"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.

Wednesday, February 16, 2011

Gold & Dollar Zip - Silver Wins

Morning Miners!

It is 5:34 AM. Have a cup of hump day motivation. Old Miner Woden won a bet with the ole Colonel this morning. After pointing out that gold and the U.S. dollar have gone nowhere in three months he asked me which of our favorite metals did the best. I said copper. Nuts.

Gold & Dollar Zip - Silver Wins

Even though gold was a record setter in early December pegging a new high at $1,432.5/oz it quickly lost its shine and has gone nowhere in 3 months. Yesterday COMEX gold closed at $1,374.1/oz and we were at $1,372.7/oz in mid-November. The U.S. dollar has fared no better as shown in this chart of their relative performance (gold blue, U.S. dollar index orange):

Zero percent gain for both. Zip. Nada.

So what has done better? I picked copper because it seems like it sets a new record everyday. Old Miner Woden pointed out that silver has actually done better over this 3-month period. Here are the numbers:

COMEX copper $3.9245/lb (11/15) $4.5360/lb (2/15) up 15.6%
COMEX silver $26.167/oz (11/15) $30.696/oz (2/15) up 17.3%

Not too bad for either. How about the broader markets? The S&P 500 is up 10.8% so copper and silver have been the much better pick.

How about our benchmark miners?

Freeport-McMoRan (FCX) $51.00 (11/15) $54.65 (2/15) up 7.2%
Barrick Gold (ABX) $50.15 (11/15) $49.19 (2/15) down 1.9%
Thompson Creek (TC) $12.56 (11/15) $14.06 (2/15) up 11.9%

Hmm, not a great period for the miners either except for moly producer Thompson Creek who nudged out the S&P 500 by a nose. I'm not even going to talk about Barrick.

Time to run Woden up to Elko to get him some new readers at WalMart - seems like he's seeing things just fine to me. I guess I owe the ole boy a beer or two.

Daily Oil Watch

On February 1st we identified North Sea Brent crude oil as a good barometer for the developing crisis in Egypt and the Middle East. The most active front month contract remains above $100/bbl with a very large spread from the North American benchmark, Western Texas Intermediate or "Texas light sweet crude", traded on the NYMEX (see note 1). The Report normally follows the latter but will track both until things settle out in this volatile region.

Here are the most active front month contracts as of this morning:

NYMEX light sweet crude $84.98
ICE North Sea Brent crude $102.40
Spread (ICE- NYMEX) = $17.42 (yesterday $17.25)

Here are the June contracts with a narrower spread:

NYMEX light sweet crude $93.03
ICE North Sea Brent crude $102.90
Spread (ICE- NYMEX) = $9.87 (yesterday $8.98)

Although prices are off their crisis highs, we have $100+ Brent and mid-$90 NYMEX in June favoring higher oil prices for the summer. I'll still stick with my December prediction that we will see NYMEX $100/bbl oil before the Fourth of July.

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 640.23, down from from yesterday's 645.76 but above the 1-month moving average of 560.40. The EMI continues to be down from the high set on January 4th but a trend reversal to the upside may be in the works.

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 miners are still in a rough patch but conditions are improving; The VIX or "fear index" is below 25; bellwether Freeport-McMoRan (FCX) is stuck between its 50-day and 100-day moving average. FCX is still well above its 200-day average of $43.06 (our new warning level, 02/02 update after the FCX 2:1 stock split); 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, R&R Partners parts ways with Nevada Mining Association

Otherwise, all lights are green on the Eureka Outlook Dashboard (upper right, what's this?)

Commodity Market Morning Update

NYMEX/COMEX: Oil is up $0.66 in early trading at $84.98 (March contract, most active); Gold is up $0.7 to $1374.8 (April contract, most active); Silver is down $0.031 to $30.665 (March contract, most active); Copper is down $0.0180 to $4.5180 (March contract, most active)

Western Molybdenum Oxide is $17.00; European Molybdenum Oxide is $17.92; LME moly 3-month seller's contract is $18.14, LME cash seller is $17.96

Stock Market Morning Update

The DOW is up 37,84 points to 12,264.48; the S&P 500 is up 4.51 at 1332.52. Miners are mixed:

Barrick (ABX) $49.52 up 0.67%
Newmont (NEM) $58.05 up 0.02%
US Gold (UXG) $7.05 down 0.84%
General Moly (Eureka Moly, LLC) (GMO) $5.39 up 1.51%
Thompson Creek (TC) $14.23 up 0.71%
Freeport-McMoRan (FCX) $54.93 up 0.51% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $37.67 up 1.35% - global steel producer
POSCO (PKX) $108.25 up 0.74% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.50% at $1,779,177.99(what's this?).


Colonel Possum

Note 1 - West Texas intermediate (WTI), also known as Texas light sweet, is a type of crude oil used as a benchmark in oil pricing and is the underlying commodity of New York Mercantile Exchange's (NYMEX) oil futures contracts. The price of WTI is often referenced in North American news reports on oil prices, alongside the price of North Sea Brent crude (Wiki).

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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