"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.

Friday, October 8, 2010

The Report Says ‘Happy Trails’ until November


“Copper remains hot, so far staying above $1.80, 2-bucks here we come.” Eureka Miner’s Market Report, 3/23/2009

“General Moly (GMO) opened up over 5% today with an intraday high...of $1.32. That's more than a 100% gain from its March 2 close of $0.64. Over one million shares traded yesterday. Somebody loves us. Yee-ha!” Eureka Miner’s Market Report, 3/25/2009

“Predicting the price of gold is a fool's errand but the ole Colonel is at least a happy fool...I'm sticking with my beer bet: Gold sees $929 before $844 on or before 5/15/09” Eureka Miner’s Market Report, 4/15/2009

“...Eureka sits at the crossroads of gold and molybdenum. Hell, I'm still bullish on both. Let's rock the clock!” Eureka Miner’s Market Report, 4/26/2009

*** BREAKING NEWS *** General Moly (GMO) broke $4.00/share this morning for an intraday high of $4.10 on high volume. The surge started at 11:39 ET and continued to 11:47 ET

GENERAL MOLY ANNOUNCES HANLONG'S RECEIPT OF KEY CHINESE GOVERNMENTAL APPROVAL

*** BREAKING NEWS *** COMEX copper hit a new high $3.8015/lb at 11:00:00 ET


Morning Miners!

It 1s 5:41 AM. Scott Raine dropped by some of his new Trail Blazer TGIF Coffee last night - hang on to your hat, pardner. The Report will be saying "Happy Trails" until sometime before Turkey-Day. The ole Colonel is traveling down to Louisiana to pickup his sweetheart and plans to return to Eureka in November. Loquita will be riding shotgun.

It's been an exciting 19-month ride with 375 market reports under our belt (The Report archive is on you right toward the end of the blog page). We stared a market commentary tailored for the mining interests of Eureka County just two weeks after the S&P 500 pegged its closing bottom of 676.53 (3/9/2009). It was a tough long pull from the depths of Great Recession Canyon as evidenced by the headline quotes from the early reports. Gold was then in the high-$800s; now, we get excited if we fall a few dollars from the mid-$1300s. General Moly had fallen to penny-stock levels, next summer fully-funded Mt. Hope mine construction begins.

Hopefully, a few more folks are aware of what goes on out here in the heart of North American gold country with a promising future in strategic minerals. Every state and territory in the Union has dropped by the break room at one time or the other along with 81 countries from as far away as Australia and Kazakhstan. We'll saddle up soon and get ready for a new ride into 2011. Thank you for your questions,contributions and support.

Monthly Jobs Report Down - Gold Up, Metals & Miners Up

I watched the release of the U.S. Labor Department monthly jobs report this morning on CNBC Business News. It was interesting because the Federal Reserve Bank of St. Louis President, James Bullard, was there to offer his comments on the data. Mr. Bullard is the most vocal proponent for additional quantitative easing (QE) by the Fed (loosely, this means print more money).

The report showed fewer jobs in September than expected, with private payrolls adding only 64,000 jobs and overall non-farm payrolls falling by 95,000. The unemployment rate remains at 9.6%. Mr. Bullard commented that the growth in private jobs was the most important number and not too different from what he expected. He needed to "plug that number into the models" and review the details of the report.

No doubt his comments only added to the market's expectation that the Federal Reserve will commence QE in November after the elections. Both London spot and COMEX gold went up then down then up again on the report.



In the strange calculus of further Fed action, the dollar fell to a new 15-year low on the yen (82.20, below the last Japanese intervention at 83) and the metals & miners rallied as the broader markets opened. The Eureka Miner's Index(EMI) just set a new record for 2010 breaking 300 at 310.24. Bellwether miner Freeport-McMoRan (FCX) is hitting new highs not seen since August, 2008.

What's Next for Gold?

My favorite gold and metals analyst, Jim Wyckoff, gave a good summary of what may lie ahead for gold after yesterday's sharp reversal:

P.M. Kitco Metals Roundup: Comex Gold Hit With Profit-Taking; Near-Term Technical Damage if More Selling Pressure Friday
(Jim Wyckoff, Mineweb, 10/7/2010)

Thursday's gold and oil futures had an "outside day" down which means higher-highs, lower-lows followed by a lower close than the previous day. It was a real whipsaw with gold moving nearly $40 between ups and downs:

COMEX gold

9/6 1351.0 (high) 1340.0 (low) 1347.7 (close)
9/7 1366.0 (new record) 1326.5 (low) 1335.0 (close)

NYMEX oil

9/6 84.09 (high) 82.29 (low) 83.23 (close)
9/7 84.43 (new high since 5/10) 81.00 (low) 81.40 (close)

Outside days can indicate a top especially if today's close confirms yesterday's action as a "key reversal." So far things are looking up with COMEX gold presently trading at $1357.0/oz and NYMEX oil at $81.84/bbl. We'll just need to wait and see. My horse sense tells me that gold will pause some this month and then head north on the heels of QE and a falling dollar.

On Monday, The Report picked a nominal gold price of $1320/oz for this month. Although this estimate may be a bit low in light of today's events, it does not preclude copper from hitting $3.90/lb. If gold moves higher, it is possible that copper can re-enter $4/lb territory. If FCX holds up and oil prices stay above $80/bbl, I'm optimistic going into November.

Oil & Gold Correlation Remains Positive

Before the ole Colonel heads for the door, let's update our correlations one last time. Yesterday we noted that oil and gold were back in the saddle breaking a negative 3-month correlation that began in May (5/11/10). This change is a bullish condition for metals & miners as long as oil prices don't rise too much higher. Oil, like copper, is a reliable proxy for global growth . The Report tracks oil/gold, copper/gold and copper/oil faithfully and reports their correlations in our weekly roundup on Monday mornings which will resume in November.

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

Oil/Au correlation +0.7808 (1-month) +0.1007 (3-month)
Cu/Au correlation +0.9609 (1-month) +0.8619 (3-month)
Cu/Oil correlation +0.8054 (1-month) +0.2529 (3-month)

Monday's numbers:

Oil/Au correlation +0.5862 (1-month) -0.2204 (3-month)
Cu/Au correlation +0.8939 (1-month) +0.8018 (3-month)
Cu/Oil correlation +0.6548 (1-month) +0.0621 (3-month)

All three correlations remain in positive territory for the short & near-term (1-month & 3-month) suggesting a continuation of the metals rally although it is likely that we may see some pullbacks. A dollar short-covering rally (see note 1) or change in investor's expectation of further Federal Reserve quantitative easing could alter this picture. I'll stick with my prediction that copper sees $3.90/lb before Turkey-Day.

Happy trails to you, until we meet again.
Happy trails to you, keep smilin' until then.
Who cares about the clouds when we're together?
Just sing a song and bring the sunny weather.
Happy trails to you, 'till we meet again.

Some trails are happy ones,
Others are blue.
It's the way you ride the trail that counts,
Here's a happy one for you.

Happy trails to you, until we meet again.
Happy trails to you, keep smilin' until then.
Who cares about the clouds when we're together?
Just sing a song and bring the sunny weather.

Happy trails to you, 'till we meet again.

(Lyrics, Dale Evans Rogers)

Daily Market Roundup

Enough singing, let's walk the walk:

The Eureka Miner's Index(EMI) is above-par atand sets a hew high for 2010 of 310.24, up from yesterday's 293.31 and a long way from the 6/7/10 low of 50.7. Today's number is above the lower trend level of 265.08 and very comfortably above support at 186.51. The 1-month moving average is 235.36. The previous 2010 record high for the EMI was 294.37 set Wednesday, 10/6/2009. 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-$90s well above its 200-day average of $74.59 (our new warning level, 10/01 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 YELLOW light is turned on our Fuel Gauge with oil above $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 $0.17 in early trading at $81.84 (November contract, most active); Gold is up $5.4 to $1340.4 (December contract, most active); Silver is up $0.171 to $22.755 (December contract, most active); Copper is up $0.0535 to $3.7330 (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 $15.24

Stock Market Morning Update

The DOW is up 17.25 points to 10965.83; the S&P 500 is up 1.70 to 1159.76. Miners are QE happy, except for Newmont:

Barrick (ABX) $47.92 up 0.50%
Newmont (NEM) $62.94 down 0.14%
US Gold (UXG) $5.12 up 1.39%
General Moly (Eureka Moly, LLC) (GMO) $3.70 up 0.82%
Thompson Creek (TC) $10.92 up 1.58%
Freeport-McMoRan (FCX) $93.30 up 2.11% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $34.62 up 2.06% - global steel producer
POSCO (PKX) $118.94 down 1.01% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.84% to $1,566,472.96 (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

(1) A U.S. dollar short-covering rally occurs when investors betting against the dollar in relation to other currencies get cold feet and pull their "short" bets off the table. Since the U.S. dollar index is dominated by European currencies (euro, pound sterling are 69.5%, throw in the Swiss franc and Swedish krona and you're up to 77.3%), any bad news from that neck of the woods could quickly reverse declines in our dollar.

Headline photograph by Mariana Titus

Thursday, October 7, 2010

Gold & Silver Step Out - Oil Joins the Parade



*** BEAKING NEWS *** There may be a reversal in gold underway on a late morning dollar rally...


Þūnresdæg
Morning Miners!

It is 5:39 AM. Have a cup of Thor's Thunderous Java and let's go right to the record books for our daily posting. Excuse the noise outside, our favorite Norseman is out in the parking lot playing "Thunderclap" with Loquita. I don't what's worse, her barking or his sonic booms.

Gold & Silver Step Out - Oil Joins the Parade

Gold and silver hit new highs at the COMEX and London spot exchanges. Copper is taking a rest but oil hit a new 4 1/2-month high.

COMEX gold $1366.0/oz 04:20:00 ET, 10/7/2010 (December contract, most active), new record
COMEX Silver $23.530/oz 04:20:00 ET, 10/7/2010 (December contract, most active), 30-year high
NYMEX Oil $84.43 09:00:00 ET, 10/7/2010 (November contract, most active), since mid-May

Most of this is driven by a continuing decline in the U.S. dollar - the euro hit $1.4028, its cheapest level since January (1/28/10); the U.S. dollar index plumbs new depths at 77.35. The yen is at 82.31 below the last intervention at 83. In the "race to debase" sovereign currency the U.S. now leads Japan.

This morning is noteworthy not only because of gold & silver charge on but oil has finally re-established a positive relation with gold (see below). I don't like mid-$80/bbl oil but its lack of participation in the metals rally has been troubling. I wouldn't doubt some profit taking tomorrow across the commodity space after tomorrow's monthly Labor Report together with consolidation before the weekend.

Oil & Gold Correlation Go Positive

Oil/gold have had a negative 3-month correlation since May (5/11/10) - a bearish condition for metals & miners since oil, like copper, is a reliable proxy for global growth. The Report tracks oil/gold, copper/gold and copper/oil faithfully and reports their correlations in our weekly roundup on Monday mornings.

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

Oil/Au correlation +0.7736 (1-month) +0.0513 (3-month)
Cu/Au correlation +0.9634 (1-month) +0.8444 (3-month)
Cu/Oil correlation +0.7971 (1-month) +0.2152 (3-month)

Monday's numbers:

Oil/Au correlation +0.5862 (1-month) -0.2204 (3-month)
Cu/Au correlation +0.8939 (1-month) +0.8018 (3-month)
Cu/Oil correlation +0.6548 (1-month) +0.0621 (3-month)

All three correlations being in positive territory for the short & near-term (1-month & 3-month) suggests a continuation of the metals rally although it is likely that we may see some pullbacks. A dollar short-covering rally (see note 1) or change in investor's expectation of further Federal Reserve quantitative easing could alter this picture. I'll stick with my prediction that copper sees $3.90/lb before Turkey-Day.

There goes another durn Thor thunderclap. Stay tuned, buckaroos.

Daily Market Roundup

Enough talk, let's walk the walk:

The Eureka Miner's Index(EMI) is above-par at 293.31, down slightly from yesterday's new record of 294.37 and a long way from the 6/7/10 low of 50.7. Today's number is above the lower trend level of 261.15 and very comfortably above support at 186.51. The 1-month moving average is 231.45. The previous 2010 record high for the EMI was 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 low-$90s well above its 200-day average of $74.59 (our new warning level, 10/01 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 YELLOW light is turned on our Fuel Gauge with oil above $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 $83.99 (November contract, most active); Gold is up $9.3 to $1357.0 (December contract, most active); Silver is up $0.252 to $23.295 (December contract, most active); Copper is up $0.0090 to $3.7440 (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 $15.20

Stock Market Morning Update

The DOW is down 4.28 points to 10963.37; the S&P 500 is down 0.72 to 1159.25. Miners are tired:

Barrick (ABX) $47.97 down 1.28%
Newmont (NEM) $63.43 down 1.99%
US Gold (UXG) $5.09 down 2.49%
General Moly (Eureka Moly, LLC) (GMO) $3.66 down 3.68%
Thompson Creek (TC) $10.85 down 1.72%
Freeport-McMoRan (FCX) $92.10 down 1.62% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $33.96 up 1.86% - global steel producer
POSCO (PKX) $119.96 down 0.42% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 1.28% to $1,561,127.31(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

(1) A U.S. dollar short-covering rally occurs when investors betting against the dollar in relation to other currencies get cold feet and pull their "short" bets off the table. Since the U.S. dollar index is dominated by European currencies (euro, pound sterling are 69.5%, throw in the Swiss franc and Swedish krona and you're up to 77.3%), any bad news from that neck of the woods could quickly reverse declines in our dollar.

Headline photograph by Colonel Possum

Wednesday, October 6, 2010

Green Eggs and Ham - The Colonel's Outlook for the Rest of 2010



I would not eat green eggs and ham.
I do not like them, Sam-I-am
Dr. Suess


Wōdnesdæg
Morning Miners!

It is 5:45 AM. Grab a cup of hump day coffee and let's see what has Old Miner Woden chuckling. He's looking at this morning's headline photo, "Colonel, these here green eggs were by my diggings. I remember your sidekick taking the picture when you came to visit in the spring of 2007."

If you care to visit Old Miner Woden his camp is on the north-west face of Lone Mountain about 1/4 mile up from the old headframe. He's there every day except "Woden's Day" when he drops by the break room for coffee. Give a holler first or you might be picking buckshot out of your behind.

Gold breaks $1350 - New highs for Silver & Copper

More records after the strike of midnight, pardner:

COMEX gold $1351.0/oz 00:45:00 ET, 10/6/2010 (December contract, most active), new record
COMEX Silver $23.20/oz 17:00:00 ET, 10/6/2010 (December contract, most active), 30-year high (updated later in the day from last high at 00:45:00)
COMEX Copper $3.7895/lb 03:00:00 ET, 10/6/2010 (December contract, most active), 27-month high

Our tireless friends in London have the copper story:

Copper Advances to a 27-Month High on Fed Speculation; Tin Reaches Record (Anna Stablum, London Bloomberg News, 10/6/2010)

The Colonel's Outlook for the Rest of 2010

A faithful reader of the Report asked me for my thoughts yesterday on General Moly (GMO) and the markets. He is the owner of a very successful internet-based company in Seattle, Washington, and an ardent supporter of our Mt. Hope molybdenum project. I replied that GMO was on track and then gave him my thoughts for the remainder of the market year. Since this comment, Freeport-McMoRan (FCX) has posted a new high of $93.48 in early morning trading - a level not seen since the summer of 2008:

"...The markets are a huge mental puzzle lately. Base metals say blue skies globally and domestic bond markets point to Armageddon. I always side with the metals.

I'd watch Freeport-McMoran (it broke $90 today) and oil. If Freeport stumbles and oil heads south from $80, I'm going to put on my winter gear.

Freeport [FCX] was a terrific early warning indicator in December 2008 and again in February of this year. The former presaged the S&P 500 dip to 600 territory in March, 2009; the later, warned of the commodity correction in May-June 2010 even as copper and the S&P went on to post highs in April.

As long as FCX is good I'm bullish for the remainder of the year.

Moly started to look soft but the LME [London Metal Exchange] futures picked up some yesterday. Tight supply seems to be the word for a lot of the metals.

My contrarian nature has me buying the dollar index lately (UUP) just because EVERYONE hates the U.S. dollar. Since the index is euro-dominated this opinion could change with the next hiccup from Europe. UUP [Powershares DB US Dollar Index Bullish Fund] is a trade because the long term prospects for the greenback may not be super-duper. Meredith Whitney has some rather sobering thoughts about state finances in 2011 - is California the next Greece etc.

Cheers to you for running a successful business in this environment! Folks like you will help this country move forward into broad, sunlit uplands (Chrurchill)."

Let's expand a bit more on these thoughts...

Green Eggs and Ham


I'd like to apply the famous Dr. Suess title for his timeless children's book, "Grren Eggs and Ham" to today's markets. Green eggs: This morning the 10-year Treasury is plumbing depths in yield (2.394%) and the International Monetary Fund (IMF) has just downgraded its global growth estimate on concerns about the U.S. recovery:

"Growth prospects for the U.S. took the IMF's largest downgrade, falling to 2.3% in 2011 from a previous estimate of 2.9%. China's growth rate is still expected to fall slightly to a still-steamy 9.6% from 10.5%. The IMF sees euro-zone economies averaging 1.7% growth this year and 1.5% next year -- both improvements on its previous projection, helped by strength in Germany." (WSJ, 10/6/2010)

Our ham for the morning is more daily records for gold, silver, copper and several other base metals. Our Eureka Miner's Index(EMI) has just hit a new high for the year of 294.4.

In the stark dichotomy between bond and commodity markets, I do side with the metals but will cautiously monitor Freeport for any signs of weakness. At the end of January this year the report threw up a red flag on FCX, Freeport "Broken", Miners in Correction:

"The fate of Freeport is important because it is often considered the bellwether of mining stocks by the investment community. Yesterday on CNBC, Dennis Gartman, the Commodity King, declared Freeport 'technically broken' and saw rocky roads ahead for metals and miners in the near term. A stock that is technically broken is expected to fall further based on its chart performance even if the company's fundamentals are positive." (The Eureka Miner's Market Report, 1/31/2010)

The metals & miners did recover and new highs were set in April only to be dashed by the severe May-June commodity correction. In retrospect, I believe the early FCX stumble saw beyond the April rally.

If FCX stays happy, the Colonel remains optimistic for the remainder of the year; if not, we'll take our lesson from recent history.

Earlier this year I predicted we'd see 1,251 on the S&P 500 before Christmas. I'll stick with that although we may see a pullback prior to a post-election/Christmas rally. The level 1,251 is important because it was the entry point for The Great Recession Bear Market (i.e. 20% down from 2007 highs). If FCX breaks down before Santa, the ole Colonel may be buying a lot of readers a lot of beers. The S&P 500 is at 1160 as I write this morning's blog, 91 points to go.

In my comment, the Colonel isn't cheering for higher oil prices but a downturn could be a bearish sign since copper and oil are reliable proxies for global growth. It's always good to spread your bets so that's why I'm buying a little dollar index for safe keeping.

Finally, the Churchill quote is from his famous "Finest Hour" speech and does apply to anybody brave enough to meet a payroll these days. It may be the "finest hour" for every American small business when we look back on these most difficult days.

Daily Market Roundup

Enough prognostication, let's walk the walk:

The Eureka Miner's Index(EMI) is above-par setting a new record at 294.37, up from yesterday's 266.46 and a long way from the 6/7/10 low of 50.7. Today's number is above the lower trend level of 257.22 and very comfortably above support at 186.51. The 1-month moving average is 227.28. The old 2010 record high for the EMI was 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 low-$90s well above its 200-day average of $74.59 (our new warning level, 10/01 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 YELLOW light is turned on our Fuel Gauge with oil above $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 $82.63 (November contract, most active); Gold is up $5.4 to $1345.7 (December contract, most active); Silver is up $0.138 to $22.875 (December contract, most active); Copper is up $0.0265 to $3.7530 (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 $15.20

Stock Market Morning Update

The DOW is up 12.33 points to 10957.05; the S&P 500 is down 0.37 to 1160.38. Miners are still rocking:

Barrick (ABX) $47.77 up 0.95%
Newmont (NEM) $63.81 up 0.22%
US Gold (UXG) $5.19 up 0.38%
General Moly (Eureka Moly, LLC) (GMO) $3.74 up 1.08%
Thompson Creek (TC) $10.90 up 0.09%
Freeport-McMoRan (FCX) $92.08 up 0.99% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $33.40 up 0.48% - global steel producer
POSCO (PKX) $118.97 up 0.52% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.54% to $1,567,424.83 (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, October 5, 2010

Gold, Silver & Copper New Highs - Silver Outlook High-tech


*** BREAKING NEWS *** More new highs:

COMEX gold $1342.90/oz 15:15:00 ET, 10/5/2010 (December contract, most active), new record
COMEX Silver $22.920/oz 14:35:00 ET, 10/5/2010 (December contract, most active), 30-year high
COMEX Copper $3.745/lb 10:30:00 ET, 10/5/2010 (December contract, most active), 26-month high (7/18/2008)


Morning Miners!

It is 5:48 AM. Grab a cup and get ready for another record breaker day. If you're an early riser you may have seen Ruby's custom Pete parked down by Country Roads this morning. She's proud as can be of her new ride. Someone asked why she has a sleeper on a day-haul truck. Ruby Tuesday winked, "It's a nice hideout from them blasted grandkids!"

Now don't come a'knocking...

Gold, Silver and Copper Hit New Highs




It looks like another gold rush this morning. Gold & silver got a nice bounce on the London spot market around midnight (PT) and moved up along with copper to set new highs on the COMEX just a short while ago:

COMEX gold $1322.00/oz 10:15:00 ET, 10/5/2010 (December contract, most active), new record
COMEX Silver $22.170/oz 11:00:00 ET, 10/5/2010 (December contract, most active), 30-year high
COMEX Copper $3.7220/lb 09:45:00 ET, 10/5/2010 (December contract, most active), 26-month high (7/18/2008)

Our friends in London caught the copper move,

Copper Advances Before U.S. Service-Industries Report; Tin Gains to Record (Yi Tian and Anna Stablum, London Bloomberg News, 10/5/2010)

and a good background piece on silver posted yesterday:

Silver May Gain Into 2011 on Investor, Industry Use, Deutsche Bank Says
(Nicholas Larkin, edited by Claudia Carpenter, London Bloomberg News, 10/4/2010)

Silver Outlook: Safe Haven and Hi-tech

As reported by Bloomberg, Daniel Brebner of Deutsche Bank AG believes silver may see $26.50/oz in 2011 after rock star performance this year. Silver benefits as a safe haven precious metal play but also has many industrial uses in a recovering economy.

This report has covered the importance of silver in future battery technologies for the emerging electrified transportation story and continued application in portable devices. Silver-zinc batteries have a higher energy per volume ratio than lithium-ion and close to lithium-ion in energy per weight. The Report has covered the hi-tech future of silver in recent blogs:

A Silver Lining for the Silver State, 11/16/2009

What's in a Battery for Eureka County?, 11/23/2009

Looks like we've got a good day for the miners too, buckaroos.

Daily Market Roundup

Enough talk, let's walk the walk:

The Eureka Miner's Index(EMI) is above-par at 266.46, up from yesterday's 245,81 and a long way from the 6/7/10 low of 50.7. Today's number is above the lower trend level of 253.30 and very comfortably above support at 186.51. The 1-month moving average is 223.45. 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 $74.59 (our new warning level, 10/01 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 YELLOW light is turned on our Fuel Gauge with oil above $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 $0.84 in early trading at $82.31 (November contract, most active); Gold is up $16.0 to $1332.8 (December contract, most active); Silver is up $0.327 to $22.365 (December contract, most active); Copper is up $0.0605 to $3.7245 (December contract, most active)

Western Molybdenum Oxide is $15.00; European Molybdenum Oxide is $14.95; LME moly 3-month seller's contract is $15.42, LME cash seller is $15.15

Stock Market Morning Update

The DOW is up 113.41 points to 10864.68; the S&P 500 is up 14.82 to 1151.85. Miners are rocking:

Barrick (ABX) $47.07 up 2.37%
Newmont (NEM) $64.53 up 2.85%
US Gold (UXG) $5.06 up 2.64%
General Moly (Eureka Moly, LLC) (GMO) $3.60 up 1.12%
Thompson Creek (TC) $10.79 up 1.60%
Freeport-McMoRan (FCX) $89.23 up 2.29% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $32.71 up 1.84% - global steel producer
POSCO (PKX) $117.65 up 1.98% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 1.78% to $1,538,045.01 (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, October 4, 2010

$3.90 Copper by T-Day - Metals & Miners Weekly Roundup


Morning Miners!

It is 5:50 AM. It's a BIG 10-4 Monday, grab a cup and let's get to work. You only get a 10-4 on a Monday every seven years so make the most of it, pardner. Let's do some prognostication...

The Colonel's Metal Outlook for October

The Report hasn't had a metal outlook for several months because oil and copper have been in wicked inversions with respect to gold. We believe oil and copper together are reliable proxies for global growth. The 3-month correlation of oil and gold is still negative but improving; copper is now strongly correlated - a bullish sign for metals (see below).

After a strong run of records in the last several weeks, I'm going to guess that gold takes a pause this month and will pick a nominal price for COMEX gold of $1320/oz for October. Given this nominal, here is the Colonel's outlook for copper and silver:

The fair value of COMEX copper is $3.6619/lb in a range of $3.4203/lb to $3.9035/lb

The fair value of COMEX silver is $21.798/oz in a range of $20.995/oz to $22.602/oz

The top range for either copper or silver would set new records (see below) so I'll stick my neck out with the turkey and predict that copper breaks $3.90/lb before Thanksgiving.

For you chart buffs, the following shows COMEX copper versus gold based on the last 3-months of futures data. The magenta line is "fair value"; the aqua lines represent the upper and lower bounds of the price range. The squiggly lines connect actual price data; yellow is most recent (3-months), blue is older data (a larger and more readable chart is given near the bottom of the blog page):



Record Highs

I thought it would be helpful to include the latest records for gold, silver and copper in our Monday morning weekly roundup. This Report looks for intraday highs over the market week. Highs set on weekend or holiday electronic trading will be noted as "weekend wonders" but not counted as official. The Report occasionally asks London Bloomberg News to confirm records and dates.

COMEX gold $1322.00/oz 10:15:00 ET, 10/1/2010 (December contract, most active, new record
COMEX Silver $22.170/oz 11:00:00 ET, 10/1/2010 (December contract, most active), 30-year high (1)
COMEX Copper $3.7220/lb 09:45:00 ET, 10/1/2010 (December contract, most active), 26-month high (2)

Eureka Miner's Index(EMI) 274.66 Friday market close, 9/24/2010, 2010 year-to-date closing high

(1)"Weekend wonder" record: Silver $22.235/oz 18:15:00 ET, 10/3/2010, Sunday (December contract, most active)
(2)Confirmed - London Bloomberg, 11:13 a.m. PT, 10/1/2010: since 7/30/2008

Weekly Molybdenum Roundup



Moly prices remain in a stable range for the year but are below mid-range with Western moly oxide at $15.00/lb just above to European moly at $14.95/lb. The LME 3-month seller contract moved down to $14.97 from $15.65/lb. The Report's mid-range price target for 2010 moly prices is $15.71/lb.

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

Moly Oxide, Europe (Mo Drummed Molydbic Oxide EU) $14.95/lb (the price reported in the Metals Bulletin)

LME Futures Contracts

LME cash seller is at $32,400/metric ton $14.70/lb

3-Month (Buyer) $32,000/metric ton $14.52/lb
3-Month (Seller) $33,000/metric ton $14.97/lb

15-Month (Buyer) $32,000/metric ton $14.52/lb
15-Month (Seller)$33,000/metric ton $14.97/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 and more readable chart appears near the bottom of this blog page.


The Eureka Miner's Index(EMI) is above-par at 245.81, down from Friday's close of 263.18 but a long way from the 6/7/10 low of 50.7. Today's number is below the lower trend level of 249.37 but very comfortably above support at 186.51. The 1-month moving average is 217.49. 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.

200-day averages used in the EMI to normalize current mining company share price are updated monthly. Upper and lower trend lines are updated weekly.

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 the April COMEX copper high of $3.68/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 approaching the 4/27/2010 starting point - 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 good improvement from last week's 3-month correlation. The graphs above are up to Friday's close.

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

Oil/Au correlation +0.5862 (1-month) -0.2204 (3-month)
Cu/Au correlation +0.8939 (1-month) +0.8018 (3-month)
Cu/Oil correlation +0.6548 (1-month) +0.0621 (3-month)

Last week's numbers:

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 +0.5107 (1-month) +0.0847 (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 high-$80s above its 200-day average of $74.59 (our new warning level, 10/01 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 YELLOW light is turned on our Fuel Gauge with oil above $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 $82.09 (November contract, most active); Gold is down $1.1 to $1316.7 (December contract, most active); Silver is up $0.010 to $22.070 (December contract, most active); Copper is down $0.0135 to $3.6770 (December contract, most active)

Western Molybdenum Oxide is $15.00; European Molybdenum Oxide is $14.95; LME moly 3-month seller's contract is $14.97, LME cash seller is $14.70

Stock Market Morning Update

The DOW is down 9.46 points to 10820.22; the S&P 500 is down 2.45 to 1143.79. Miners are down:

Barrick (ABX) $46.58 down 0.91%
Newmont (NEM) $63.09 down 0.93%
US Gold (UXG) $4.93 down 1.00%
General Moly (Eureka Moly, LLC) (GMO) $3.64 down 1.09%
Thompson Creek (TC) $10.79 down 0.46%
Freeport-McMoRan (FCX) $88.13 down 1.12% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $32.61 down 0.082.63% - global steel producer
POSCO (PKX) $115.89 down 0.63% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.74% to $1,524,819.96 (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, October 1, 2010

Copper 2-year High, Gold Breaks $1319, Oil Above $80



*** BREAKING NEWS *** MORE NEW HIGHS:

COMEX gold $1322.00/oz 10:15:00 ET (December contract, most active), updated
COMEX Silver $22.170/oz 11:00:00 ET (December contract, most active), updated
COMEX Copper $3.7220/lb 09:45:00 ET (December contract, most active), updated


Morning Miners!

It is 5:44 AM. Scott Raine surprised us last night with his new Record Breaker TGIF coffee. Have a cup, its one for the books. We got a few more record breakers flying at us on a falling dollar and new positive data from China.

Copper & Gold New Highs

Our favorite London correspondent, Claudia Carpenter, got the copper headline for Bloomberg News this morning with colleague Glenys Sim:

Copper Climbs to Two-Year High on Chinese Manufacturing, Weakening Dollar (Claudia Carpenter and Glenys Sim, London Bloomberg News, 10/1/2010)

COMEX gold also pegged a new high in early morning trading on the COMEX. Here's our scorecard to date:

COMEX copper $3.720/lb 06:00:00 ET December contract, most active - since 7/31/2008
COMEX gold $1319.3/oz 02:45:00 ET December contract, most active - record

Silver was left from the lead pack this morning but got her new high yesterday:

COMEX silver $22.125/oz 06:25:00 ET (9/30)December contract, most active - 30-yr high

According to Bloomberg, the weakening dollar, declining inventories and positive manufacturing data helped propel copper over the April high of $3.68/lb. China’s official purchasing managers’ index (PMI) rose to 53.8 from 51.7 in August, "beating the median forecast of 52.5 in a Bloomberg News survey of 15 economists. A separate PMI released on Sept. 29 by HSBC Holdings Plc and Markit Economics climbed to a five-month high."

The U.S dollar is plumbing new depths with the dollar index (.DXY or"Dixie") hitting a near 10-month low of 78.1 earlier this morning although it has recovered some at 78.21. The euro is at 1.3734 and the yen is very near mid-September intervention levels at 83.48 (Japan Intervenes on Yen - U.S. Dollar Up, 9/15/2010).


Folks, the seat of my pants are starting to say this metals & miners rally may be getting a little ahead of the parade. Caterpillar (CAT) was down this morning and the big boys are starting to build short positions on Freeport-McMoRan (FCX). I took a little profit on both yesterday - it's been a nice run. Maybe my britches are telling lies.

Watch what you wish for - Oil breaks $80/bbl

The Colonel has been whining for sometime about the lack of oil's participation in the metals rally. This report contends that to sustain for a copper rally, both oil and the red metal need to move in a positive direction with gold (at least more often than not). The logic is pretty simple: given the emerging economies voracious natural resource appetite, both oil and copper are good proxies for global growth. Their relative value with respect to gold removes the element of currency fluctuation. When there is fear about the health of the global recovery gold goes up, oil & copper go down (i.e. oil & copper are negatively correlated with gold). When fear recedes they begin to re-correlate positively.

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

Oil/Au correlation +0.5440 (1-month) -0.3003 (3-month)
Cu/Au correlation +0.8864 (1-month) +0.7911 (3-month)
Cu/Oil correlation +0.6187 (1-month) +0.0186 (3-month)

These are Monday's numbers from the weekly roundup:

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)

As we see, copper & gold are doing great but oil & gold are only just starting to come together (we'd like to see both 1-month and 3-month positive correlations across the board).

Of course, there is a limit to all this. If oil is too expensive it starts to squeeze mining profit margins - the Report draws a line at $80/bbl. This morning then is a mixed bag; oil & gold are getting back together but oil is above $80/bbl - a difficult balancing act, buckaroos. Stay tuned.

Miss Moly slips a little in Europe

By the by, European moly oxide slipped below the $15/lb level to $14.95/lb sitting below Western moly for the first time in many months ($15.00/lb). This Report's 2010 mid-range molybdenum target price is $15.72/lb...something to watch.

Daily Market Roundup

Enough talk, let's walk the walk:

The Eureka Miner's Index(EMI) is above-par at 255.42, down from yesterday's 258.11 but a long way from the 6/7/10 low of 50.7. Today's number is below the lower trend level of 263.60 but very comfortably above support at 186.51. The 1-month moving average is 211.94. 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 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 YELLOW light is turned on our Fuel Gauge with oil above $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 $1.12 in early trading at $81.09 (November contract, most active); Gold is up $7.2 to $1316.8 (December contract, most active); Silver is up 0.114 to $21.965 (December contract, most active); Copper is up $0.0525 to $3.7040 (December contract, most active)

Western Molybdenum Oxide is $15.00; European Molybdenum Oxide is $14.95; LME moly 3-month seller's contract is $14.97, LME cash seller is $14.70

Stock Market Morning Update

The DOW is up 67.51 points to 10855.56; the S&P 500 is up 7.93 to 1149.13. Miners are up:

Barrick (ABX) $46.94 up 1.40%
Newmont (NEM) $63.78 up 1.54%
US Gold (UXG) $5.01 up 0.81%
General Moly (Eureka Moly, LLC) (GMO) $3.69 up 0.94%
Thompson Creek (TC) $10.90 up 1.11%
Freeport-McMoRan (FCX) $87.53 up 2.51% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $33.61 up 1.91% - global steel producer
POSCO (PKX) $115.65 up 1.47% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 1.61% to $1,533,223.83 (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