"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.

Thursday, February 17, 2011

Gold, Silver & Brent Crude Up - Shoe Tree Down

Quoth the raven, "Nevermore." - Edgar Allen Poe

*** UPDATE *** COMEX silver broke its earlier record moving up to $31.790/oz at 15:40 ET

*** BREAKING NEWS *** COMEX silver just set a new record of $31.750/oz at 15:00 ET (March contract, most active). At that time of day, COMEX gold traded at $1385.40/oz for an extremely low gold/silver ratio of 43.63. This closely watched ratio has been compressing for some time with strong silver/weak gold price movements and is at presently at multi-year lows.

Morning Miners!

It is 5:51 AM. I just put on another pot - a lot of news today, pardner! Our favorite Norseman Thor spent his day off in Middlegate, that story and much more...

Eureka County in Photographs (circa 1940s)

Today we begin our series of photographs by Arthur Rothstein who captured images of Eureka County in the early 1940s (more detail at the bottom of this blog). Today's shot is of a locomotive at the north end of the county taken in 1940. Eric Pastorino, our local train expert, informs me that this "big boy" is traveling on the main line that runs east-west along the Humboldt River and today's I-80.

A Little More Northern Nevada History

Some of you may have gone to the Shoe Tree Memorial near Middlegate on Valentine's Day. For those of you less familiar with these parts, Middlegate is on HWY 50 in Churchill County, east of Fallon on your way to Carson City. There is one business in town, a bar and restaurant run by Freeda Stevenson. You can see her place in the movie Black Road, Gregory Hutton's award-winning 2002 short film starring William Nilon. Mariana and the Colonel stopped by years ago and watched a video of Freeda and her sweetheart participating in a national game show. I think they won something but I can't remember what. Freeda is quite a gal.

The other prominent feature of Middlegate is its famous shoe tree. Locals and passerbys have been pitching shoes in this old tree since wagons had wheels. Tragically, vandals cut it down and a memorial service was held Monday. Here is a news clip from 2 News, KTVN Reno:

2/14 - 5pm - Shoe Tree Memorial Held in Middlegate

Freeda and our very own Dave Pastorino are in the very first part of the reporter's story. You can see Thor very briefly at the end of the piece, he is standing behind the mobile home.

Gold, Silver & Brent Crude Up

The crisis in the Middle East, spreading now to Libya and Bahrain, is steadily lifting gold prices with the yeller stuff trading this morning at $1381.50/oz on the COMEX. Dennis Gartman, author of the respected Gartman Letter, had predicted that the outbreak in Egypt would put a bottom in for gold at $1309.1/oz and he started buying. So far, Mr. Gartman has been right.

Silver has benefited too nearly topping its record by hitting $30.970/oz at the stroke of midnight. This morning COMEX silver has fallen back a tad to $30.810/oz. The closely watched gold/silver ratio is at an amazingly low 44.8, by my records it touched 44.7 Monday.

Brent crude oil, this Report's barometer on the Middle East situation, did break a record on the ICE exchange in the late afternoon scoring $104.52/bbl. Let's update our record book which now includes Brent:

COMEX Gold $1432.5/oz 08:25:00 ET 12/7/2010, February contract most active
COMEX Silver $31.275/oz 08:15:00 ET 01/03/2011, March contract most active
COMEX Copper $4.6495/lb 18:15:00 ET 02/14/2011, March contract most active
ICE Brent crude $104.52/bbl 16:30:00 ET 02/16/2011, April contract most active

Another force behind the recent moves in gold and silver has been the growing demand coming from China as reported this morning by Reuters:

China top bank sees explosive growth in gold demand and voracious appetite for silver (Shanghai Reuters, 2/16/2020)

Surprisingly, China which is world's largest producer of gold, is now a net importer as the government encourages its folks to buy gold as an inflation hedge. Up, up and away buckaroos. Stay tuned.

Even More Headwinds for Miners?

Mining Editor Adella Harding of the Elko Daily Free Press has been keeping tabs on more troubling news for Nevada's miners. Here are two of her latest articles which I will include in the Eureka Outlook Dashboard "Adverse Regulation/Legislation" list (see below):

Mineral commission fights consolidation (ADELLA HARDING Mining Editor, Elko Daily Free Press, Wednesday, February 16, 2011 5:26 pm)

Obama budget includes mining royalty (ADELLA HARDING Mining Editor, Elko Daily Free Press, February 15, 2011 4:17 pm)

Daily Oil Watch

On February 1st we identified North Sea Brent crude oil as a good barometer for the developing crisis in 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 $87.91
ICE North Sea Brent crude $103.93
Spread (ICE- NYMEX) = $16.02 (yesterday $17.42)

Here are the June contracts with a narrower spread:

NYMEX light sweet crude $92.33
ICE North Sea Brent crude $104.39
Spread (ICE- NYMEX) = $12.06 (yesterday $9.87)

Although prices are off their crisis highs, we have $100+ Brent and $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 599.62, down from from yesterday's 640.23 but above the 1-month moving average of 555.13. 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, Obama budget includes mining royalty , Mineral commission fights consolidation

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

Commodity Market Morning Update

NYMEX/COMEX: Oil is up $0.07 in early trading at $87.91 (April contract, most active); Gold is up $6.4 to $1381.5 (April contract, most active); Silver is up $0.181 to $30.810 (March contract, most active); Copper is down $0.0200 to $4.4500 (March contract, most active)

Western Molybdenum Oxide is $17.00; European Molybdenum Oxide is $17.82; LME moly 3-month seller's contract is $18.14, LME cash seller is $17.96

Stock Market Morning Update

The DOW is down 28.57 points to 12,259.60; the S&P 500 is down 3.09 at 1333.23. Miners are mixed:

Barrick (ABX) $50.63 up 1.83%
Newmont (NEM) $58.28 up 0.53%
US Gold (UXG) $6.98 down 0.14%
General Moly (Eureka Moly, LLC) (GMO) $5.35 down 0.19%
Thompson Creek (TC) $14.17 down 0.77%
Freeport-McMoRan (FCX) $54.82 down 1.10% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $37.25 down 0.75% - global steel producer
POSCO (PKX) $108.33 up 0.05% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.03% at $1,774,613.13(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 from the Library of Congress
• Title: Train crossing the mountains. Eureka County, Nevada
• Creator(s): Rothstein, Arthur, 1915-1985, photographer
• Date Created/Published: 1940 Mar.
• Medium: 1 negative : safety ; 3 1/4 x 4 1/4 inches or smaller.
• Reproduction Number: LC-USF34-029588-D (b&w film neg.)
• Rights Advisory: No known restrictions. For information, see U.S. Farm Security Administration/Office of War Information Black & White Photographs(http://www.loc.gov/rr/print/res/071_fsab.html)
• Call Number: LC-USF34- 029588-D [P&P] LOT 342
• Other Number: J 143
• Repository: Library of Congress Prints and Photographs Division Washington, DC 20540 USA http://hdl.loc.gov/loc.pnp/pp.print

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