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


The author/editor of the Eureka Miner owns common shares of local mining stocks, General Moly (GMO) and Newmont Mining (NEM); together with benchmark miner Freeport-McMoRan (FCX). Please do your own research, markets can turn on you faster than a feral cat.

Tuesday, 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?).


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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