Thursday, January 6, 2011
Au & Ag Struggle to Stabilize - POSCO (PKX) Gets Its Groove Back
It is 6:05 AM. Grab a cup of Thursday joe and tell our favorite Norseman Thor to close the dad blame door. You'd think he grew up in the clouds...
Gold & Silver Struggle to Stabilize
COMEX gold struggled to stabilize from its descent in the early morning hours hitting a low of $1367.2/oz before coming back up to $1375.8/oz. COMEX silver plumbed the $28/oz level for a low of $28.930/oz before moving back up to $29.395/oz. The gold/silver ratio is still a very low 46.8 down slightly from yesterday's 46.9.
The London spot markets for gold & silver show the back and forth for these two precious metals as they seek a new bottom:
The precious metal correction will no doubt continue if tomorrow's government nonfarm payrolls report is better than expected. Signs of the U.S. economy gaining some steam have supported the U.S. dollar and put downward pressure on gold and silver. The number of U.S. workers filing new claims for jobless benefits rose slightly less than economists predicted in this mornings data. Improving jobless claims together with yesterday's encouraging U.S. private-sector jobs ADP report suggest a more favorable report tomorrow. Stay tuned.
The ole Colonel continues to believe this is a temporary pullback for gold and will stick with his prediction that the lustrous stuff will break $1570/oz before July 4th.
Copper or Equities?
Copper prices continued to struggle also. The recent darling of investors seeking an alternative asset class, the red metal is now competing with an optimistic view for U.S. equities as reported by our favorite London metals correspondent, Claudia Carpenter:
Copper Falls in New York on Speculation U.S. Growth May Benefit Equities (Claudia Carpenter, Bloomberg News, 01/06/2011, 5:55 AM PT)
A strong dollar and rapidly rising inventories at the London Metal Exchange also continue to be forces behind copper's descent. London Metal Exchange (LME) inventories have returned to September 24th levels. At 208,550 metric tons, the red metal is still down 62% from its 550,000 ton peak last February. Here is a 1-month chart of the current LME copper stores:
Given the latest winds, the Colonel took some profit on copper giant Freeport-McMoRan (FCX) Tuesday and General Moly (GMO) yesterday. I remain bullish on both for the long term.
POSCO (PKX) Gets Its Groove Back
A bit of bright news is the recent ascent in share price for South Korean steelmaker POSCO (PKX). POSCO is a 20% owner of Mt.Hope and an investor in General Moly (GMO). This supports Commodity King Dennis Gartman's theme that steel producers should have a good 2011. He has also been bullish on the metals & miners associated with the steel business (e.g. molybdenum and moly miners).
On December 15th, the Colonel suggested POSCO may be a good one to consider (Buy POSCO?) and bought a few shares at $102.89 as North Korea threatened Armageddon. POSCO is trading this morning at $112.76. Here is a 6-month chart for PKX showing its recent move to the upside briskly breaking its 200-day moving average (green line):
Daily Market Roundup
Enough talk, let's walk the walk:
Eureka Miner's Index(EMI)
This morning the Eureka Miner's Index(EMI) is above-par at 651.78, slightly up from yesterday's 644.76. We are now 2-days below the 1-month moving average of 688.54, a potentially bearish sign.
The record high for the EMI is 816.78 set 01/04/2011; the low was set 6/7/2010 at 50.7. An EMI greater than 100 signals better times for the metals & miners relevant to Eureka County, the EMI re-established an upward trend on Friday, 12/3 which is now under pressure.
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.
Eureka Outlook Dashboard
4-WD is OFF - Markets are stable but there could be rough roads ahead; The VIX or "fear index" is below 25; bellwether Freeport-McMoRan (FCX) in the low-$100s above its 200-day average of $83.07 (our new warning level, 01/05 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 $0.46 in early trading at $89.84 (February contract, most active); Gold is up $2.1 to $1375.8 (February contract, most active); Silver is up $0.197 to $29.395 (March contract, most active); Copper is down $0.0230 to $4.3850 (March contract, most active)
Western Molybdenum Oxide is $16.00; European Molybdenum Oxide is $16.70; LME moly 3-month seller's contract is $17.01, LME cash seller is $17.24
Stock Market Morning Update
The DOW is down 7.98 points to 11,714.91; the S&P 500 is unchanged at 12676.56. Miners are still not happy:
Barrick (ABX) $49.70 down 0.40%
Newmont (NEM) $58.12 down 0.07%
US Gold (UXG) $7.32 down 1.48%
General Moly (Eureka Moly, LLC) (GMO) $6.31 down 0.32%
Thompson Creek (TC) $14.70 down 0.34%
Freeport-McMoRan (FCX) $117.56 down 0.67% (a bellwether mining stock spanning copper, gold & molybdenum)
The Steels are mixed, POSCO is smiling (a "tell" for General Moly & Thompson Creek):
ArcelorMittal (MT) $36.32 down 1.73% - global steel producer
POSCO (PKX) $112.76 up 0.32% - South Korean integrated steel producer
The Eureka Miner's Grubstake Portfolio is is down 0.47% at $1,893,889.81 (what's this?).
Write Colonel Possum at firstname.lastname@example.org for answers to your questions or to request e-mail updates on the market
Headline photograph by Mariana Titus