"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.

Friday, January 21, 2011

Gold & Dollar Down , Newmont Rocks, Euro Moly Up



Morning Miners!

It is 5:52 AM. Have a cup of Raine's TGIF Red Label and let's be glad it's Friday. The week hasn't been all that bad, gold is down but Old Miner Woden is back whistling in the hi-bay and we've got spring in January. If you haven't got stuck in the mud lately, life is still good in the Great Basin.

Gold & Dollar Down

The euro pegged an 8-week high this morning at $1.3529, the U.S. dollar is taking another leg down and gold is falling toward my "low ball" number for January. On January 10th I asked if the metals & miners were in a correction. Based on this week's market performance, the answer is "yup!"

We identified a trading range for gold with key support at $1298.0/oz and key resistance at 1413.00/oz. Within this range I choose a nominal COMEX gold price of $1380/oz gold for January and a "low ball" price of $1320/oz. This morning we're trading at $1340.3/oz with a low of $1338.3/oz set in the wee hours.

Our trusty Eureka Miner's Index(EMI),, which measures the market temperature for the sectors most important to mining in Eureka County, has reversed course and is now trending down form the high set on January 4th of 816.8. This morning's EMI is a sobering 531.8 up a bit from yesterday's sell-off but still way below our 1-month moving average of 685.3 (see below).

So what? I still contend this correction will be short in duration and that COMEX gold will break $1570/oz before July 4th. How's that for a little fighting spirit. To put some money where my mouth is, I threw a few shares of Newmont (NEM) in the buckboard this morning. They're sitting side-by-side with a few Barrick Gold (ABX) shares that I high-graded on January 11th.

Do we really think all the problems in Europe are over? Will the euro remain strong? What about a slowdown in China? The Chinese are off celebrating their New Year from now until it actually starts with the new moon February 3rd. They may be worried about inflation but I doubt if the dragon will lose its appetite for gold and raw materials when everyone returns from the party. Hang in there buckaroos, I'm betting on a falling euro, rising gold and better times for the good ole U.S.A. Stay tuned.

Newmont Rocks

The sterling (or should I say "golden") example of fighting spirit was Newmont Mining yesterday. As the Eureka Miner's Grubstake Portfolio closed down a dismal 2.99%, Newmont closed up on the day. Why? Shucks, they posted a great report:

Newmont Announces Preliminary 2010 Production and Operating Results; Portfolio Continues to Deliver (Press release, 1/20/2011)

Adella Harding, mining editor for the Elko Daily Free Press, did a terrific job of summarizing their performance in her article yesterday:

Newmont reports gold, copper production figures (Adella Harding, Elko Daily Free Press, January 20, 2011 2:15 pm)

Newmont Mining announced that gold production for all of 2010 totaled a whopping 5.4 million ounces and copper production totaled 327 million pounds. Not a bad time to take advantage of rising copper prices. In Nevada alone, Newmont estimated attributable sales of 1.7 million ounces of gold for 2010 and costs for sales of $565/oz. Our $1340/oz on the day doesn't look all that bad does it! Take heart.

On Wednesday, the ole Colonel asked the question, "Buy Barrick? Buy Newmont?" You know my answer now. Please do your own research, pardner - I could be dead wrong...or maybe not.

Euro Moly Up

European moly oxide nudged up a little more to $17.50/lb this week widening the gap with Western molybdenum that stubbornly sits at $16.00/lb. Spot Euro Moly is paying a premium of $0.40/lb with respect to the London Metal Exchange (LME) 3-month seller contract of $17.10/lb suggesting rising near term demand overseas. A little more good news.

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 531.82, up slightly from yesterday's 499.50. We are below the 1-month moving average of 685.28 and the the EMI is now trending down.

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.

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 ON - The metals & miners have hit a rough patch; The VIX or "fear index" is below 25; bellwether Freeport-McMoRan (FCX) in is below its 50-day moving average but still well 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 $0.16 in early trading at $89.43 (March contract, most active); Gold is down $6.2 to $1340.3 (February contract, most active); Silver is down $0.258 to $27.215 (March contract, most active); Copper is up $0.0105 to $4.2825 (March contract, most active)

Western Molybdenum Oxide is $16.00; European Molybdenum Oxide is $17.50; LME moly 3-month seller's contract is $17.10, LME cash seller is $17.69

Stock Market Morning Update

The DOW is up 64.78 points to 11,887.58; the S&P 500 is up 8.86 at 1289.12. Miners are mixed:

Barrick (ABX) $46.81 down 0.36%
Newmont (NEM) $55.32 down 0.70%
US Gold (UXG) $6.23 down 2.96%
General Moly (Eureka Moly, LLC) (GMO) $5.62 up 1.44%
Thompson Creek (TC) $14.28 up 0.99%
Freeport-McMoRan (FCX) $109.83 down 0.96% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $37.20 up 3.77% - global steel producer
POSCO (PKX) $104.29 down 0.52% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.02% at $1,786,207.39 (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

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