"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.

Tuesday, November 30, 2010

Euro Drops - Gold, Silver, Copper & Moly Strong



Morning Miners!

It is 6:06 AM. Have a cup and warm up with Ruby Tuesday and me by the fire. Her truck is on the blink this morning so I have to run her over to Ernie's after the report - pronto! Let's get rolling...

Dollar Strong, Metals Strong

There is enough bad news on the wire to take down the metal complex on a normal day but these are not normal times. The euro continued its descent on worsening European sovereign debt contagion fears dropping below the key $1.30 level to plumb 2-month lows against the dollar and yen. A rising dollar didn't stop gold from a nice bounce this morning on the London spot exchange to the $1385/oz level. Silver followed spiking above $27.60/oz:



Last night the Elko Daily Free Press kindly included some of the ole Colonel's thoughts on the recent moves of the yellow metal in Adella Harding's article on gold price:

Gold prices up on worries about Europe (Elko Daily Free Press, November 29, 2010 4:37 PM PT)

My theme lately has been a return to strong gold, strong dollar if the euro continues to fall. What is curious is how well the metal complex is holding up given a strengthening dollar and renewed fears of inflation in China. It seems that good the good old law of supply and demand may be trumping headline fear for a change - at least for copper. Bloomberg News ran an interesting piece on copper prices this morning:

Copper, Heading for Fifth Monthly Gain, May Climb on Shortage Speculation (Maria Kolesnikova, Bloomberg News - Nov 30, 2010 7:05 AM PT)

A supply restricted secular bull market appears to be underway for the red metal. As reported by Bloomberg, rising prices are expected for the next several years, "Copper will exceed $11,000 [$4.99/lb] by 2013 because of supply shortages, researcher GFMS Ltd. said yesterday."

Molybdenum futures rise

Another pleasant surprise was a small pop in molybdenum futures at the London Metal Exchange (LME) yesterday. As I mentioned in the Miner's Weekly Roundup, moly prices have been unusually stable for some time. In fact, the 3-month seller contract hasn't moved off $15.88/lb for several weeks; yesterday it finally broke $16/lb moving up to $16.19/lb. This aligns the 3-month contract with the current European moly oxide spot price of $16.20/lb. The Report wouldn't normally get excited about a 2% move in moly price but again these are not normal times especially with a backdrop of European financial disarray and future growth rate uncertainty in China. Let's watch Miss Moly in the coming weeks, she may be telling us something. Stay tuned.

Daily Market Roundup

Enough talk, let's walk the walk:

Eureka Miner's Index (EMI)

The Eureka Miner's Index(EMI) remains below its 1-month average. This morning the EMI is above-par at 400.84, up from yesterday's 369.81. The 1-month moving average is 467.86. The 2010 record high for the EMI is 661.28 set 11/9/2010; the low was set 6/7/2010 at 50.7. Although an EMI greater than 100 signals better times for the metals & miners relevant to Eureka County, the EMI has reversed direction and is now trending down.

Eureka Outlook Dashboard

4-WD is OFF - cautious going in the marketplace although we're still above our key warning thresholds; The VIX or "fear index" is below 25; bellwether Freeport-McMoRan (FCX) in the high-$90s above its 200-day average of $75.91 (our new warning level, 11/01 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 GREEN light is turned back on for Commodity Reflation with copper trading comfortably above $3.50/lb

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 Treasurys (QE2)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 may flag 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 $0.95 in early trading at $84.78 (January contract, most active); Gold is up $17.4 to $1384.9 (February contract, most active); Silver is up $0.377 to $27.570 (March contract, most active); Copper is up $0.0085 to $3.7710 (March contract, most active)

Western Molybdenum Oxide is $15.75; European Molybdenum Oxide is $16.20; LME moly 3-month seller's contract is $16.19, LME cash seller is $15.65

Stock Market Morning Update

The DOW is down 75.4 points to 10977.45; the S&P 500 is down 10.21 to 1177.55. Miners are mixed:

Barrick (ABX) $50.84 up 1.02%
Newmont (NEM) $58.53 up 0.76%
US Gold (UXG) $6.22 up 3.84%
General Moly (Eureka Moly, LLC) (GMO) $5.46 down 2.67%
Thompson Creek (TC) $12.11 down 2.34%
Freeport-McMoRan (FCX) $99.77 down 1.51% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $31.19 down 1.83% - global steel producer
POSCO (PKX) $98.14 up 0.21% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.08% to $1,703,004.19 (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, November 29, 2010

Buy Gold Now? - Metals & Miners Weekly Roundup


Morning Miners!

It is 6:09 AM. Have a cup of just-one-more-turkey-sandwich-left coffee and let's get to work...

Buy Gold Now?

Friday I said that November 9th may have been the market top for the metals & miners, at least for awhile. On that day, COMEX gold and silver set new records at $1424.3/oz and $29.340/oz. COMEX copper followed on the 11th with its new high at $4.0835/lb. The Eureka Miner's Index (EMI) peaked out at a strong 661.3 on 11/9 but has trended down ever since (see discussion and charts below).

The culprit behind this decline has been a long string of scary headlines about Korea and the re-emerging debt crisis in Europe with Ireland, Portugal and Spain in the barrel. Over the weekend, the EU cobbled together a rescue package for Ireland but the euro continued its descent against the U.S. dollar as investors focused on the potential for contagion to the other euro-zone countries in question. Since mid-September gold has been behaving like a commodity, so a strengthening dollar results in falling gold prices.

I woke up this morning with a voice in my head telling me to buy gold. There's at least some reasons why this may be a bad idea. Technically, gold has established a "head-and-shoulders" pattern in its recent ups and downs (see note 1). The SPDR Gold Trust(GLD) which tracks gold price and is part of the Eureka Miner's Grubstake Portfolio peaked on the 9th with COMEX gold at $139.15/share (the "head"). This high is accompanied by earlier and later peaks of lesser magnitude (the "shoulders") as shown in the 6-month chart below (closing prices: $134.75/share 10/14 and $134.41/share 11/23) followed by the recent decline.



This pattern is often a sign of further declines suggesting that we won't be seeing $1400/oz gold again for some time to come. Friday's GLD closing price dropped below its 1-month moving average (red line) along with the Eureka Miner's Index (EMI) (see chart at the bottom of this blog page) which are further bearish signs.

I say nuts to all this! Gold can easily positively re-correlate with the dollar and leave his commodity buddies in the dust as we saw earlier this year during the Greece crisis. My sense is that we're only seeing a pause in gold prices which could easily continue their upward ascent with more lousy headlines from Korea, Europe or the next whoopsy-doopsy. I threw a little gold dust in the buckboard this morning just in case buckaroos. Apparently Dennis Gartman, the Commodity King, also believes in the fortunes of gold in this topsy-turvy world as reported in the Kitco Nuggets this morning:

Market Nuggets: Gartman: Gold Has Become World's Third Most Popular Reserve Currency (Kitco News, 11/28/2010)

If you have any problems finding this nugget (since the Kitco list is refreshed throughout the day), the key quote from the Gartman Letter is: "More properly, we should say that gold shall continue to gain upon the EUR [euro currency] as the propensity on the part of reserve bank asset managers to hold EURs shall weaken at the margins, while their propensity to own gold shall rise. These are tectonic plates shifting very, very slowly but doing so inexorably."

Stay tuned.

Weekly Molybdenum Roundup



Moly prices remain in a stable range for the year sitting slightly above mid-range with Western moly oxide at $15.75/lb just below European moly at $16.20/lb. The LME 3-month seller contract falls between these two prices at $15.88/lb. The Report's mid-range price target for 2010 moly prices is $15.71/lb.

Western Moly Oxide $15.75/lb (the price tracked by Base Metals on the General Moly Website)

Moly Oxide, Europe (Mo Drummed Molydbic Oxide EU) $16.20/lb (the price reported in the Metals Bulletin)

LME Futures Contracts

LME cash seller is at $34,500/metric ton $15.651/lb

3-Month (Buyer) $33,000/metric ton $14.97/lb
3-Month (Seller) $35,000/metric ton $15.88/lb

15-Month (Buyer) $33,000/metric ton $14.97/lb
15-Month (Seller) $35,000/metric ton $15.88/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). A 1-month moving average is given by the blue line. A larger and more readable chart appears near the bottom of this blog page.


The Eureka Miner's Index(EMI) this morning is above-par at 369.81 continuing a down trend, down from Friday's close of 408.33, and falling below the 1-month moving average for a second consecutive time. Today's 1-month moving average is 463.81. The 2010 record high for the EMI is 661.28 set 11/9/2010; the low was set 6/7/2010 at 50.7. Although an EMI greater than 100 signals better times for the metals & miners relevant to Eureka County, the EMI has reversed direction and is now trending down.

200-day averages are used in the EMI to normalize current mining company share price and 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.

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

Oil/Au correlation +0.7869 (1-month) +0.9212 (3-month)
Cu/Au correlation +0.8016 (1-month) +0.9463 (3-month)
Cu/Oil correlation +0.8974 (1-month) +0.9396 (3-month)

Here are the numbers from the last Monday's roundup (11/22/2010):

Oil/Au correlation +0.8905 (1-month) +0.9383 (3-month)
Cu/Au correlation +0.8725 (1-month) +0.9669 (3-month)
Cu/Oil correlation +0.9075 (1-month) +0.9490 (3-month)

Interestingly the oil & copper correlations, although high, are starting to de-correlate slightly from gold. It is important to watch to see if this behavior continues lending support to the Colonel's "buy gold now" argument.

Daily Market Roundup

Enough talk, let's walk the walk:

Eureka Outlook Dashboard

4-WD is OFF - cautious going in the marketplace although we're still above our key warning thresholds; The VIX or "fear index" is below 25; bellwether Freeport-McMoRan (FCX) in the mid-$90s above its 200-day average of $75.91 (our new warning level, 11/01 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 GREEN light is turned back on for Commodity Reflation with copper trading comfortably above $3.50/lb

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 Treasurys (QE2)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 may flag 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 $0.54 in early trading at $84.30 (January contract, most active); Gold is down $0.1 to $1364.2 (February contract, most active); Silver is up $0.063 to $26.835 (March contract, most active); Copper is up $0.0085 to $3.7710 (March contract, most active)

Western Molybdenum Oxide is $15.75; European Molybdenum Oxide is $16.20; LME moly 3-month seller's contract is $15.88, LME cash seller is $15.65

Stock Market Morning Update

The DOW is down 148.53 points to 10943.47; the S&P 500 is down 13.50 to 1175.90. Miners are down:

Barrick (ABX) $49.60 down 1.65%
Newmont (NEM) $57.73 down 1.38%
US Gold (UXG) $5.64 down 0.35%
General Moly (Eureka Moly, LLC) (GMO) $5.41 down 2.35%
Thompson Creek (TC) $12.18 up 0.98%
Freeport-McMoRan (FCX) $96.66 down 1.29% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $31.14 down 1.74% - global steel producer
POSCO (PKX) $96.90 down 0.31% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 1.15% to $1,661,928.24 (what's this?).

Cheers,

Colonel Possum

Note 1: Head and Shoulders Pattern - A technical analysis term used to describe a chart formation in which a stock's price:

1. Rises to a peak and subsequently declines.
2. Then, the price rises above the former peak and again declines.
3. And finally, rises again, but not to the second peak, and declines once more.

The first and third peaks are shoulders, and the second peak forms the head.

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, November 26, 2010

Been There, Done That - Gold Stumbles


Morning Miners!

It is 6:09 AM. Have a cup of Scott Raine's new Holiday TGIF Coffee, there's some turkey leftovers in the frig. Monday when we kicked off a new season for this report, I promised to "...explore whether early November was a [market] top or if there is more upside as we near year's end." Hmmm.

Been There, Done That...

If the ole Colonel had to vote based on this week's data, I'd have to say the metals & miners are setting up for a rough patch. Unfortunately, the European sovereign debt problems have re-emerged and seem to worsen every day. Ireland is negotiating a bailout from the European Union and Portugal and Spain may be next in line. This has been terrific for the U.S. dollar and not so hot for the metal complex. The Wall Street Journal reports this morning:

"Spanish Prime Minister Jose Luis Rodriguez Zapatero moved to dispel the growing anxiety surrounding the country's fiscal position Friday, saying there was 'absolutely' no chance the euro zone's fourth-largest economy would seek a bailout from the European Union." (WSJ, 11/26/2010)

This is what London spot gold and silver thought of his assurances:




You may remember the Irish made similar "no way" statements before they caved in, so did Greece earlier this year. Let's take a look at gold (blue line) versus the U.S. Dollar Index (orange line) over that time period:



Gold hit a bottom in early February but then moved up with the U.S. dollar as the Greece crisis developed. The dollar index reached a top in early June which marked the worst time for the metals & miners this year. By mid-September, gold and the dollar were moving in their more traditional opposition with gold hitting a top of $1424.3/oz on 11/9 and copper reaching its high of $4.0835/lb on 11/11. If the Europe situation doesn't improve, the dollar and gold may resume running together as investors seek safe haven in both. This may be supportive for gold price but is a bleak omen for base metals.

This Report uses the Eureka Miner's Index(EMI) to gauge market temperature for the sectors that have the greatest impact on mining in Eureka County. Here is how the EMI fared when compared to the PowerShares UUP which tracks the U.S. Dollar Index:

Early June

UUP high 25.84 (6/7/2010)
EMI low 50.7 (6/7/2010)

Early November

UUP low 21.91 (11/4/2010)
EMI high 661.3 (11/9/2010)

Today

UUP 23.25 (11/26/2010)
EMI 441.2 (11/26/2010)

LIBOR moves up

Another troubling sign is the recent upward movement of the London Interbank Offered Rate (LIBOR) reported yesterday by the Wall Street Journal:

LONDON–The market in which banks borrow and lend dollars among themselves is seeing early signs of stress after months of relative calm, with growing nervousness over the euro zone’s peripheral nations sparking concerns that banks from the region may find it difficult to get their hands on the dollars they need. (WSJ, 11/25)

The three-month dollar LIBOR on Thursday reached its highest level since mid-September at 0.29188%. During the Greece crisis the LIBOR rose above 0.5% (It's all about Oil, Gold...and LIBOR?). The Colonel will be hawking this number buckaroos.

Good News for POSCO?

Bloomberg carried an interesting piece on POSCO this morning:

Stainless Steel Demand in Asia to Climb as Posco Seeks to Cut Nickel Usage (Bloomberg, Nov 26 2010 7:21AM)

POSCO, the world’s second-biggest maker of stainless steel and 20% owner of Mt.Hope, has had some bumps lately with artillery rockets flying in Korea and a cut of its full-year profit forecast by 7 percent. An expected rise in China’s stainless-steel production may improve their outlook although margins are being pinched by the recent run ups in nickel price. Molybdenum, another important ingredient in the manufacture of stainless tell, has enjoyed much more stable prices than nickel and is presumably less a worry for POSCO. Stay tuned.

Daily Market Roundup

Enough talk, let's walk the walk:

Eureka Miner's Index (EMI)

The Eureka Miner's Index(EMI) has stumbled below its 1-month average on today's European headlines. This morning the EMI is above-par at 441.16, down from yesterday's 515.09. The 1-month moving average is 452.23. The 2010 record high for the EMI is 661.28 set 11/9/2010; the low was set 6/7/2010 at 50.7. Remember an EMI greater than 100 signals improving times for the metals & miners relevant to Eureka County.

Eureka Outlook Dashboard

4-WD is OFF - cautious going in the marketplace although we're still above our key warning thresholds; The VIX or "fear index" is below 25; bellwether Freeport-McMoRan (FCX) in the high $90s above its 200-day average of $75.91 (our new warning level, 11/01 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 GREEN light is turned back on for Commodity Reflation with copper trading comfortably above $3.50/lb

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 Treasurys (QE2)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 may flag 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 $0.67 in early trading at $83.19 (January contract, most active); Gold is down $19.1 to $1353.9 (December contract, most active); Silver is down $0.943 to $26.585 (December contract, most active); Copper is down $0.0395 to $3.7160 (December contract, most active)

Western Molybdenum Oxide is $15.75; European Molybdenum Oxide is $16.20; LME moly 3-month seller's contract is $15.65, LME cash seller is $15.88

Stock Market Morning Update

The DOW is down 79.88 points to 11107.40; the S&P 500 is down 6.46 points to 1191.89. Miners are calling in sick:

Barrick (ABX) $50.15 down 1.40%
Newmont (NEM) $58.84 down 1.84%
US Gold (UXG) $5.72 down 1.89%
General Moly (Eureka Moly, LLC) (GMO) $5.49 down 1.96%
Thompson Creek (TC) $12.27 down 2.46%
Freeport-McMoRan (FCX) $98.64 down 2.07% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $31.64 down 1.03% - global steel producer
POSCO (PKX) $97.90 down 1.36% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 1.73% to $1,681,374.79 (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, November 24, 2010

Happy Thanksgiving! Barrick (ABX) & Newmont (NEM)



Wōdnesdæg
Morning Miners!

It is 6:18 AM. Have a brimming cup of hump day brew with Old Miner Woden and me. The ole boy is in town for the winter and plans to return to his Lone Mountain diggins' in the spring. The Colonel is trying like heck to get him in senior housing but his reputation for hell raising is getting in the way. For now he is camping out in the hi-bay but complains that there aren't any pretty gals to chase around. Let me know if you have any ideas, for now - Happy Thanksgiving from the two of us!

Anchors aweigh and a little bad Irish Luck

A U.S. carrier group is sailing off to join South Korea in a naval drill to punish their errant neighbor for the artillery assualt yesterday. Thankfully, South Korean steelmaker POSCO has rerecovered nearly all of its losses from yesterday's nose dive. The metals & miners are back on their feet too with some improving data on our domestic economy as the number of U.S. workers filing new claims for jobless benefits fell to the lowest level since July 2008. There was also good news on American's personal income growth and consumer spending on the heels of the upcoming holidays.

The scary bit is continued sovereign-debt contagion fears in Europe which has kept the euro on the slide against the U.S. dollar and Japanese yen. This time Ireland is in the hot seat with troubles brewing in Spain and Portugal. You may remember that the sovereign debt booger bear appeared one year ago with the Dubai crisis followed by Greece well into 2010. Both had a devasting effect on the metals & miners with the Eureka Miner's Index(EMI) hitting a low of 50.7 in early June. The index has been above the 400s this month (see below), let's hope we're not headed down the same road as last November - stay tuned.

Barrick Gold and Newmont Mining

Yesterday we took a look at Eureka's two aspiring junior miners, General Moly and U.S. Gold; today let's see how the senior class is doing. Below are 1 -year charts of gold mining giants Barrick Gold (ABX) and Newmont Mining (NEM). The blue line is share price; the green line shows their 200-day moving average:





Here is a comparison of their relative performance over the same time period:



Neither of the senior gold miners have enjoyed the 100+ % returns of General Moly or U.S. Gold but their performance has been very respectable: Barrick is up 17% in a year and Newmont, 12.5%. It is important to note that both have risen more than 30% from the lows in early February boosted by gold's impressive gains. Now that Barrick is unhedged it can fully enjoy this increase in gold price. One should expect stable but not particular startling performance from large mining companies in production globally when compared to juniors in exploratory phases or on the verge of production as is the case for General Moly. Eureka County presently benefits from a mix of both contributing to a stable source of mining income from the former and a promise of new jobs and additional revenue as the juniors come on line.

To give this some perspective, the Eureka Miner's Grubstake Portfolio, which has all four stocks and eight others related directly or indirectly to Eureka county, is up 32.0% over this same time period:

Portfolio 11/24/2010 $1,702,624
Portfolio 11/24/2009 $1,289,411

Daily Market Roundup

Enough talk, let's walk the walk:

Eureka Miner's Index (EMI)

The Eureka Miner's Index(EMI) has recovered most of its losses from yesterdays dust-up in Korea. This morning the EMI is above-par at 515.09, up from yesterday's 449.30 and nearly back to Monday's 526.33. The 1-month moving average is 452.23. The 2010 record high for the EMI is 661.28 set 11/9/2010; the low was set 6/7/2010 at 50.7. Remember an EMI greater than 100 signals improving 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 $100s above its 200-day average of $75.91 (our new warning level, 11/01 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 GREEN light is turned back on for Commodity Reflation with copper trading comfortably above $3.50/lb

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 Treasurys (QE2)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 may flag 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 $0.11 in early trading at $$81.36 (January contract, most active); Gold is down $2.2 to $1375.4 (December contract, most active); Silver is down $0.202 to $27.370 (December contract, most active); Copper is up $0.0370 to $3.7395 (December contract, most active)

Western Molybdenum Oxide is $15.75; European Molybdenum Oxide is $16.20; LME moly 3-month seller's contract is $15.60, LME cash seller is $15.88

Stock Market Morning Update

The DOW is up 109.51 points to 11145.88; the S&P 500 is up 11.48 to 1192.21. Miners are feeling better:

Barrick (ABX) $51.06 up 0.47%
Newmont (NEM) $60.72 up 0.21%
US Gold (UXG) $5.78 up 0.87%
General Moly (Eureka Moly, LLC) (GMO) $5.52 up 0.73%
Thompson Creek (TC) $12.35 up 1.98%
Freeport-McMoRan (FCX) $100.48 up 1.80% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $32.06 up 0.56% - global steel producer
POSCO (PKX) $98.94 up 3.78% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.94% to $1,702,2624.24(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 the ole Colonel

Tuesday, November 23, 2010

Rockets Away - General Moly (GMO) & U.S. Gold (UXG)



Morning Miners!

It is 6:11 AM. Let the ole Colonel pour you another cup and help yourself to a glazed doughnut. Sweet Ruby Tuesday dropped them by this morning on her haul-back to Elko. Enjoy the sugar rush, we could have a rough-toughie in the markets today...

Rockets Away

Nothing like a little more madness from North Korea to shake up the metals and miners (and steelmakers). Yesterday it was the enriched uranium story and this morning North Korea fired artillery rockets at a South Korean island killing two South Korean marines. Escalating tensions on the peninsula brought the the U.S. dollar to a seven-week high versus the yen early this morning given Japan's proximity to the Koreas. Dollar up, commodities down and our miners fall down the mineshaft. Fortunately, gold rose too providing some relief for the gold diggers but POSCO, South Korean steelmaker and 20% owner of Mt. Hope, dropped 6% at the open of the NYSE. Let's hope this is just a one-day whoopsy-doopsy.

General Moly and U.S. Gold

I'd planned to take a look today at Eureka's two aspiring junior miners today and Kim Jong-il is not going to stop me. Both General Moly (GMO) and U.S. Gold (UXG) have had amazing moves in their share price over the past year. General Moly moves closer to mine construction next year at our Mt.Hope and U.S. Gold has two significant land holdings, one in Nevada next to Barrick’s multi-million ounce Cortez project, and the other in Mexico with a promising silver discovery.

If you need to catch up a bit on General Moly news here is a link to the latest press release and an Elko Daily Free Press article flagged by one of the Report's faithful readers:

General Moly Announces Hanlong's Signing of Memo of Cooperation with EXIM Bank of China (Press Release, 11/18/2010)

General Moly provides update
(Elko Daily Free Press, November 19, 2010)

Below are charts of both miners and their meteoric rise in price over 1-year. The blue line is share price; the green line shows their 200-day moving average:





Here is a comparison of their relative performance over the same time period:



In one year, GMO is up 130% and UXG has moved 100% - sure beats bank CD rates. As the ole Colonel has said in the past, I wouldn't be surprised if U.S. Gold is in the cross hairs of one of our larger miners. The best of luck to both.

Daily Market Roundup

Enough talk, let's walk the walk:

Eureka Miner's Index (EMI)

Rockets flying in Korea has sent the Eureka Miner's Index(EMI) down to it's 1-month moving average. This morning the EMI is above-par at 449.30, down from yesterday's 526.33. The 1-month moving average is 443.25. The 2010 record high for the EMI is 661.28 set 11/9/2010; the low was set 6/7/2010 at 50.7. Remember an EMI greater than 100 signals improving 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 $90s above its 200-day average of $75.91 (our new warning level, 11/01 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 GREEN light is turned back on for Commodity Reflation with copper trading comfortably above $3.50/lb

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 Treasurys (QE2)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 may flag 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 $0.71 in early trading at $81.03 (January contract, most active); Gold is up $9.1 to $1366.9 (December contract, most active); Silver is up $0.054 to $27.515 (December contract, most active); Copper is down $0.0455 to $3.7060 (December contract, most active)

Western Molybdenum Oxide is $15.75; European Molybdenum Oxide is $16.20; LME moly 3-month seller's contract is $15.88, LME cash seller is $15.71

Stock Market Morning Update

The DOW is down 145.99 points to 11032.59; the S&P 500 is down 16.93 to 1180.91. Miners are in their foxholes:

Barrick (ABX) $50.12 down 0.26%
Newmont (NEM) $60.65 down 0.48%
US Gold (UXG) $5.62 down 1.23%
General Moly (Eureka Moly, LLC) (GMO) $5.60 down 1.75%
Thompson Creek (TC) $12.24 down 2.24%
Freeport-McMoRan (FCX) $99.88 down 2.09% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $32.13 down 3.57% - global steel producer
POSCO (PKX) $95.96 down 5.03% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 1.57% to $1,693,435.12 (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, November 22, 2010

A New Season Begins - Metals & Miners Weekly Roundup


Morning Miners!

It is 6:18 AM. Pour yourself a hot cup of Monday joe and let's kickoff a new season for the Eureka Miner's Market Report. Miss Moly, Sweet Ruby Tuesday, Old Miner Woden and our favorite Norseman Thor can't wait to start rolling again...

The Colonel's Metal Outlook for November

At our last Monday roundup in early October, the ole Colonel predicted we'd see $3.90/lb copper by turkey day. On the 11th of November, COMEX copper set a new high at $4.0835/lb. COMEX gold and silver have had quite a run too both setting new records on the 9th of this month at $1424.3/oz and $29.340/oz. With a strengthening U.S. dollar we've fallen off these highs but things remain bullish for metals at least in the near term. We'll look at some of the drivers behind these moves in the coming days and explore whether early November was a top or if there is more upside as we near year's end.

For today, let's assume gold returns to $1400/oz territory before long. If we choose $1400/oz as a nominal price point, my models give these price ranges for copper and silver:

The fair value of COMEX copper is $3.9654/lb in a range of $3.8408/lb to $4.0900/lb

The fair value of COMEX silver is $25.461/oz in a range of $24.622/oz to $26.300/oz

The top range for copper would return us to just a thin flat washer above it's recent record. Silver, however, falls several dollars short of it's recent spike ($26.300/oz versus $29.340/oz). This morning COMEX silver is sitting at $27.210/oz with gold hovering at $1352/oz suggesting an overvalued condition for the former.

Another way to look at silver's relative value to gold is the gold/silver ratio (Au:Ag). Lately we have been at pre-recession levels around 50:

silver price = Gold Price / (Au:Ag)
silver price = $1400/oz nominal / 50 = $28/oz

If fear returns to the marketplace this ratio could return to levels near 70 seen in early June of this year:

silver price = $1400/oz nominal / 70 = $20/oz

Tread carefully buckaroos, at today's prices silver may headed for a correction.

For you chart buffs, the following shows COMEX silver 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):



The latest prices are racing far outside the aqua bands - a time for caution with this precious metal.

Weekly Molybdenum Roundup



Moly prices remain in a stable range for the year sitting slightly above mid-range with Western moly oxide at $15.75/lb just below European moly at $16.20/lb. The LME 3-month seller contract falls between these two prices at $15.88/lb. The Report's mid-range price target for 2010 moly prices is $15.71/lb.

Western Moly Oxide $15.75/lb (the price tracked by Base Metals on the General Moly Website)

Moly Oxide, Europe (Mo Drummed Molydbic Oxide EU) $16.20/lb (the price reported in the Metals Bulletin)

LME Futures Contracts

LME cash seller is at $34,625/metric ton $15.71/lb

3-Month (Buyer) $33,000/metric ton $14.97/lb
3-Month (Seller) $35,000/metric ton $15.88/lb

15-Month (Buyer) $33,000/metric ton $14.97/lb
15-Month (Seller) $35,000/metric ton $15.88/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). A 1-month moving average is given by the 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 526.33, slightly down from Friday's close of 567.33 but towering above the 6/7/10 low of 50.7. The 1-month moving average is 432.31. The new 2010 record high for the EMI is 661.28 set Tuesday, 11/9/2010. Remember an EMI greater than 100 is improving times for the metals & miners relevant to Eureka County.

200-day averages are used in the EMI to normalize current mining company share price and 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 shortly after early year highs in copper and the S&P 500. 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 with tighter positive correlations than our starting point - the magenta line shows 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 has also re-established a very high positive correlation with gold. The graphs above are up to Friday's close, 11/19/2010.

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

Oil/Au correlation +0.8905 (1-month) +0.9383 (3-month)
Cu/Au correlation +0.8725 (1-month) +0.9669 (3-month)
Cu/Oil correlation +0.9075 (1-month) +0.9490 (3-month)

Here are the numbers from the last Monday roundup in October (10/4/2010):

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)

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 low-$100s above its 200-day average of $75.91 (our new warning level, 11/01 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 GREEN light is turned back on for Commodity Reflation with copper trading comfortably above $3.50/lb

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 Treasurys (QE2)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 may flag 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 $0.32 in early trading at $81.66 (January contract, most active); Gold is down $0.3 to $1352.0 (December contract, most active); Silver is up $0.031 to $27.210 (December contract, most active); Copper is down $0.0385 to $3.7950 (December contract, most active)

Western Molybdenum Oxide is $15.75; European Molybdenum Oxide is $16.20; LME moly 3-month seller's contract is $15.88, LME cash seller is $15.71

Stock Market Morning Update

The DOW is down 84.68 points to 11118.87; the S&P 500 is down 7.38 to 1192.35. Miners are down:

Barrick (ABX) $49.62 down 0.30%
Newmont (NEM) $60.23 down 0.18%
US Gold (UXG) $5.55 down 1.25%
General Moly (Eureka Moly, LLC) (GMO) $5.55 down 0.54%
Thompson Creek (TC) $12.63 up 0.08%
Freeport-McMoRan (FCX) $101.08 down 0.70% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $33.08 down 3.36% - global steel producer
POSCO (PKX) $100.15 down 0.25% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.66% to $1,697,918.85 (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