"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, September 14, 2010

Gold Breaks $1261 & Silver $20.4 - Copper Calls Ruby

*** EVENING UPDATE *** Gold price spurts to record high (Adella Harding, Elko Daily Free Press, 4:26 p.m.(PDT), 9/14/2010)
*** BREAKING NEWS *** COMEX gold hit $1276.5/oz at 8:50 a.m. (PDT); COMEX silver $20.55/oz at 7:30 a.m. (PDT)

Morning Miners!

It is 5:42 AM. Have a cup of joe and excuse the mess. Ruby Tuesday came into the break room this morning like a late season hurricane. Her face was redder than the cab of her Peterbilt 379 - Pardner, I mean to tell you that ole gal was some mad! Miss Copper called her at midnight from the Vegas Greyhound and wanted bus fare home. She was crying that Gold had got too big for his britches again and was high-rolling in the casinos with Silver. Lord knows, I don't think I'll ever get Gold and Copper to the altar. If you've missed all this melodrama you may want to start with yesterday's blog, Copper & Gold Head for Vegas.

Just the Facts Ma'am

If Joe Friday were in the break room this morning he'd sit Ruby down and start from the top, "Just the facts, ma'am." Our first fact is that this Report watches the fortunes of Miss Copper and her beau Gold with great interest. As copper goes, so go the metals & miners, so go the broader markets in my world. That's the way it's been working ever since China and other emerging economies acquired a voracious appetite for the red metal and all manner of other natural resources.

Our second fact is that the metals & miners do best when oil, copper and gold all march in step. That hasn't been the case for many months until very recently. Copper re-established a positive correlation with gold and it now looks like oil is not far behind. If this trend continues we should see bluer skies for all the metals and miners as we close out 2010. So what caused all the stir in Las Vegas last night?

Softer than expected economic data came out of Europe and investors raced to the safe haven of precious metals. COMEX gold hit $1261.9/oz and COMEX silver peaked at $20.44/oz in early trading. They've fallen back but not much with gold at $1260.4/oz and silver at $20.265 as the ole Colonel takes notes for Sergeant Friday. As you might expect Miss Copper fell down the hotel stairs:

Here's what the bellboy had to say:

METALS-Copper falls after European economic data (Reuters, 9/14/2010, 12:24pm GMT)

Now sweet Ruby T has a good head on her shoulders when she's not hollering and screaming. In the wee hours she reminded Miss Copper that her prices were up 9% in only 12-days in India and her China imports have risen big time for August.

Chinese copper imports rise to 379,527 tonnes in August (Reuters, 9/14/2010)

The ole Colonel found it encouraging that this one month Chinese demand is nearly equivalent to all the remaining copper stored in the London Metal Exchange (LME) warehouse - 391,400 tonnes. That inventory has been in decline for months after peaking earlier this year at some 550,000 tonnes. Here is a recent inventory chart for Miss Copper at her London flat:

Lastly, even with all the commotion today's Eureka Miner's Index(EMI) remains above 200 and steps higher than yesterday's number (see below). Ruby convinced Miss Copper to return to the hotel, kiss and makeup - it will take more than a little sour news from Europe to breakup this reunion.

Daily Market Roundup

Enough boo-hooing, let's walk the walk:

The Eureka Miner's Index(EMI) is above-par at 217.20, up from yesterday's 207.93 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 above a lower trend level of 204.41 and comfortably above support at 178.59. 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 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 unchanged in early trading at $77.19 (October contract, most active); Gold is up $13.3 to $1260.4 (December contract, most active); Silver is up $0.114 to $20.265 (December contract, most active); Copper is down $0.0295 to $3.4495 (December contract, most active)

Western Molybdenum Oxide is $15.50; European Molybdenum Oxide is $15.80; LME moly 3-month seller's contract is $16.33, LME cash seller is $16.10

Stock Market Morning Update

The DOW is down 30.43 points to 10513.70; the S&P 500 is down 4.36 to 1117.54. Miners are down except for the gold diggers:

Barrick (ABX) $45.42 up 2.74%
Newmont (NEM) $62.65 up 3.69%
US Gold (UXG) $5.20 up 2.36%
General Moly (Eureka Moly, LLC) (GMO) $3.14 down 1.88%
Thompson Creek (TC) $10.22 down 0.58%
Freeport-McMoRan (FCX) $81.00 down 0.95% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $32.07 down 2.55% - global steel producer
POSCO (PKX) $110.76 down 0.83% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.46% to $1,452,494.53 (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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