"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, December 3, 2010

Miners Rally on Lousy Jobs Report - Gold Breaks $1400

Morning Miners!

It is 5:53 AM. Have a brimming cup of Raine's Holiday Season TGIF coffee. Some strange goings on in Santa's mineshaft this morning...

Looking for the Cleanest Dirty Shirt

I just watched the monthly Labor Department employment report release on CNBC news. It was not good. The unemployment rate unexpectedly rose to 9.8% last month and a startling 6.3 million people or 41.9% of unemployed Americans were out of work for more than six months in November. Nonfarm payrolls rose by a measly 39,000 compared to economists expectations of 144,000 and an unemployment rate of 9.6%. The all important private-sector number added only 50,000 jobs. Nuts.

Comments from the experts following the report included "very disappointed" and "an ugly number" but I felt the best came from CNBC reporter Rick Santelli. As he watched the euro bounce 1% against the dollar from the floor of the CME, Mr.Santelli commented, "this is like looking for the cleanest dirty shirt in your closet."

His reference is of course to choosing between two ailing Western economies and their embattled currencies; the U.S. and Europe, the greenback and euro. The euro which has fallen precipitously against the dollar with the re-emergence of the European sovereign debt crisis found some giddy-up go on the lousy U.S. report.

Gold Breaks $1400/oz

Gold, which loves currency instability, bounced over $1400/oz to near November 9th levels on both the London and COMEX exchanges. At the time of the release, COMEX gold hit $1404.0/oz and silver shot up to $29.09/oz. Earlier this month both precious metals pegged new highs of $1424.0/oz and $29.340/oz.

Miners Rally on Lousy Jobs Report

The broader markets are now open and although the S&P and DOW are down, the mining sector is in rally mode. Surprisingly the Eureka Miner's Index(EMI) has bested its November 9th record in early trading. Currently the EMI is 668.83 compared to the 11/9 high of 661.28 (see below). If this level holds at today's market close we could have a trend reversal to the upside for the metals & miners important to Eureka County. Strange day indeed.

Followup on Copper's Mystery Buyer

In yesterday's report we discovered that someone is holding an enormous quantity of the London Metal Exchange's red metal stockpile. The Wall Street Journal broke the story and today Reuters carries a followup piece:

Up to 80% of LME copper stocks held by single trader (Mineweb, by Thomson Reuters, 12/3/2010)

The buyer has yet to be identified but is now suspected of contributing to the "supply tightness that has lifted the premium of cash copper over the three-month contract to more than two-year highs." Copper giant Freeport-McMoran (FCX) doesn't seem to care about who's hoarding copper breaking its 52-week high in early trading at $108.74. We'll stay on the case of whose-got-the-copper buckaroos.

Daily Market Roundup

Enough talk, let's walk the walk:

Eureka Miner's Index (EMI)

The Eureka Miner's Index(EMI) is challenging its November 9th record on day three of a mining sector rally. The EMI is above-par at 668.83, up from yesterday's 587.70. The 1-month moving average is 481.22. 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 reversed its upward trend after the November 9th high. Today's numbers may reverse the down trend. Let's see what happens at the market close.

Eureka Outlook Dashboard

4-WD is OFF - Improving conditions in the marketplace; The VIX or "fear index" is below 25; bellwether Freeport-McMoRan (FCX) is 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.

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 Watch as the Federal Reserve resumes buying Treasurys (aka QE2)

The GREEN light is turned back on for Investor Confidence as investment returns to the equity markets

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 $87.68 (January contract, most active); Gold is up $10.7 to $1400.0 (February contract, most active); Silver is up $0.433 to $29.005 (March contract, most active); Copper is down $0.0095 to $3.9695 (March contract, most active)

Western Molybdenum Oxide is $15.75; European Molybdenum Oxide is $16.05; LME moly 3-month seller's contract is $16.78, LME cash seller is $16.55

Stock Market Morning Update

The DOW is down 14.79 points to 11347.62; the S&P 500 is down 2.23 to 1219.30. Miners are still mostly happy:

Barrick (ABX) $54.26 up 1.82%
Newmont (NEM) $61.78 up 2.10%
US Gold (UXG) $7.02 up 2.93%
General Moly (Eureka Moly, LLC) (GMO) $5.49 up 0.73%
Thompson Creek (TC) $12.93 down 0.39%
Freeport-McMoRan (FCX) $108.74 up 1.02% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $34.42 up 0.64% - global steel producer
POSCO (PKX) $103.17 down 0.12% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 1.08% to $1,809,965.27 (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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