"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.

Friday, October 1, 2010

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


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?).


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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