Bloomberg, 9/27/2010)

The Report thanks Claudia and Anna for helping the Colonel verify the April COMEX copper intraday high ($3.68/lb, May contract, most active).

On the demand side, a favorable Chinese purchasing managers’ index (PMI) is expected October 1st. The HSBC indendent PMI was released today set a five-month high of 52.9 from 51.9 in August. A higher PMI is supportive of the base metal complex.

I don't know if I can take too many more mornings like this.

Are we Near a Top?


Dennis Gartman, the "Commodity King", said on CNBC Business News that its hard to call tops but you know when they happen. He added that we shouldn't be surprised to wake up one morning to see gold gap up $50 then close for the day $30 lower, "that's when you know its over." Of course this will be an overdue correction with the longer term prospects for gold still looking quite bullish. COMEX silver had a suspicious "gap up" in the wee hours followed by a fairly decent drop ($21.830/oz versus $22.075/oz, 1.1% drop), we'll just have to wait and see. Remember silver goes up the stairs and down the elevator when it does rollover.

With everyone racing to precious metals and hating the U.S. dollar, the ole Colonel has decided to swim upstream. I bought a little dollar index (Powershares DB US Dollar Index Bullish, UUP) to throw in the buckboard for safe keeping. Stay tuned.

Daily Market Roundup

Enough talk, let's walk the walk:

The Eureka Miner's Index(EMI) is above-par at 260.25, up from yesterday's 233.65 and a long way from the 6/7/10 low of 50.7. Today's number is above the lower trend level of 253.32 and very comfortably above support at 186.51. The 1-month moving average is 201.15. The new 2010 record high for the EMI is 274.66 set Friday, 9/24/2010. Remember an EMI greater than 100 is good times (or at least better times) for the metals & miners relevant to Eureka County.

Eureka Outlook Dashboard

4-WD is OFF - improving roads in the marketplace; The VIX or "fear index" is below 25; metals & miners are on firm timber with bellwether Freeport-McMoRan (FCX) in the high-$80s above its 200-day average of $74.48 (our new warning level, 9/03 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment but there is still some deflationary caution now that we are sub-3%.

The YELLOW light is turned back on for Commodity Reflation. Although copper is trading above $3/lb, the 10-yr T-Note is below 3.00%

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

The YELLOW light is turned on for Inflation/Deflation Watch as the Federal Reserve resumes buying back Treasurys and the 10-yr T-Note remains below 3.00%

The GREEN light is turned back on for Investor Confidence as investment returns to the equity markets but the bond markets still signal trouble ahead

The GREEN light is 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, U.S. House committee debates miner workplace safety bill

Otherwise, all lights are green on the Eureka Outlook Dashboard (upper right, what's this?)

Commodity Market Morning Update

NYMEX/COMEX: Oil is down $0.15 in early trading at $76.03 (November contract, most active); Gold is up $1.4 to $1309.7 (December contract, most active); Silver is up 0.123 to $21.830 (December contract, most active); Copper is up $0.0075 to $3.6445 (December contract, most active)

Western Molybdenum Oxide is $15.00; European Molybdenum Oxide is $15.05; LME moly 3-month seller's contract is $15.42, LME cash seller is $15.15

Stock Market Morning Update

The DOW is down 37.88 points to 10820.26; the S&P 500 is down 4.57 to 1143.13. Miners are mixed:

Barrick (ABX) $46.85 up 0.19%
Newmont (NEM) $63.85 down 0.59%
US Gold (UXG) $5.08 down 0.39%
General Moly (Eureka Moly, LLC) (GMO) $3.57 up 0.28%
Thompson Creek (TC) $10.67 down 3.09%
Freeport-McMoRan (FCX) $87.05 up 0.02% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $32.87 down 2.46% - global steel producer
POSCO (PKX) $111/32 down 1.08% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.41% to $1,518,775.09 (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 photograph by Mariana Titus

Tuesday, September 28, 2010

Thompson Creek (TC) & General Moly (GMO) Rock On



*** BREAKING NEWS *** Silver just hit another new high: COMEX silver $21.775 12:55:00 ET, December contract, most active
*** BREAKING NEWS *** Gold just moved to another new high: COMEX gold $1311.8 12:50:00 ET, December contract, most active
*** BREAKING NEWS *** After starting out in the red, gold just pegged a new high: COMEX gold $1309.9 12:20:00 ET, December contract, most active


Morning Miners!

It is 5:45 AM. Grab a cup of joe and some of that home-baked on the table. Sweet Ruby T rolled in Tuesday at the strike of midnight and left us the goodies. The second day of the week is all she's rolling these days with her Pete still in the shop over in Carson City. The grandkids are driving her crazy and she can't wait to get back in the cab - look for that pretty ruby red 379 pouring coal later this week.

How are the Moly Miners Doing?

With the Eureka Miner's Index(EMI) setting a new record for the year Friday, it is high time to check on the moly miners. Let's start with our moly producer benchmark, Thompson Creek (TC). TC is important because it is a pure molybdenum play and a reasonable model for what General Moly (GMO) will become once Mt. Hope transitions to production (mine construction scheduled to begin next summer).

During the May-June commodity correction, Thompson Creek stock dropped from $14 high-grade to the low-$8 level of the mineshaft to become the worst performing stock in the Eureka Miner's Grubstake Portfolio. Although molybdenum prices were amazingly resilient during this period, TC was punished by a grim view of future moly demand against a backdrop of financial crisis in Europe.

That was then, this is now. The euro hit a 5-month high against the dollar this morning at 1.3509 and the outlook for Europe has much improved since early summer. There are still concerns about Ireland but a successful Spanish bond auction and statements of support from the ECB have investors thinking the worst is over (at least for now).

More importantly, Asia has shown real strength lately as evidenced by POSCO (PKX), South Korean steel producer and 20% investor in Mt. Hope. POSCO has risen from $88 this spring to north of $110 this September (up 25%). Improving steel demand in Asia is an important measure of growth in that region and positive support for moly going forward.

Here is a one-year chart of Thompson Creek. At yesterday's close, TC was very near its 200-day moving average (green line) in $11 territory moving steadily up from the bottom set on 8/25.


Bellwether miner Freeport-McMoRan(FCX) has been on a similar trajectory since late August. Copper giant FCX is important because they produce gold and molybdenum as well as copper and is a thereby a key benchmark in our EMI. Here is a a one-year chart of FCX:



Thompson Creek to Acquire Terrane Metals Corp

A final note on Thompson Creek is their planned acquisition of Terrane Metals Corp, a Canadian mineral development and exploration company. This will increase their metal diversification with Terrane's Mt. Milligan copper-gold project and the Berg copper-molybdenum-silver project, both in central British Columbia, Canada. The completion of the acquisition is expected to occur early next month as announced yesterday,

Thompson Creek Metals Company Receives Final Court Order For Transaction With Terrane Metals Corp. (Press release, 9/27/2010)

Genral Moly Snap-back Rally

General Moly (GMO) has had a nice snap-back rally too finding its way to $3.50 pasture after falling to sub-$3 levels this summer. Unlike TC and FCX, GMO has managed to stay mostly above its 200-day moving average since early spring:



The markets are now open and it looks like the miners are getting punished by some mixed headline news on our domestic recovery. The S&P Case-Shiller home-price indexes showed that home prices rose again in July but this good news was swamped by weaker-than-expected reports on consumer confidence and manufacturing. Interestingly, while the miners are in currently the red, POSCO is showing green today. This perhaps illustrates again the push-pull dynamic between domestic and global recovery stories. Stay tuned, buckaroos.

Daily Market Roundup

Enough talk, let's walk the walk:

The Eureka Miner's Index(EMI) is above-par at 233.65, down from yesterday's 263.74 and a long way from the 6/7/10 low of 50.7. Today's number is also below the lower trend level of 248.18 but very comfortably above support at 186.51. The 1-month moving average is 193.53. The new 2010 record high for the EMI is 274.66 set Friday, 9/24/2010. Remember an EMI greater than 100 is good times (or at least better times) for the metals & miners relevant to Eureka County.

Eureka Outlook Dashboard

4-WD is OFF - improving roads in the marketplace; The VIX or "fear index" is below 25; metals & miners are on firm timber with bellwether Freeport-McMoRan (FCX) in the mid-$80s above its 200-day average of $74.48 (our new warning level, 9/03 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment but there is still some deflationary caution now that we are sub-3%.

The YELLOW light is turned back on for Commodity Reflation. Although copper is trading above $3/lb, the 10-yr T-Note is below 3.00%

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

The YELLOW light is turned on for Inflation/Deflation Watch as the Federal Reserve resumes buying back Treasurys and the 10-yr T-Note remains below 3.00%

The GREEN light is turned back on for Investor Confidence as investment returns to the equity markets but the bond markets still signal trouble ahead

The GREEN light is 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, U.S. House committee debates miner workplace safety bill

Otherwise, all lights are green on the Eureka Outlook Dashboard (upper right, what's this?)

Commodity Market Morning Update

NYMEX/COMEX: Oil is down $0.19 in early trading at $76.33 (November contract, most active); Gold is down $2.6 to $1296.0 (December contract, most active); Silver is down 0.161 to $21.310 (December contract, most active); Copper is up $0.0060 to $3.6030 (December contract, most active)

Western Molybdenum Oxide is $15.00; European Molybdenum Oxide is $15.05; LME moly 3-month seller's contract is $15.42, LME cash seller is $15.15

Stock Market Morning Update

The DOW is down 24.74 points to 10787.30; the S&P 500 is down 4.54 to 1137.62. Miners are down:

Barrick (ABX) $45.08 down 1.49%
Newmont (NEM) $61.89 down 1.21%
US Gold (UXG) $4.74 down 4.05%
General Moly (Eureka Moly, LLC) (GMO) $3.43 down 0.58%
Thompson Creek (TC) $10.71 down 2.72%
Freeport-McMoRan (FCX) $85.08 down 1.71% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $32.89 down 0.09% - global steel producer
POSCO (PKX) $110.73 up 0.21% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 1.32% to $1,480,440.58 (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 photograph by Mariana Titus

Monday, September 27, 2010

Barrick $1500+ Gold for 2011 - Metals & Miners Weekly Roundup


Morning Miners!

It is 5:40 AM. Grab a cup of record breaking java and let's get to work. Last week was quite a week with our favorite metals setting records or new highs. This morning it looks like COMEX silver made another new high of $21.645/oz in the wee hours but has pulled back since (03:00:00 ET, 12/10 contract). COMEX Gold is a thin flat washer below $1300/oz and copper is off its 5-month high set Friday.

London Bloomberg is predicting some softness in the red metal after Chinese selling and broader concerns about more financial woes emerging from Europe.

Copper May Decline as Prices at Five-Month High Spur Selling by Investors (Anna Stablum, London Bloomberg News, 9/27/2010)

Barrick Gold's Jamie Sokalsky, Chief Financial Officer, is willing to put a number on next year's gold outlook. On CNBC Buisness News last week, President and CEO Aaron Regent, wouldn't discuss levels but only the direction of their lustrous product (Outlook for Barrick Gold). As reported by Mineweb, Mr. Sokalsky suggested greater than $1,500/oz is in the cards for next year.

Gold could easily rise above $1,500 in the next year - Barrick (Mineweb, Jan Harvey, Reuters, 9/27/2010)

He told Reuters on the sidelines of a recent London Bullion Market Association event:

"From what we're hearing, there are still significant new buyers coming into the market...My view is that we could see much stronger prices still from here," he said, adding: "I can see gold easily taking out new highs and going above $1,500 an ounce in the next year." (Mineweb, Jan Harvey, Reuters, 9/27/2010)

He also said the company's Cortez Hills mine was likely to outstrip its current production target expecting to exceed guidance of 1.1 million ounces on the order of 5-10%.

With all this good news in our sails it will be important to watch this week's economic data on automotive sales and housing together with events in Europe to determine whether we're at the top or setting the stage for even better numbers for the metals & miners. The Eureka Miner's Index(EMI) set a new high of 274.66 for the year as the markets closed last Friday - that's not all bad buckaroos (see below).

Let's start our weekly roundup with Miss Moly...

Weekly Molybdenum Roundup



Moly prices remain in a stable range for the year but slipped a little last week with Western moly oxide at $15.00/lb close to European moly at $15.05/lb. The LME 3-month seller contract moved down to $15.65 from $16.33/lb. The Report's mid-range price target for 2010 moly prices is $15.71/lb.

Western Moly Oxide (FeMo65) $15.00/lb (the price tracked by Base Metals on the General Moly Website)

Moly Oxide, Europe (Mo Drummed Molydbic Oxide EU) $15.05/lb (the price reported in the Metals Bulletin)

LME Futures Contracts

LME cash seller is at $34,000/metric ton $15.42/lb

3-Month (Buyer) $32,500/metric ton $14.74/lb
3-Month (Seller) $34,500/metric ton $15.65/lb

15-Month (Buyer) $32,500/metric ton $14.74/lb
15-Month (Seller)$34,500/metric ton $15.65/lb

Here is a chart of the LME 3-month contract (seller) from the February launch to the present:



Eureka Miner's Index (EMI)

The Eureka Miner's Index (EMI) gives us the market temperature for the sectors that have the greatest impact on mining in Eureka County. Below is a chart of the EMI at Friday's close. The magenta line is the EMI with a low interest cap of 3% on 10-year Treasurys (LIRC) and adjustments for gold and silver prices (i.e., Au:Ag ratio); the gray line is the EMI without these corrections. A new 1-month moving average has been added (blue line). A larger more readable chart appears at the bottom of this blog page.


The Eureka Miner's Index(EMI) is above-par at 263.74, down from Friday's record 274.66 and a long way from the 6/7/10 low of 50.7. Friday's closing high exceeds the old EMI high of 259.35 set on 4/12/2010 - the same day that COMEX copper peaked. Today's number is also above the lower trend level of 243.04 and very comfortably above support at 186.51. The 1-month moving average is 185.53. Remember an EMI greater than 100 is good times (or at least better times) for the metals & miners relevant to Eureka County.

Oil & Copper Correlations with Gold

Oil & copper correlations with gold give us insight into what may happen next for the metals & miners. One way to visualize these correlations with gold over time is to plot the "near-term" 3-month versus the "short-term" 1-month correlations (aka "rho") as shown below in these two graphs (ref: China to the Rescue?):



In the case of copper versus gold, we start out on 4/27/10 with both positively correlated (i.e. in the "+,+" or "green" quadrant). This is the day after the 2010 S&P 500 high and shortly after COMEX copper high of $3.5840/lb (4/12/10). Unfortunately we soon descended into negative territory (i.e. in the "-,-" or "red" quadrant) as the financial crisis in Europe worsened (blue line). Presently we are back in the "+/+" or "green" quadrant - the magenta line and arrow show the most recent data and direction. To sustain optimism for copper prices we need to stay in the "+,+" green pasture.

Oil versus gold has a similar trajectory starting 5/4/2010 moving from the "+/+" to "-/-" quadrant. Oil needs a breakout to the positive to end the bearish cycle of the past few months but has shown some improvement from last week's 3-month correlation although the 1-month has slipped some. The graphs above are up to Friday's close.

Here are the latest correlations given this morning's NYMEX/COMEX trading:

Oil/Au correlation +0.3871 (1-month) -0.4053 (3-month)
Cu/Au correlation +0.8194 (1-month) +0.6866 (3-month)
Cu/Oil correlation +0.5197 (1-month) +0.0847 (3-month)

Last week's numbers:

Oil/Au correlation +0.4197 (1-month) -0.4341 (3-month)
Cu/Au correlation +0.7650 (1-month) +0.4437 (3-month)
Cu/Oil correlation +0.6439 (1-month) +0.1002 (3-month)

Daily Market Roundup

Enough talk, let's walk the walk:

Eureka Outlook Dashboard

4-WD is OFF - improving roads in the marketplace; The VIX or "fear index" is below 25; metals & miners are on firm timber with bellwether Freeport-McMoRan (FCX) in the mid-$80s above its 200-day average of $74.48 (our new warning level, 9/03 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment but there is still some deflationary caution now that we are sub-3%.

The YELLOW light is turned back on for Commodity Reflation. Although copper is trading above $3/lb, the 10-yr T-Note is below 3.00%

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

The YELLOW light is turned on for Inflation/Deflation Watch as the Federal Reserve resumes buying back Treasurys and the 10-yr T-Note remains below 3.00%

The GREEN light is turned back on for Investor Confidence as investment returns to the equity markets but the bond markets still signal trouble ahead

The GREEN light is 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, U.S. House committee debates miner workplace safety bill

Otherwise, all lights are green on the Eureka Outlook Dashboard (upper right, what's this?)

Commodity Market Morning Update

NYMEX/COMEX: Oil is up $0.51 in early trading at $77.00 (November contract, most active); Gold is up $1.3 to $1299.6 (December contract, most active); Silver is up $0.121 to $21.520 (December contract, most active); Copper is down $0.0105 to $3.6075 (December contract, most active)

Western Molybdenum Oxide is $15.00; European Molybdenum Oxide is $15.05; LME moly 3-month seller's contract is $15.65, LME cash seller is $15.42

Stock Market Morning Update

The DOW is down 12.95 points to 10847.31; the S&P 500 is down 2.69 to 1145.98. Miners are mixed:

Barrick (ABX) $46.73 up 0.78%
Newmont (NEM) $63.78 up 0.60%
US Gold (UXG) $5.03 up 0.82%
General Moly (Eureka Moly, LLC) (GMO) $3.26 unchanged
Thompson Creek (TC) $11.06 up 0.87%
Freeport-McMoRan (FCX) $82.02 down 0.68% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $32.25 down 0.08% - global steel producer
POSCO (PKX) $110.52 down 0.31% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.15% to $1,501,076.50 (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 photograph by Mariana Titus

Friday, September 24, 2010

Metals Trifecta: Gold Breaks $1300 - Silver, Copper + EMI New Highs


Morning Miners!

It is 5:44 AM. Have some fresh-from-the-shelf Raine's Triple-X TGIF coffee, pardner. Happy to see you as always, we have an exciting day ahead with our favorite metals and the Eureka Miner's Index(EMI) all hitting new highs. Here is the latest from the COMEX:

(Note the following numbers were updated after Friday market close):

COMEX gold $1301.6/oz 09:15:00 ET (December contract, most active), updated
COMEX Silver $21.49/oz 15:45:00 ET (December contract, most active), updated
COMEX Copper $3.6360/lb 09:50:00 ET (December contract, most active), updated

Settlement prices (9/24/2010)

COMEX gold $1298.1/oz (December contract, most active)
COMEX Silver $21.399/oz (December contract, most active)
COMEX Copper $3.6180/lb (December contract, most active)

Gold is at a new record in today's dollars (the 1980 inflation-adjusted peak was $2300/oz) and silver is at its best level since 1980 (note 1). Intraday copper is at 5-month highs not seen since April 12th. Copper was just north of $4/lb pasture in mid-2008 before the financial crisis opened the trap door on base metal prices.

EMI hits a new high for the year, what's next?

Currency instability provides a positive environment for the precious metals as evidenced by Japan's latest actions to weaken their currency and the recent statement from our Federal Reserve. If you're catching up, this Report has discussed the yen intervention, Japan Intervenes on Yen, and the possibility of further quantitative easing by the Fed, Will gold Break $1300 Today or Tomorrow?

Interestingly, commodities have come along for the ride too buoyed by tight supply conditions (e.g., Russian wheat crisis, rapidly falling London Metal Exchange inventories) as well as a falling U.S. dollar. The one notable commodity that hasn't participated in this rally is crude oil although today's prices are above $75/bbl today with NYMEX crude trading at $75.94/bbl.

Oppenheimer's Carter Worth made the point yesterday on CNBC Business News that contrary indications like rising metal and falling oil prices are a sign that markets are at an equilibrium point, the number of bulls equals the number of bears.

Further evidence of this stable point is the S&P 500 which closed barely a percent above where we were at the close of 2009 although it looks like we're having a nice rally to the upside today. The S&P 500 200-day average is 1,116.77, the 12/31/2009 close was 1,115.10, yesterday's close was 1,124.83.

Fortunately, the metals & miners are setting new records against this backdrop of broader market malaise. The Eureka Miner's Index(EMI) is at a new high for the year at 273.78 and bellwether miner Freeport-McMoRan is trading above $85 at $86.63. This Report has said that oil, gold and copper moving in the same direction is the best environment for the metals & miners and perhaps a necessary condition to maintain this rally. Monday we'll take a closer look at the correlations of these three important commodities.

Reaction from Three Experts

The Wall Street Journal this morning gave the reaction of three experts to the Friday surge:

Alan Ruskin, Deutsche Bank: “We are seeing plenty of negative [U.S. dollar] trades expressed through commodities that go well beyond gold (a relative underperformer) with silver breaking to new highs another expression of [quantitative easing] debasement fears.”

Camilla Sutton, Scotia Capital: “The threat of quantitative easing in the U.S. and unsterilized currency intervention in Japan has led to some early skepticism over paper currencies. This is in part what has let to the rally in gold, but it is also being played out by a weakening [U.S. dollar]. We expect that downward pressure on the [U.S. dollar] will be sustained well into the fall.”

Andy Brenner, Guggenheim Securities: “The stronger tone of [emerging markets] continues to add to the commodity prices, which generates a big chunk of [emerging market] earnings … silver hit a new 30-year high while gold traded over $1,300… other commodities and softs remain strong. This is a big positive.”

A View from the Goldbugs

One of this Report's favorite London goldbugs, Lawrence Williams, wrote a good summary article in Mineweb just before the $1300/oz level was breached:

Gold on the $1300 brink - London silver fixes at $21.35 (Lawrence Williams, Moldon, Mimeweb 9/24/2010)

Mr. Williams reports on how safe haven investment-related buying of precious metals has more than offset the negative effect high prices have on jewelry demand in key markets like India, the Middle East and Turkey. He cautions gold may see some pullback in October.

Stay tuned, buckaroos.

Daily Market Roundup

Enough talk, let's walk the walk:

Eureka Outlook Dashboard

The Eureka Miner's Index(EMI) is above-par at 273.78, up from yesterday's 233.76 and a long way from the 6/7/10 low of 50.7. This exceeds the EMI high for the year of 259.35 set on 4/12/2010 - the same day that COMEX copper peaked. Today's number is also above an upper trend level of 268.67 and very comfortably above support at 186.51. Remember an EMI greater than 100 is good times (or at least better times) for the metals & miners relevant to Eureka County.

4-WD is OFF - improving roads in the marketplace; The VIX or "fear index" is below 25; metals & miners are on firm timber with bellwether Freeport-McMoRan (FCX) above the mid-$80s and its 200-day average of $74.48 (our new warning level, 9/03 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment but there is still some deflationary caution now that we are sub-3%.

The YELLOW light is turned back on for Commodity Reflation. Although copper is trading above $3/lb, the 10-yr T-Note is below 3.00%

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

The YELLOW light is turned on for Inflation/Deflation Watch as the Federal Reserve resumes buying back Treasurys and the 10-yr T-Note remains below 3.00%

The GREEN light is turned back on for Investor Confidence as investment returns to the equity markets but the bond markets still signal trouble ahead

The GREEN light is 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, U.S. House committee debates miner workplace safety bill

Otherwise, all lights are green on the Eureka Outlook Dashboard (upper right, what's this?)

Commodity Market Morning Update

NYMEX/COMEX: Oil is up $0.76 in early trading at $75.94 (November contract, most active); Gold is up $4.1 to $1300.4 (December contract, most active); Silver is up $0.212 to $21.425 (December contract, most active); Copper is up $0.0305 to $3.6210 (December contract, most active)

Western Molybdenum Oxide is $15.00; European Molybdenum Oxide is $15.15; LME moly 3-month seller's contract is $16.33, LME cash seller is $16.06

Stock Market Morning Update

The DOW is up 178.6 points to 10841.03; the S&P 500 is up 21.45 to 1146.28. Miners are mixed:

Barrick (ABX) $46.33 down 0.81%
Newmont (NEM) $63.41 down 0.69%
US Gold (UXG) $5.02 up 0.77%
General Moly (Eureka Moly, LLC) (GMO) $3.23 up 1.89%
Thompson Creek (TC) $10.91 up 4.00%
Freeport-McMoRan (FCX) $86.63 up 2.85% (a bellwether mining stock spanning copper, gold & molybdenum)

The Steels are pouring metal (a "tell" for General Moly & Thompson Creek):

ArcelorMittal (MT) $33.30 up 3.85% - global steel producer
POSCO (PKX) $110.34 up 1.91% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 1.66% to $1,494,844.98 (what's this?).

Cheers,

Colonel Possum

Note 1: Silver futures reached an all-time high of $50.35 in 1980, a year after the Hunt brothers tried to corner the market. The unadjusted peak price of gold in 1980 was $852/oz.

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

Thursday, September 23, 2010

Outlook for Barrick Gold (ABX) - Copper New High



Þūnresdæg
Morning Miners!

It is 5:55 AM. Have a cup of Thor's thunderous java and let's play a video to start the day. Our favorite Norseman and I just watched a CNBC Business News interview with Barrick Gold's President and CEO, Aaron Regent. It is probably one of the best gold mining outlooks the ole Colonel can remember in some time including questions from business icon and former General Electric CEO, Jack Welch. I've included a video link to the entire discussion at the bottom of this blog page (just below the chart of the Eureka Miner's Index). Thor was less impressed and has switched the tube back to the weather station - after all it is "Thor's Day!"

Interview with Barrick Gold's Aaron Regent

The interview began with a question about $1300/oz gold and whether there was further upside. Mr. Regent painted a broad brush of the present global situation and how it effects current gold prices including reflationary trends and the looming clouds of global deficits. He noted that the world's central banks are now net buyers of gold and the introduction of gold exchange traded funds such as GLD have drawn considerable new investor interest (The Eureka Miner's Grubstake Portfolio holds the SPDR Gold Trust ETF GLD). Both are supportive of gold price going forward.

On the supply side, Mr. Regent noted that gold mining is declining an average of 1% per year as new resources are more difficult to find and new mine lead times can be up to 10 years. Tight supply coupled with new demand should move prices higher.

Jack Welch, in his characteristic ubber-CEO manner, interjected, "Trees don't grow to the sky" and quized Mr. Regent on what may drive gold to $500/oz. Barrick's CEO acknowledged downside risk and gave three possible events that could undermine the upward trend: 1) China recession (see note 1), (2) the return of a strong U.S. dollar and 3) central banks exit strategies form present monetary stimulus.

Arguing the reasonableness of $1300/oz gold, Mr. Regent stated that in "real terms" the present price is only 55% of the 1980 peak of $2300/oz (i.e. the inflation adjusted price). He also cited the stability of oil and copper prices in terms of gold (i.e barrels of oil and pounds of copper per ounce of gold). Followers of this Report understand the importance of the oil/gold and copper/gold relation since both oil and copper are proxies for global growth. Comparing their value with gold removes currency variability. Mr. Regent said that historical averages of 15 barrels of oil and 433 pounds of copper per ounce of gold are in line with today's prices (we'll check his numbers in a minute).

The Barrick CEO was reluctant to predict a future price of gold (nothing new here) but said that they're doing "quite well" at $1300/oz (no kidding!). He said for planning they put a healthy discount on spot gold prices and try to anticipate direction instead of price level realizing that gold will be volatile. Mr. Regent would rather be prepared for the bad times and surprised with more cash during the good.

Jack Welch closed the interview questioning the "cash cost" of gold mining. Aaron Regent said their present cost was about $450/oz and expected that to be stable in the foreseeable future. The logic is that older mines represent rising cost as mining intensity increases with diminishing resource but that this is offset by new mines with a lower cost basis. Mr. Welch's closing comment was that gold mining appeared to have a better cost story than other commodities today.

This is a good'un buckaroos.

Checking Aaron Regent's Numbers

Aaron Regents oil/gold and cu/gold numbers seem to be roughly inline with recent price movements of these three commodities. Since early June oil has been in a range of 14.5-17.5 bbl/oz, the mid-range a little higher than his quoted 15 bbl/oz. Copper has been in a range of 350-450 lbs/oz with his historical number of 433 lbs/oz slightly lower than the mid-range.

Here are some noteworthy dates:

Mining's "worst day" 12/5/2008, COMEX gold $745.2/oz

Au:oil 21.29 bbl/oz
Au:Cu 573.2 lbs/oz

S&P 500 high for 2010 1219.8 4/26/2010, COMEX gold $1155.2/oz

Au:oil 13.36 bbl/oz
Au:Cu 325.6 lbs/oz

Today, COMEX gold $1293.2/oz

Au:oil 17.46 bbl/oz
Au:Cu 361.49 lbs/oz

COMEX copper marked a new high 5-month high today at $3.5940/lb at 03:30:00 9/23/2010.

Enough talk, let's walk the walk:

Eureka Outlook Dashboard

The Eureka Miner's Index(EMI) is above-par at 232.76, down from yesterday's 257.26 and a long way from the 6/7/10 low of 50.7. The EMI high for the year was 259.35 on 4/12/2010 - the same day that COMEX copper peaked. Today's number is just below a lower trend level of 260.45 but comfortably above support at 186.51. Remember an EMI greater than 100 is good times (or at least better times) for the metals & miners relevant to Eureka County.

4-WD is OFF - improving roads in the marketplace; The VIX or "fear index" is below 25; metals & miners are on firm timber with bellwether Freeport-McMoRan (FCX) in the low-$80s above its 200-day average of $74.48 (our new warning level, 9/03 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment but there is still some deflationary caution now that we are sub-3%.

The YELLOW light is turned back on for Commodity Reflation. Although copper is trading above $3/lb, the 10-yr T-Note is below 3.00%

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

The YELLOW light is turned on for Inflation/Deflation Watch as the Federal Reserve resumes buying back Treasurys and the 10-yr T-Note remains below 3.00%

The GREEN light is turned back on for Investor Confidence as investment returns to the equity markets but the bond markets still signal trouble ahead

The GREEN light is 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, U.S. House committee debates miner workplace safety bill

Otherwise, all lights are green on the Eureka Outlook Dashboard (upper right, what's this?)

Commodity Market Morning Update

NYMEX/COMEX: Oil is down $0.63 in early trading at $74.083 (November contract, most active); Gold is up $1.3 to $1293.4 (December contract, most active); Silver is down $0.005 to $21.050 (December contract, most active); Copper is up $0.0130 to $3.5780 (December contract, most active)

Western Molybdenum Oxide is $15.00; European Molybdenum Oxide is $15.15; LME moly 3-month seller's contract is $16.33, LME cash seller is $16.01

Stock Market Morning Update

The DOW is down 59.60 points to 10679.71; the S&P 500 is down 6.98 to 1127.30. Miners are down:

Barrick (ABX) $46.78 down 0.93%
Newmont (NEM) $64.32 down 0.95%
US Gold (UXG) $5.09 down 1.93%
General Moly (Eureka Moly, LLC) (GMO) $3.16 down 1.86%
Thompson Creek (TC) $10.47 down 2.44%
Freeport-McMoRan (FCX) $82.82 down 2.00% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $32.26 down 2.57% - global steel producer
POSCO (PKX) $109.41 down 1.00% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 1.27% to $1,472,663.61 (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

Note 1: Although Mr. Regent didn't explain what he meant by a "China recession", some Asia watchers throw up a red flag if China GDP growth drops below 7%. In the western developed world we often define recession as a prolonged negative GDP.

Headline photograph by Mariana Titus

Wednesday, September 22, 2010

Will Gold Break $1300 Today or Tomorrow? Grubstake $1.5M+



Wōdnesdæg
Morning Miners!

It is 5:43 AM. Have a cup of hump day brew with Old Miner Woden and the Colonel. I got a kick from watching the old boy this morning, he's still over in the corner with my readers on and glued to the computer screen. Last week he told me computers don't even make good wheel chocks; today he and the internet are inseparable. What's got his interest? He's been watching the COMEX gold futures market. In the wee hours our lustrous metal came within 2-bucks of breaking $1300/oz; silver is comfortably north of $21/oz. What's behind the latest jump? One sentence from Uncle Ben...

Federal Reserve Comments Move Gold


Yesterday the Federal Reserve said it's "prepared to provide additional accommodation if needed to support the economic recovery." The Federal Open Market Committee (FOMC) said other things in their summary statement but that sentence is what has propelled gold and silver to new heights. The markets are interpreting this to mean that the Fed is prepared to do further quantitative easing (QE) in the future. In layman's terms that means simply, "print more money."

The media has coined this "QE2" bringing to mind the launching of a great ship into uncharted waters. Unfortunately, we may all be on this cruise together.

Quantative Easing (QE)

The Federal Reserve doesn't crank up the money printing presses to accomplish QE. It is much simpler, they just move a decimal point in their balance sheet. With this money they create ex nihilo ("out of nothing"), the Fed then purchases financial assets such as Treasurys and mortgage-backed securities from banks and other financial institutions. The purchases give banks the excess reserves required to allow them to loan more money, and thus (hopefully) stimulate the economy. The Fed has been buying back Treasury notes for some time from the money they made from maturing mortgage-backed securities, often referred to as "QE-lite."

What does QE mean for the metals & miners?

As you might guess, just the suggestion of further QE cratered the U.S. dollar with respect to other currencies. Since most commodity prices are expressed in our dollars, this gives a boost to those markets. Copper, for example, set a five-month high shortly after the broader markets opened. It has fallen back some but oil is also up for the day at $75.73/bbl. This Report has said many times that rising oil, copper and gold prices are the best environment for the metals & miners as long as crude oil prices don't get too crazy (less than $80/bbl, rising oil & copper prices are proxies for global growth).

There is broad evidence that tight supply/demand is presently also driving many commodities. Wheat, corn and cotton are on a roll and copper inventories at the London Metal Exchange (LME) have fallen a dramatic 31% since February (382,500 versus 555,875 metric tons, 2/19/2010). Molybdenum has remained in a tight supply with prices contained within a narrow trading range for most of the year - even through the commodity downturn of May-June.

Naturally, most miners benefit from the tight supply/falling dollar scenario. The Eureka Miner's Grubstake Portfolio has just broken the $1.5M mark this morning ($1,502,602.53) after starting with one million dollars last May. It is comprised of twelve mining and related stocks that directly or indirectly benefit Eureka County (How well is Eureka County Doing? Ask the Grubstake).

Our gauge of market temperature is the Eureka Miner's Index(EMI) which came within just a few points of its April 12th high (257.26 versus 259.35, 4/10/2010 - see below).

Can the metals & miners rally last?

Most of you are probably wondering how creating money from nothing can benefit miners in the long run. The metals & miners rebound from the depths of the mineshaft in 2009 was no doubt aided from the first round of QE together with renewed Chinese demand for raw materials. Metals such as copper were sorely in need of "reflation" from its bottom in December, 2008 ($1.30/lb). Bellwether miner Freeport-McMoRan (FCX) rose from a 12/2008 low of $16.80 to a high of $90.55 this January. This morning FCX is trading at $84.78 after dropping to $56.71 in July.

QE2 hasn't happened yet (and may not) but the mere suggestion has rocketed gold along with commodity-sensitive stocks. To answer the question of "can the rally last" really depends on where the economy goes from here. From wheat to copper, its not unreasonable to say we're entering a period of commodity inflation. One Federal Reserve mandate is to maintain stable consumer (not commodity) prices and presently they are more worried about deflation than inflation.

Here's the problem: if a manufacturer can't pass the rising prices of their raw materials to the consumer, their profit margins shrink. If the embattled consumer decides to do without rather than buy more, the manufacturer is forced to lower prices to bring their customers back. In an environment of rising input costs and falling product prices, a wicked deflationary spiral can occur. The manufacturer lays off workers and this adds to the depressed consumer base. The second part of the Federal Reserve's dual mandate is to bring us to "full employment" - now we can understand why Uncle Ben is in a pickle.

Fortunately for now, miners are at the input side of this equation and benefit from the rising prices of their product. They can continue to do well due to tight supply globally even if the U.S. economy stumbles a little. Rising oil prices could upset their ore cart but so far good. If the U.S. enters a deflationary spiral all bets are off. Most economists agree that the double-dip scenario is off the table for both the domestic and global economy for now. If we can maintain modest growth without deflation, Ben may not need to do QE and we'll all be better off in the long run. Stay tuned, buckaroos.

Daily Market Roundup

Enough talk, let's walk the walk:

Eureka Outlook Dashboard

The Eureka Miner's Index(EMI) is above-par at 257.26, up from yesterday's 243.85 and a long way from the 6/7/10 low of 50.7. The EMI high for the year was 259.35 on 4/12/2010 - the same day that COMEX copper peaked. Today's number is just above a upper trend level of 2249.95 and comfortably above support at 186.51. Remember an EMI greater than 100 is good times (or at least better times) for the metals & miners relevant to Eureka County.

4-WD is OFF - improving roads in the marketplace; The VIX or "fear index" is below 25; metals & miners are on firm timber with bellwether Freeport-McMoRan (FCX) in the mid-$80s above its 200-day average of $74.48 (our new warning level, 9/03 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment but there is still some deflationary caution now that we are sub-3%.

The YELLOW light is turned back on for Commodity Reflation. Although copper is trading above $3/lb, the 10-yr T-Note is below 3.00%

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

The YELLOW light is turned on for Inflation/Deflation Watch as the Federal Reserve resumes buying back Treasurys and the 10-yr T-Note remains below 3.00%

The GREEN light is turned back on for Investor Confidence as investment returns to the equity markets but the bond markets still signal trouble ahead

The GREEN light is 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, U.S. House committee debates miner workplace safety bill

Otherwise, all lights are green on the Eureka Outlook Dashboard (upper right, what's this?)

Commodity Market Morning Update

NYMEX/COMEX: Oil is up $0.76 in early trading at $75.73 (November contract, most active); Gold is up $21.2 to $1295.5 (December contract, most active); Silver is up $0.510 to $21.150 (December contract, most active); Copper is up $0.0825 to $3.5635 (December contract, most active)

Western Molybdenum Oxide is $15.00; European Molybdenum Oxide is $15.15; LME moly 3-month seller's contract is $16.33, LME cash seller is $16.01

Stock Market Morning Update

The DOW is down 2.87 points to 10758.16; the S&P 500 is down 1.99 to 1137.79. Miners are happy:

Barrick (ABX) $47.19 up 0.79%
Newmont (NEM) $64.69 up 0.87%
US Gold (UXG) $5.34 up 1.33%
General Moly (Eureka Moly, LLC) (GMO) $3.26 up 1.24%
Thompson Creek (TC) $10.85 up 1.40%
Freeport-McMoRan (FCX) $84.78 up 2.16% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $33.94 up 1.83% - global steel producer
POSCO (PKX) $111.45 up 0.96% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.94% to $1,502,602.53 (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 photograph by Mariana Titus

Tuesday, September 21, 2010

How Well is Eureka County Doing? Ask the Grubstake!



*** BREAKING NEWS *** COMEX gold hit a new high of $1292.4/oz (December contract, most active) at 15:45:00 EDT

Morning Miners!

It is 5:43 AM. Have a cup of Tuesday java with Ruby and me. She is some proud this morning, pardner. A custom shop in Carson is going to turn her Pete 379 into the beautiful ride she deserves. Checkout this computer graphic they created of what the the new Ruby Tuesday will become (inset photo)...ohh-weee! She'll need to drive to California to get an ocean sunset like that. It should be roaring down the Highway 50 by the end of this month, give her a toot. Oh, by the way the Great Recession is over...

The Great Recession is Over

The National Bureau of Economic Research (NBER) has determined that the recession that began in December, 2007, ended last year in the month of June, 2009. The so-called Great Recession marked the longest slump since the Great Depression, destroyed 7.3 million jobs, cut 4.1% from economic output and cost Americans 21% of their net worth. For many folks this official determination offers little solace, especially if you're still out of work.

The Eureka Miner's Grubstake Portfolio


Mining helped buffer Eureka County from some of the harshest effects of this recession. Coincidentally, this Report created the Eureka Miner's Million Dollar Grubstake Portfolio the month before the official end of the recession. At that time we gave the readers one million dollars to invest in twelve stocks that directly or indirectly impact our local economy. I thought it would be interesting to compare its performance with the broader market to gauge how well we're doing in recovery. Here's the present composition (see note 1):

Stocks Related Directly to Eureka County Mining:

Barrick (ABX) - Senior benchmark gold miner
Newmont (NEM) - Senior gold miner
US Gold (UXG) - Junior gold miner
General Moly (Eureka Moly, LLC) (GMO) - Junior molybdenum miner
ArcelorMittal (MT) - International steel producer, investor in General Moly
POSCO (PKX) - South Korean integrated steel producer, investor in the Mt. Hope Project (Eureka Moly, LLC)

Stocks Related to Domestic & Global Recovery:

Gold exchange traded fund (ETF) (GLD) - Gold investment fund
Silver ETF (SLV) - Silver investment fund
Caterpillar (CAT) - Global supplier of mining equipment
Freeport-McMoRan (FCX) - Bellwether miner spanning copper, gold & molybdenum
Thompson Creek (TC) - Benchmark molybdenum miner & producer
EOG Resources (EOG) - Domestic oil & gas producer

The first market day for the Grubstake was May 11, 2009. On that day the S&P 500 closed at 909.24 and gold was trading at $913/oz. The broader markets have just opened, let's see how we're doing by comparison:

S&P 500 today, 10:15 a.m. EDT 1141.30 up 25.5%

COMEX gold (December contract) today, $1278.9/oz up 40.1%

Eureka Miner's Grubstake Portfolio today, $1,474,914.84 up 47.5%

I'd say we're doing pretty good buckaroos!

How do the individual stocks stack up? In order of highest return:

1 -US Gold (UXG) up 98.1%
2 - Caterpillar (CAT) up 89.2%
3 - General Moly (Eureka Moly, LLC) (GMO) up 73.9%
4 - Freeport-McMoRan (FCX) up 59.0%
5 - Silver ETF (SLV) up 46.4%
6 - Newmont (NEM) up 43.2%
7 - Gold ETF (GLD) up 38.5%
8 - Barrick (ABX) up 33.9%
9 - POSCO (PKX) up 23.8%
10 - ArcelorMittal (MT) up 16.5%
11 - EOG Resources (EOG) up 14.4%
12 - Thompson Creek (TC) down 9.8%

In fairness Thompson Creek and US Gold were swapped in early this year (see note 1). If we compare their performance back to 5/11/2009, the overall returns would be:

US Gold (UXG) up 152.1%
Thompson Creek (TC) up 42.5%

This keeps US Gold at the top of the stack and Thompson Creek would just edge out the gold ETF for the number seven spot.

All in all, not too bad if the Grubstake performance is any indication of how well the mining business is doing in our county. If you must have a recession, it's good to live in Eureka, Nevada!

Daily Market Roundup

Enough talk, let's walk the walk:

Eureka Outlook Dashboard

The Eureka Miner's Index(EMI) is above-par at 243.85, up from yesterday's 242.25 and a long way from the 6/7/10 low of 50.7. The EMI high for the year was 259.35 on 4/12/2010 - the same day that COMEX copper peaked. Today's number is just below a lower trend level of 244.02 but comfortably above support at 186.51. Remember an EMI greater than 100 is good times (or at least better times) for the metals & miners relevant to Eureka County.

4-WD is OFF - improving roads in the marketplace; The VIX or "fear index" is below 25; metals & miners are on firm timber with bellwether Freeport-McMoRan (FCX) in the low-$80s above its 200-day average of $74.48 (our new warning level, 9/03 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment but there is still some deflationary caution now that we are sub-3%.

The YELLOW light is turned back on for Commodity Reflation. Although copper is trading above $3/lb, the 10-yr T-Note is below 3.00%

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

The YELLOW light is turned on for Inflation/Deflation Watch as the Federal Reserve resumes buying back Treasurys and the 10-yr T-Note remains below 3.00%

The GREEN light is turned back on for Investor Confidence as investment returns to the equity markets but the bond markets still signal trouble ahead

The GREEN light is 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, U.S. House committee debates miner workplace safety bill

Otherwise, all lights are green on the Eureka Outlook Dashboard (upper right, what's this?)

Commodity Market Morning Update

NYMEX/COMEX: Oil is down $0.11 in early trading at $76.08 (November contract, most active); Gold is down $1.9 to $1278.9 (December contract, most active); Silver is down $0.083 to $20.720 (December contract, most active); Copper is up $0.0025 to $3.5070 (December contract, most active)

Western Molybdenum Oxide is $15.50; European Molybdenum Oxide is $15.65; LME moly 3-month seller's contract is $16.33, LME cash seller is $16.01

Stock Market Morning Update

The DOW is down 6.17 points to 10747.45; the S&P 500 is down 1.41 to 1141.30. Miners are down except for Thompson Creek:

Barrick (ABX) $45.59 down 1.85%
Newmont (NEM) $62.67 down 0.95%
US Gold (UXG) $5.27 down 2.23%
General Moly (Eureka Moly, LLC) (GMO) $3.20 down 3.03%
Thompson Creek (TC) $11.03 up 0.73%
Freeport-McMoRan (FCX) $82.37 down 1.18% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $33.43 up 1.18% - global steel producer
POSCO (PKX) $110.19 down 0.74% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.87% to $1,474,914.84 (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

Note 1 - There were two changes to the Eureka Miner Grubstake for 2010:
Thompson Creek Metals (TC) replaced Nucor (NUE) 01-05-2010 and
US Gold (UXG) replaces ConocoPhilips (COP) 01-12-2010.

Headline photograph by Mariana Titus