"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.

Monday, October 31, 2011

The Report Says "Happy Trails" Until Mid-November

Happy Pumpkin!

My latest Kitco commentary:
Copper and Gold, "What a Long Strange Trip It's Been" (10/17/2011)


My Latest International Business Times commentary: What is Up (or Down) with Silver and Gold?
(10/6/2011)


This morning's...
COMEX Gold price = $1,723.8/oz (December contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 97.58
Value Adjusted Gold Price© (VAGP) = $1,476.0/oz
COMEX - VAGP = $247.8/oz; gold is trading at a premium to key commodities; the gold:copper ratio exceeds recession levels but continues to trend down (bullish move)


Morning Miners!

It is 5:39 AM. Have a cup of Pumpkin Seed java, it's really just Raine's Red Label with a few roasted pumpkin seeds thrown in the filter for autumn flavor. The Report will be going off the air until sometime mid-November - the ole Colonel needs a little R&R with his sweetheart who is coming home from Louisiana.

This is the five hundred and ninety ninth market report since we began in March 2009. If you think the markets are rough now just remember those days; the S&P 500 had just recovered from its bottom of 666.79, copper was under $2/lb and you could buy a share of General Moly for less than a buck!

Even though it appears we're headed for a down day today after a currency intervention by Japan, the Report is leaving the metals & miners in pretty decent shape for the remainder of 2011.

Checking our Indices

Japan intervened massively to weaken the yen and western markets reacted Sunday night. The last currency intervention was 4.5 trillion yen in August - this one is a whopping $7 trillion yen. The action strengthened the U.S. dollar, weakened the euro and sent gold prices south $40/oz. COMEX gold has recovered some now trading down $23.4/oz from Friday's close at $1,723.8/oz. Commodities suffered from the strengthening dollar; COMEX copper backed down to $3.5895/lb and NYMEX oil is down a buck fifty at $91.85/bbl. COMEX silver is presently trading at $34.410/oz.

Here is the Eureka Miner's Index© (EMI) through Friday's close (a larger more readable plot is near the bottom of the blog page):


Friday's closing EMI (magenta line) decisively broke above the 100-level and out of its declining channel (dotted lines). Even though the miners are getting hit pretty hard this morning, the EMI is still above par at 101.36. The 1-month moving average has begun an uptrend but we need to get it above 100 to sustain a rally for the miners into the end of the year. This morning the average is at 54.46.

The Eureka Miner’s Gold Value Index© (GVI) is bullish for key commodities going forward. Here is the companion plot to the EMI (also near the bottom of the blog page):


To sustain a rally for the metals & miners, we need gold to give up some relative value to copper, oil and silver. Remember, the GVI and EMI typically (but not always) have an inverse relation; as the GVI falls, the EMI rises. It is good then to see the GVI below its 1-month average (dark line) and the EMI above. Presently, the GVI is 97.58 sitting underneath an average of 101.7 and down 11.3% from its 2010-2011 high of 109.97 set on Oct. 4.

To complete the picture, copper and gold have made a complete lap around the Report's correlation map from early August, when the wheels started coming off the U.S. and European debt wagons, to this Friday's close. We are back in positive correlation territory (green "+, +" quadrant) which is bullish for the metals & miners.


Have a happy Halloween and I'll be back soon!


Daily Market Roundup

Enough talk, let's walk the walk:

Eureka Miner's Index(EMI)

This morning the Eureka Miner's Index© (EMI) is below-par at 101.36, down from Friday's closing 133.61 and above the 1-month moving average of 54.46. The new record low for 2010-2011 was set Oct. 4, 2011 at 22.88. The 1-month average is currently below the 100-level but we've broken out of the descending channel and the average continues its fifth day of upward trend.

The EMI gives us the market temperature for the factors that have the greatest impact on mining in Eureka County. The record high for the EMI is 816.78 set 01/04/2011. An EMI of 100 is the boundary between hot and cold markets for the metals & miners.

200-day averages are used to update mining equity norms in the EMI on a monthly basis.

Gold Value Index (GVI)

The Eureka Miner’s Gold Value Index© (GVI) is above-par at 97.58, up from Friday's closing 96.56 and below its 1-month average of 101.70. The new record high for 2010-2011 is 109.97 set on Oct. 4, 2011.Value Adjusted Gold Price© (VAGP) is $1,476.0/oz which is $247.8/oz below the current COMEX gold price.

The GVI initially trended down from 6/7/2010 when it had a value of 100; gold regained value reversing the trend, moved sideways for a time and and headed back up with vigor. Recent moves down below the 100-level are bullish for key commodities.

The GVI gauges the value of gold in relation to oil, copper and silver independent of currency. These three commodities were chosen for relative value comparison because 1) oil derivatives are a common cost element for all miners, 2) copper has proven to be a reliable proxy for global growth and 3) silver is a precious and industrial metal that now competes with gold for investment and as a hedge against fiat currencies.

The Value Adjusted Gold Price (VAGP) is a level that supports current oil, copper & oil prices based on historical commodity norms. If the daily COMEX price is less than the VAGP, then gold is undervalued; if above, overvalued.

Daily Debt Crisis Watch

July 26th we introduced the Debt Crisis Index (DCI). The DCI is computed in the mornings and at the market close Friday in much the same way we do the EMI and GVI indices. Today, the DCI has a value of 163.0 up from Friday's closing 147.8. A level above 200 is time for serious concern. We are now below that level.

Daily Oil Watch

Latest Nevada Fuel Prices

On February 1st we identified North Sea Brent crude oil as a good barometer for the ongoing crises in the Middle East and North Africa (MENA). It is now above $100/bbl with a large spread from the North American benchmark, Western Texas Intermediate or "Texas light sweet crude", traded on the NYMEX

Here are the key front-month contracts as of this morning:

NYMEX light sweet crude $91.85
ICE North Sea Brent crude $108.60
Spread (ICE- NYMEX) = $16.75 (last report, $17.29)

Here are the February contracts* with a narrower spread:

NYMEX light sweet crude $91.68
ICE North Sea Brent crude $107.45
Spread (ICE- NYMEX) = $15.77 (last report, $16.47)

* NYMEX futures contracts have rolled forward, we now show December and February for a 2-month look-ahead

Prices are off their crisis highs and we have $100+ Brent and $90+ NYMEX in February favoring high oil prices throughout the late fall and winter.

Eureka Outlook Dashboard

4-WD is ON - The miners remain on rough roads; The VIX or "fear index" is above 25; in early morning trading, bellwether Freeport-McMoRan (FCX) is below its 200-day moving average of $48.72(our new key level, 10/28 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment.

The YELLOW light is turned on for Commodity Reflation with copper trading around $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 The Federal Reserve phased out buying Treasurys June 30 (aka QE2) but will maintain low interest rates until mid-2013. Presently they are engaged in a bond program called "Operation Twist" to control long interest rates.

The YELLOW light is turned back on for Investor Confidence with investors less adverse to commodity-sensitive equities

The ORANGE light is turned on our Fuel Gauge with oil above $90

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, Democrats seek to repeal mining tax from the constitution, Rhoads, Ellison oppose repeal of net proceeds tax, Proposal could change net proceeds tax, 'You get to deduct WHAT???' Nevada lawmakers ask gold miners

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

Commodity Market Morning Update

NYMEX/COMEX: Oil is down $1.47 in early trading at $91.85 (November contract, most active); Gold is down $23.4 to $1723.8 (December contract, most active); Silver is down $0.878 to $34.410 (December contract, most active); Copper is down $0.1165 at $3.5895 (December contract, most active)

Western Molybdenum Oxide (General Moly update) is $13.50/lb to $14.20/lb; European Molybdenum Oxide (Bloomberg) is $12.85/lb; LME cash seller is $13.15/lb, LME moly 3-month seller's contract is $13.15/lb

Stock Market Morning Update

The DOW is down 146.75 points to 12,084.36; the S&P 500 is down 17.52 points at 1,267.56

Miners are unhappy:

Barrick (ABX) $49.64 down 2.38%
Newmont (NEM) $66.57 down 2.80%
US Gold (UXG) $4.64 down 3.93%
General Moly (Eureka Moly, LLC) (GMO) $3.63 down 5.47%
Thompson Creek (TC) $7.15 down 6.04%
Freeport-McMoRan (FCX) $40.91 down 4.42% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $11.63 down 3.17%
Timberline Resources (TLR) $0.67 down 5.63%

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

ArcelorMittal (MT) $21.69 down 2.03% - global steel producer
POSCO (PKX) $85.84 up 1.66% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is down 3.34% at $1,493,465.32 (what's this?).

Cheers,

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 (source: Wikipedia)

Note 2 - The impact of the U.S. debt ceiling debate affected investment decisions for weeks before its resolution August 2nd and was followed by an S&P credit downgrade. Global sovereign debt issues have been an overhang on markets for many, many months starting with the Dubai crisis in late November, 2009 and spreading to the euro-zone in 2010-2011.

Headline photo by Mariana Titus

Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market

Friday, October 28, 2011

The Colonel's Friday Thoughts on Gold & Copper


Curious Rock

My latest Kitco commentary:
Copper and Gold, "What a Long Strange Trip It's Been" (10/17/2011)


My Latest International Business Times commentary: What is Up (or Down) with Silver and Gold?
(10/6/2011)


This morning's...
COMEX Gold price = $1,744.1/oz (December contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 97.22
Value Adjusted Gold Price© (VAGP) = $1,499.1/oz
COMEX - VAGP = $245.0/oz; gold is trading at a premium to key commodities; the gold:copper ratio exceeds recession levels but continues to trend down (bullish move)



Morning Miners!

It is 5:37 AM. Have a second cup of Raine's delicious Red Label TGIF! Unless an asteroid strikes us Monday, it looks as if we're closing this month in pretty decent shape, pardner.



The Colonel's input to the Weekly Kitco Gold Survey

The ole Colonel is plenty happy about this week's market rally but didn't we see this movie about this time last year? Maybe a broader market correction in November then off to the races in December? This time around I'm going to sell Freeport-McMoRan before Chinese Lunar New Year!

Here is my weekly input for the Kitco gold survey.

Q. Where do you see gold’s price headed next week, up, down or unchanged?

A. Up. Although we are in a descendant value cycle for gold, its price can still rise in the present environment. It is not likely for gold to exceed $1,800/oz in the near-term.

Q. Why?

A. Gold value relative to key commodities copper, oil and silver is falling, down roughly 12% from its Oct.4 high. Gold has also re-established positive correlations with all three which is typically bullish for commodities and gold. In this environment gold price is likely to rise but not as quickly as the reference commodities. For example, if copper rises 9% to $4/lb due to declining LME and Shanghai inventories and improving demand, gold could reach its current psychological resistance level of $1,800/oz with only a 3% rise from this morning's price. This would require a copper-to-gold ratio of 450 lb/oz which is just below its 3-month average of 470 lb/oz. This ratio has been dramatically declining toward non-recession levels (i.e. <400 lb/oz) so 450 lb/oz in the near-term is very reasonable. Oil and silver ratios have already returned to non-recession levels with respect to gold thereby copper is the most important price to watch.


Have a good weekend - you deserve it.


Daily Market Roundup

Enough talk, let's walk the walk:

Eureka Miner's Index(EMI)

This morning the Eureka Miner's Index© (EMI) is below-par at 99.61, up from yesterday's 85.63 and above the 1-month moving average of 49.97. The new record low for 2010-2011 was set Oct. 4, 2011 at 22.88. The 1-month average is currently below the 100-level but we've broken out of the descending channel and the average continues its fourth day of upward trend.

The EMI gives us the market temperature for the factors that have the greatest impact on mining in Eureka County. The record high for the EMI is 816.78 set 01/04/2011. An EMI of 100 is the boundary between hot and cold markets for the metals & miners.

200-day averages are used to update mining equity norms in the EMI on a monthly basis.

Gold Value Index (GVI)

The Eureka Miner’s Gold Value Index© (GVI) is above-par at 97.22, up from yesterday's 95.96 and below its 1-month average of 101.96. The new record high for 2010-2011 is 109.97 set on Oct. 4, 2011.Value Adjusted Gold Price© (VAGP) is $1,499.1/oz which is $245.0/oz below the current COMEX gold price.

The GVI initially trended down from 6/7/2010 when it had a value of 100; gold regained value reversing the trend, moved sideways for a time and and headed back up with vigor. Recent moves down below the 100-level are bullish for key commodities.

The GVI gauges the value of gold in relation to oil, copper and silver independent of currency. These three commodities were chosen for relative value comparison because 1) oil derivatives are a common cost element for all miners, 2) copper has proven to be a reliable proxy for global growth and 3) silver is a precious and industrial metal that now competes with gold for investment and as a hedge against fiat currencies.

The Value Adjusted Gold Price (VAGP) is a level that supports current oil, copper & oil prices based on historical commodity norms. If the daily COMEX price is less than the VAGP, then gold is undervalued; if above, overvalued.

Daily Debt Crisis Watch

July 26th we introduced the Debt Crisis Index (DCI). The DCI is computed in the mornings and at the market close Friday in much the same way we do the EMI and GVI indices. Today, the DCI has a value of 155.0 down from yesterday's 155.5. A level above 200 is time for serious concern. We are now below that level.

Daily Oil Watch

Latest Nevada Fuel Prices

On February 1st we identified North Sea Brent crude oil as a good barometer for the ongoing crises in the Middle East and North Africa (MENA). It is now above $100/bbl with a large spread from the North American benchmark, Western Texas Intermediate or "Texas light sweet crude", traded on the NYMEX

Here are the key front-month contracts as of this morning:

NYMEX light sweet crude $92.59
ICE North Sea Brent crude $109.88
Spread (ICE- NYMEX) = $17.29 (last report, $18.79)

Here are the February contracts* with a narrower spread:

NYMEX light sweet crude $92.49
ICE North Sea Brent crude $108.96
Spread (ICE- NYMEX) = $16.47 (last report, $17.14)

* NYMEX futures contracts have rolled forward, we now show December and February for a 2-month look-ahead

Prices are off their crisis highs and we have $100+ Brent and $90+ NYMEX in February favoring high oil prices throughout the late fall and winter.

Eureka Outlook Dashboard

4-WD is ON - The miners remain on rough roads; The VIX or "fear index" is slightly above 25; in early morning trading, bellwether Freeport-McMoRan (FCX) is below its 200-day moving average of $48.81(our new key level, 10/18 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment.

The YELLOW light is turned on for Commodity Reflation with copper trading around $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 The Federal Reserve phased out buying Treasurys June 30 (aka QE2) but will maintain low interest rates until mid-2013. Presently they are engaged in a bond program called "Operation Twist" to control long interest rates.

The YELLOW light is turned back on for Investor Confidence with investors less adverse to commodity-sensitive equities

The ORANGE light is turned on our Fuel Gauge with oil above $90

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, Democrats seek to repeal mining tax from the constitution, Rhoads, Ellison oppose repeal of net proceeds tax, Proposal could change net proceeds tax, 'You get to deduct WHAT???' Nevada lawmakers ask gold miners

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

Commodity Market Morning Update

NYMEX/COMEX: Oil is down $1.37 in early trading at $92.596 (November contract, most active); Gold is down $3.6 to $1744.1 (December contract, most active); Silver is up $0.078 to $35.190 (December contract, most active); Copper is down $0.0300 at $3.6620 (December contract, most active)

Western Molybdenum Oxide (General Moly update) is $13.50/lb to $14.20/lb; European Molybdenum Oxide (Bloomberg) is $12.85/lb; LME cash seller is $13.15/lb, LME moly 3-month seller's contract is $13.15/lb

Stock Market Morning Update

The DOW is down 7.26 points to 12,201.29; the S&P 500 is down 2.58 points at 1,282.01

Miners are happy except Quadra is resting (after a terrific rally yesterday):

Barrick (ABX) $50.36 up 2.96%
Newmont (NEM) $66.99 up 1.41%
US Gold (UXG) $4.83 up 1.47%
General Moly (Eureka Moly, LLC) (GMO) $3.78 up 3.56%
Thompson Creek (TC) $7.50 up 2.04%
Freeport-McMoRan (FCX) $42.85 up 0.21% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $12.03 down 2.05%
Timberline Resources (TLR) $0.66 up 1.54%

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

ArcelorMittal (MT) $21.96 down 2.75% - global steel producer
POSCO (PKX) $89.24 up 1.66% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is up 1.43% at $1,534,460.01 (what's this?).

Cheers,

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 (source: Wikipedia)

Note 2 - The impact of the U.S. debt ceiling debate affected investment decisions for weeks before its resolution August 2nd and was followed by an S&P credit downgrade. Global sovereign debt issues have been an overhang on markets for many, many months starting with the Dubai crisis in late November, 2009 and spreading to the euro-zone in 2010-2011.

Headline photo by Mariana Titus

Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market

Thursday, October 27, 2011

Europe Opens Bull Pasture Gate; Barrick Reports - GMO, Quadra FNX Charge

Barrel Top Autumn

*** BREAKING NEWS ***  COMEX gold touches 1,750.2/oz (1:45 PM 10:45 AM PDT)

*** BREAKING NEWS ***  Not to miss the party, COMEX gold pops $18.7/oz to $1,742.2/oz after a slow start (9:20 AM PDT)

My latest Kitco commentary:
Copper and Gold, "What a Long Strange Trip It's Been" (10/17/2011)


My Latest International Business Times commentary: What is Up (or Down) with Silver and Gold?
(10/6/2011)


This morning's...
COMEX Gold price = $1,723.0/oz (December contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 95.96
Value Adjusted Gold Price© (VAGP) = $1,500.3/oz
COMEX - VAGP = $222.7/oz; gold is trading at a premium; the gold:copper ratio exceeds recession levels but continues to trend down (bullish move)



Þūnresdæg
Morning Miners!

It is 5:47 AM. Have a cup of Thor's Distant Thunder. Our Favorite Norseman has a pretty good sense of hearing, he thinks that rumble over the canyon may be a bull stampede...

Europe Opens Bull Pasture Gate; Barrick Reports - GMO, Quadra FNX Charge


After a late night session it appears that European leaders have pretty much "kitchen-sinked" the new-new Big Plan - there's something for everyone even the possibility of Chinese participation. The Greek bond haircut is expected to be 50%; experts were hoping for something in the 40% to 60% range. The firepower of the euro zone's European Financial Stability Facility (EFSF) has been up-gunned from .22 caliber to .45-70 providing guarantees for $1.4 trillion; experts were hoping for something in the $1 to $2 trillion range. The so-called Tier 1 capital ratios for large banks will be raised to 9% - just about what the experts had wanted.

The new deal has put all 19 global markets that this report monitors in the green. COMEX gold takes a pause at $1,723.0/oz as safe-haven buying eases but copper on the London Metal Exchange (LME) hit a 5-week high breaking $8,000/metric ton ($3.6288/lb) and COMEX copper is presently trading up 5.1% at $3.6995/lb. Everyone loves the red metal again, even Barrick Gold (ABX) which reported an excellent third quarter supported not only by higher gold but higher copper prices (Barrick expects to produce 450 million to 460 million pounds of red at total cash costs of $1.60 to $1.70/lb in 2011):

Barrick Gold Third-Quarter Earnings Rise On Higher Bullion Prices (Allen Sykora, Kitco News, 10/27/2011)

The broader markets are now open and Freeport-McMoRan (FCX) bounced 9% on the open falling back a tad to $41.99/lb; General Moly (GMO) is up a decent 5.1% at $3.52; POSCO (PKX) is pouring steel, up 7.3% at $87.02; Quadra FNX (TSE:QUX) is up 10.09% at $12.05.

The DOW Jones has broken that mercurial 12,000 level presently at 12,105.25; the S&P 500 blew away the Fibonacci 1,257 hurdle currently posting 1,269.40.

What's not not to like? At the end of the day money is in short supply to support all this "firepower" so as trader Brian Kelly said on CNBC News yesterday, "Someone, somehow, somewhere, sometime is going to have to print a lot of money!"



Daily Market Roundup

Enough talk, let's walk the walk:

Eureka Miner's Index(EMI)

This morning the Eureka Miner's Index© (EMI) is below-par at 83.53, up from yesterday's 60.48 and above the 1-month moving average of 47.42. The new record low for 2010-2011 was set Oct. 4, 2011 at 22.88. The 1-month average is currently below the 100-level but today's pop breaks out us of the descending channel and the average continues its third day of upward trend.

The EMI gives us the market temperature for the factors that have the greatest impact on mining in Eureka County. The record high for the EMI is 816.78 set 01/04/2011. An EMI of 100 is the boundary between hot and cold markets for the metals & miners.

200-day averages are used to update mining equity norms in the EMI on a monthly basis.

Gold Value Index (GVI)

The Eureka Miner’s Gold Value Index© (GVI) is above-par at 95.96, down from yesterday's 97.78 and below its 1-month average of 102.15. The new record high for 2010-2011 is 109.97 set on Oct. 4, 2011.Value Adjusted Gold Price© (VAGP) is $1,467.2/oz which is $249.8/oz below the current COMEX gold price.

The GVI initially trended down from 6/7/2010 when it had a value of 100; gold regained value reversing the trend, moved sideways for a time and and headed back up with vigor. Recent moves down below the 100-level are bullish for key commodities.

The GVI gauges the value of gold in relation to oil, copper and silver independent of currency. These three commodities were chosen for relative value comparison because 1) oil derivatives are a common cost element for all miners, 2) copper has proven to be a reliable proxy for global growth and 3) silver is a precious and industrial metal that now competes with gold for investment and as a hedge against fiat currencies.

The Value Adjusted Gold Price (VAGP) is a level that supports current oil, copper & oil prices based on historical commodity norms. If the daily COMEX price is less than the VAGP, then gold is undervalued; if above, overvalued.

Daily Debt Crisis Watch

July 26th we introduced the Debt Crisis Index (DCI). The DCI is computed in the mornings and at the market close Friday in much the same way we do the EMI and GVI indices. Today, the DCI has a value of 155.5 down from yesterday's 184.4. A level above 200 is time for serious concern. We are now below that level.

Daily Oil Watch

Latest Nevada Fuel Prices

On February 1st we identified North Sea Brent crude oil as a good barometer for the ongoing crises in the Middle East and North Africa (MENA). It is now above $100/bbl with a 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 the region.

Here are the key front-month contracts as of this morning:

NYMEX light sweet crude $93.56
ICE North Sea Brent crude $112.35
Spread (ICE- NYMEX) = $18.79 (last report, $17.38)

Here are the February contracts* with a narrower spread:

NYMEX light sweet crude $93.48
ICE North Sea Brent crude $110.62
Spread (ICE- NYMEX) = $17.14 (last report, $15.71)

* NYMEX futures contracts have rolled forward, we now show December and February for a 2-month look-ahead

Prices are off their crisis highs and we have $110+ Brent and $90+ NYMEX in February favoring high oil prices throughout the late fall and winter.

Eureka Outlook Dashboard

4-WD is ON - The miners are on very rough roads; The VIX or "fear index" is above 25; in early morning trading, bellwether Freeport-McMoRan (FCX) is seriously below its 200-day moving average of $49.56(our new key level, 10/18 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment.

The YELLOW light is turned on for Commodity Reflation with copper trading around $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 The Federal Reserve phased out buying Treasurys June 30 (aka QE2) but will maintain low interest rates until mid-2013. Presently they are engaged in a bond program called "Operation Twist" to control long interest rates.

The YELLOW light is turned back on for Investor Confidence with investors less adverse to commodity-sensitive equities

The ORANGE light is turned on our Fuel Gauge with oil above $90

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, Democrats seek to repeal mining tax from the constitution, Rhoads, Ellison oppose repeal of net proceeds tax, Proposal could change net proceeds tax, 'You get to deduct WHAT???' Nevada lawmakers ask gold miners

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

Commodity Market Morning Update

NYMEX/COMEX: Oil is up $3.36 in early trading at $93.56 (November contract, most active); Gold is down $0.5 to $1723.0 (December contract, most active); Silver is up $0.540 to $33.850 (December contract, most active); Copper is up $0.1795 at $3.6995 (December contract, most active)

Western Molybdenum Oxide (General Moly update) is $13.50/lb to $14.20/lb; European Molybdenum Oxide (Bloomberg) is $12.85/lb; LME cash seller is $13.15/lb, LME moly 3-month seller's contract is $13.15/lb

Stock Market Morning Update

The DOW is up 236.21 points to 12,105.25; the S&P 500 is up 27.40 points at 1,269.40

Miners are happy except for Newmont:

Barrick (ABX) $48.46 up 1.27%
Newmont (NEM) $65.30 down 0.74%
US Gold (UXG) $4.49 up 2.51%
General Moly (Eureka Moly, LLC) (GMO) $3.52 up 5.07%
Thompson Creek (TC) $7.29 up 3.70%
Freeport-McMoRan (FCX) $41.99 up 6.84% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $12.05 up 10.09%
Timberline Resources (TLR) $0.64 up 1.59%

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

ArcelorMittal (MT) $21.24 up 8.48% - global steel producer
POSCO (PKX) $87.02 up 7.26% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is up 3.27% at $1,483,925.21 (what's this?).

Cheers,

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 (source: Wikipedia)

Note 2 - The impact of the U.S. debt ceiling debate affected investment decisions for weeks before its resolution August 2nd and was followed by an S&P credit downgrade. Global sovereign debt issues have been an overhang on markets for many, many months starting with the Dubai crisis in late November, 2009 and spreading to the euro-zone in 2010-2011.

Headline photo by Mariana Titus

Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market

Wednesday, October 26, 2011

New Moon Rising: Gold $1,721.4/oz, Copper breaks $3.50/lb

दीपावली की शुभकामनाएं

*** BREAKING NEWS *** COMEX gold rallied $1,727.30/oz at 12:45 PM ET on growing uncertainty about the latest Euro-plan and political drama in Italy

My latest Kitco commentary:
Copper and Gold, "What a Long Strange Trip It's Been" (10/17/2011)


My Latest International Business Times commentary: What is Up (or Down) with Silver and Gold?
(10/6/2011)


This morning's...
COMEX Gold price = $1,656.4/oz (December contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 96.27
Value Adjusted Gold Price© (VAGP) = $1,467.2/oz
COMEX - VAGP = $249.8/oz; gold is trading at a premium; the gold:copper ratio exceeds recession levels but is trending down (bullish move)


दीपावली
Morning Miners!

It is 5:36 AM. Have a hot cup of Diwali Delight - today's a new moon and Indian New Year! Festivals in India have brought new life to physical gold buying and Europe jitters will lend price support to the yellow metal for many months to come. Our gold bull and market bear couldn't be happier to see glitter pass into $1,700/oz territory again. Old Miner Woden is doing a New Year's jig around the wood stove singing Old My Darling Clementine. Ruby T would be happy too, copper is back over $3.50/lb.

New Moon Rising: Gold $1,721.4/oz, Copper breaks $3.50/lb


COMEX gold spiked to a 4-week high at $1,721.40/oz in the wee hours and silver followed at $33.910/oz. Both precious metals have have backed down some, trading presently at $1,717.0/oz and 33.580/oz respectively. The closely watched gold-to silver ratio is 51.13 close to historical norms. Bargin hunting, good physical demand from the East and a return to safe-haven buying have put a strong bid under prices.

With all the debt problems in Europe and the United States there are many that believe that quantitative easing (QE) will return in some form to both sides of the pond (the U.K. has already started). The fear of resulting inflation further down the road has lifted gold and QE expectations appear to be lifting commodity prices like copper. Freeport-McMoRan has declared force majeure at the world's second largest copper mine in Indonesia exacerbating the red metal's supply-side problems. COMEX copper is presently trading at $3.5390/lb; the copper-to-gold ratio is still at recession levels (>400 lb/oz) at 485.2 lb/oz but has been trending down from its high of 538.3 on Oct. 3, 2011.

A new moon, pardner. Let's see what Europe's leaders come up with today after their second go at a new-new Big Plan in less than a week.


Daily Market Roundup

Enough talk, let's walk the walk:

Eureka Miner's Index(EMI)

This morning the Eureka Miner's Index© (EMI) is below-par at 60.48, up from yesterday's 53.35 and above the 1-month moving average of 45.94. The new record low for 2010-2011 was set Oct. 4, 2011 at 22.88. The 1-month average is currently below the 100-level keeping us solidly in bear country for the metals & miners.

The EMI gives us the market temperature for the factors that have the greatest impact on mining in Eureka County. The record high for the EMI is 816.78 set 01/04/2011. An EMI of 100 is the boundary between hot and cold markets for the metals & miners.

200-day averages are used to update mining equity norms in the EMI on a monthly basis.

Gold Value Index (GVI)

The Eureka Miner’s Gold Value Index© (GVI) is above-par at 97.78, up from yesterday's 96.27 and below its 1-month average of 102.37. The new record high for 2010-2011 is 109.97 set on Oct. 4, 2011.Value Adjusted Gold Price© (VAGP) is $1,467.2/oz which is $249.8/oz below the current COMEX gold price.

The GVI initially trended down from 6/7/2010 when it had a value of 100; gold regained value reversing the trend, moved sideways for a time and and headed back up with vigor. A sustained presence around the 100-level is bearish but no longer necessarily an indication of domestic recession.

The GVI gauges the value of gold in relation to oil, copper and silver independent of currency. These three commodities were chosen for relative value comparison because 1) oil derivatives are a common cost element for all miners, 2) copper has proven to be a reliable proxy for global growth and 3) silver is a precious and industrial metal that now competes with gold for investment and as a hedge against fiat currencies.

The Value Adjusted Gold Price (VAGP) is a level that supports current oil, copper & oil prices based on historical commodity norms. If the daily COMEX price is less than the VAGP, then gold is undervalued; if above, overvalued.

Daily Debt Crisis Watch

July 26th we introduced the Debt Crisis Index (DCI). The DCI is computed in the mornings and at the market close Friday in much the same way we do the EMI and GVI indices. Today, the DCI has a value of 184.4 down from yesterday's 186.0. A level above 200 is time for serious concern. We are now below that level.

Daily Oil Watch

Latest Nevada Fuel Prices

On February 1st we identified North Sea Brent crude oil as a good barometer for the ongoing crises in the Middle East and North Africa (MENA). It is now above $100/bbl with a 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 the region.

Here are the key front-month contracts as of this morning:

NYMEX light sweet crude $92.87
ICE North Sea Brent crude $110.73
Spread (ICE- NYMEX) = $17.86 (last report, $17.38)

Here are the February contracts* with a narrower spread:

NYMEX light sweet crude $92.63
ICE North Sea Brent crude $108.72
Spread (ICE- NYMEX) = $16.09 (last report, $15.71)

* NYMEX futures contracts have rolled forward, we now show December and February for a 2-month look-ahead

Prices are off their crisis highs and we have $100+ Brent and $90+ NYMEX in February favoring high oil prices throughout the late fall and winter.

Eureka Outlook Dashboard

4-WD is ON - The miners are on very rough roads; The VIX or "fear index" is above 25; in early morning trading, bellwether Freeport-McMoRan (FCX) is seriously below its 200-day moving average of $49.56(our new key level, 10/18 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment.

The YELLOW light is turned on for Commodity Reflation with copper trading around $3.50/lb

The YELLOW light is turned on for Stable Markets with the VIX above the 30 level (what's this?)

The YELLOW light is turned on for Inflation Watch The Federal Reserve phased out buying Treasurys June 30 (aka QE2) but will maintain low interest rates until mid-2013. Presently they are engaged in a bond program called "Operation Twist" to control long interest rates.

The ORANGE light is turned back on for Investor Confidence with investors less adverse to commodity-sensitive equities

The ORANGE light is turned on our Fuel Gauge with oil above $90

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, Democrats seek to repeal mining tax from the constitution, Rhoads, Ellison oppose repeal of net proceeds tax, Proposal could change net proceeds tax, 'You get to deduct WHAT???' Nevada lawmakers ask gold miners

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

Commodity Market Morning Update

NYMEX/COMEX: Oil is down $0.30 in early trading at $92.87 (November contract, most active); Gold is up $16.16 to $1717.0 (December contract, most active); Silver is up $0.528 to $33.580 (December contract, most active); Copper is up $0.1185 at $3.5390 (December contract, most active)

Western Molybdenum Oxide (General Moly update) is $13.50/lb to $14.20/lb; European Molybdenum Oxide (Bloomberg) is $12.95/lb; LME cash seller is $13.15/lb, LME moly 3-month seller's contract is $13.15/lb

Stock Market Morning Update

The DOW is up 125.98 points to 11,832.60; the S&P 500 is up 8.76 points at 1,237.81

Miners are happy:

Barrick (ABX) $48.00 up 1.69%
Newmont (NEM) $66.18 up 2.07%
US Gold (UXG) $4.50 up 3.21%
General Moly (Eureka Moly, LLC) (GMO) $3.26 up 3.16%
Thompson Creek (TC) $6.99 up 2.95%
Freeport-McMoRan (FCX) $38.86 up 1.70% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $10.80 up 3.32%
Timberline Resources (TLR) $0.59 up 3.51%

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

ArcelorMittal (MT) $19.57 up 0.82% - global steel producer
POSCO (PKX) $80.98 up 1.36% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is up 1.86% at $1,433,479.05 (what's this?).

Cheers,

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 (source: Wikipedia)

Note 2 - The impact of the U.S. debt ceiling debate affected investment decisions for weeks before its resolution August 2nd and was followed by an S&P credit downgrade. Global sovereign debt issues have been an overhang on markets for many, many months starting with the Dubai crisis in late November, 2009 and spreading to the euro-zone in 2010-2011.

Headline photo by Mariana Titus

Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market

Tuesday, October 25, 2011

General Moly Announces Completion of Draft Environmental Impact Statement

Barrel Top, NYMEX oil breaks $90/bbl

*** BREAKING NEWS *** COMEX gold briefly broke $1,700/oz touching $1,701.20/oz (11:55 ET)

My latest Kitco commentary:
Copper and Gold, "What a Long Strange Trip It's Been" (10/17/2011)


My Latest International Business Times commentary: What is Up (or Down) with Silver and Gold?
(10/6/2011)


This morning's...
COMEX Gold price = $1,656.4/oz (December contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 96.27
Value Adjusted Gold Price© (VAGP) = $1,437.6/oz
COMEX - VAGP = $218.8/oz; gold is trading at a premium; the gold:copper ratio exceeds recession levels but is trending down (bullish move)



Morning Miners!

It is 5:41 AM. Have cup of Bright Tomorrow - yes, our indefatigable market bull is in the house. It's a shame Ruby T couldn't be here yesterday for a real bull run; today's mood is tempered by news that the Euro-zone finance ministers' meeting scheduled for Wednesday has been cancelled although the leaders' summit will proceed as planed. Oh well, no one said the Euro-melodrama was over; this soap opera is good for at least several more seasons. We do have good news from General Moly...

General Moly Announces Completion of Draft Environmental Impact Statement

At 5:37 AM (PT) this morning, General Moly sent out a press release to announce that last Friday, the Battle Mountain Nevada office of the U.S. Bureau of Land Management (BLM) approved the Mt. Hope Draft Environmental Impact Statement (DEIS) for printing, advancing the document toward publication of a Notice of Availability (NOA) of the DEIS in the Federal Register. Here's the link:

General Moly Announces Completion of Draft Environmental Impact Statement for Mt. Hope Project (Press Release, 10/25/2011)

This is a big step forward in the prolonged and arduous permitting process for the Mt. Hope molybdenum project. Bruce D. Hansen, Chief Executive Officer, said,

This is truly a significant accomplishment for our project, the BLM, the cooperating and reviewing agencies, and our team. The completion of the DEIS represents the culmination of five years of intense review and scientific evaluation of the Mt. Hope project and an enormous effort from our team and the BLM. We will work to expedite the publication process in Washington, DC to the extent possible and anticipate publication of the NOA in the Federal Register before the end of the year.

And,

We look forward to the public comment period and the BLM preparing the final EIS. We fully expect that other major Nevada State permits will be completed in this same time period to complete the EIS and Record of Decision (ROD) and the project will go into construction shortly after issuance of the ROD in the second half of 2012.

Although the process going forward has historically taken many months, efforts by the BLM and US Department of Interior (DOI) recently have resulted in faster processing time lines.

General Moly (GMO) stock is up 1.52% at $3.33/share on a day when most mining equities are in the red.

Gold continues to lose value

Although gold dollar price has stabilized in a range, its value relative to key commodities, notably oil and copper, continues to decline. The Eureka Miner’s Gold Value Index© (GVI) today is 96.27 down 12.5% from a 2010-2011 GVI peak of 109.97 on Oct. 4, 2011.

The GVI is also now below its 1-month moving average (MVA) that reached its highest value of 103.26 at Friday's close, Oct. 21, 2011. Today's MVA is 102.70.

Given these two conditions, a trend from higher to lower relative value for gold appears to be in place. NYMEX WTI crude is up significantly in 2-days to $93.49/bbl narrowing the BRENT-WTI spread rather remarkably (see Daily Oil Watch below). COMEX copper is presently trading at $3.4450/lb and the red metal touched $7,820/tonne ($3.5471/lb) on the London Metal Exchange (LME) yesterday for the 3-month seller contract. Copper giant Freeport-McMoRan (FCX) closed up 8% yesterday.

This report believes a fall in gold value from elevated levels is a positive indication for base metals and mining equities. Stay tuned, pardner.


Daily Market Roundup

Enough talk, let's walk the walk:

Eureka Miner's Index(EMI)

This morning the Eureka Miner's Index© (EMI) is below-par at 53.35, up from yesterday's 56.13 and above the 1-month moving average of 44.57. The new record low for 2010-2011 was set Oct. 4, 2011 at 22.88. The 1-month average is currently below the 100-level putting us solidly in bear country for the metals & miners.

The EMI gives us the market temperature for the factors that have the greatest impact on mining in Eureka County. The record high for the EMI is 816.78 set 01/04/2011. An EMI of 100 is the boundary between hot and cold markets for the metals & miners.

200-day averages are used to update mining equity norms in the EMI on a monthly basis.

Gold Value Index (GVI)

The Eureka Miner’s Gold Value Index© (GVI) is above-par at 96.27, down from yesterday's 99.98 and below its 1-month average of 102.7. The new record high for 2010-2011 is 109.97 set on Oct. 4, 2011.Value Adjusted Gold Price© (VAGP) is $1,437.6/oz which is $218.8/oz below the current COMEX gold price.

The GVI initially trended down from 6/7/2010 when it had a value of 100; gold regained value reversing the trend, moved sideways for a time and and headed back up with vigor. A sustained presence around the 100-level is bearish but no longer necessarily an indication for domestic recession.

The GVI gauges the value of gold in relation to oil, copper and silver independent of currency. These three commodities were chosen for relative value comparison because 1) oil derivatives are a common cost element for all miners, 2) copper has proven to be a reliable proxy for global growth and 3) silver is a precious and industrial metal that now competes with gold for investment and as a hedge against fiat currencies.

The Value Adjusted Gold Price (VAGP) is a level that supports current oil, copper & oil prices based on historical commodity norms. If the daily COMEX price is less than the VAGP, then gold is undervalued; if above, overvalued.

Daily Debt Crisis Watch

July 26th we introduced the Debt Crisis Index (DCI). The DCI is computed in the mornings and at the market close Friday in much the same way we do the EMI and GVI indices. Today, the DCI has a value of 186.0 down from yesterday's 190.3. A level above 200 is time for serious concern. We are now above that level.

Daily Oil Watch

Latest Nevada Fuel Prices

On February 1st we identified North Sea Brent crude oil as a good barometer for the ongoing crises in the Middle East and North Africa (MENA). It is now above $100/bbl with a 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 the region.

Here are the key front-month contracts as of this morning:

NYMEX light sweet crude $93.49
ICE North Sea Brent crude $110.87
Spread (ICE- NYMEX) = $17.38 (last report, $22.15)

Here are the February contracts* with a narrower spread:

NYMEX light sweet crude $92.80
ICE North Sea Brent crude $108.51
Spread (ICE- NYMEX) = $15.71 (last report, $19.99)

* NYMEX futures contracts have rolled forward, we now show December and February for a 2-month look-ahead

Prices are off their crisis highs and we have $100+ Brent and $90+ NYMEX in February favoring high oil prices throughout the late fall and winter.

Eureka Outlook Dashboard

4-WD is ON - The miners are on very rough roads; The VIX or "fear index" is above 25; in early morning trading, bellwether Freeport-McMoRan (FCX) is seriously below its 200-day moving average of $49.56(our new key level, 10/18 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment.

The ORANGE light is turned on for Commodity Reflation with copper trading below $3.50/lb

The YELLOW light is turned on for Stable Markets with the VIX above the 30 level (what's this?)

The YELLOW light is turned on for Inflation Watch The Federal Reserve phased out buying Treasurys June 30 (aka QE2) but will maintain low interest rates until mid-2013. Presently they are engaged in a bond program called "Operation Twist" to control long interest rates.

The ORANGE light is turned back on for Investor Confidence with investors less adverse to commodity-sensitive equities

The ORANGE light is turned on our Fuel Gauge with oil above $90

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, Democrats seek to repeal mining tax from the constitution, Rhoads, Ellison oppose repeal of net proceeds tax, Proposal could change net proceeds tax, 'You get to deduct WHAT???' Nevada lawmakers ask gold miners

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

Commodity Market Morning Update

NYMEX/COMEX: Oil is up $2.22 in early trading at $93.49 (November contract, most active); Gold is up $4.1 to $1656.4 (December contract, most active); Silver is up $0.021 to $31.665 (December contract, most active); Copper is up $0.0040 at $3.4450 (December contract, most active)

Western Molybdenum Oxide (General Moly update) is $13.50/lb to $14.20/lb; European Molybdenum Oxide (Bloomberg) is $12.95/lb; LME cash seller is $13.15/lb, LME moly 3-month seller's contract is $13.15/lb

Stock Market Morning Update

The DOW is down 128.21 points to 11,785.41; the S&P 500 is down 13.74 points at 1,240.45

Miners are unhappy except for General Moly:

Barrick (ABX) $46.07 down 0.45%
Newmont (NEM) $63.11 down 1.11%
US Gold (UXG) $4.20 unchanged
General Moly (Eureka Moly, LLC) (GMO) $3.33 up 1.52%
Thompson Creek (TC) $6.90 down 2.82%
Freeport-McMoRan (FCX) $38.44 down 2.68% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $10.63 down 1.37%
Timberline Resources (TLR) $0.59 down 1.67%

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

ArcelorMittal (MT) $19.68 down 1.99% - global steel producer
POSCO (PKX) $80.48 down 1.19% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is down 0.73% at $1,392,364.61 (what's this?).

Cheers,

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 (source: Wikipedia)

Note 2 - The impact of the U.S. debt ceiling debate affected investment decisions for weeks before its resolution August 2nd and was followed by an S&P credit downgrade. Global sovereign debt issues have been an overhang on markets for many, many months starting with the Dubai crisis in late November, 2009 and spreading to the euro-zone in 2010-2011.

Headline photo by Mariana Titus

Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market

Monday, October 24, 2011

"Europhoria", China & CAT Lift Metals & Miners

Yet another brick in the euro-wall...

*** BREAKING NEWS *** COMEX copper is up 6.95% at $3.4470/lb, Freeport-McMoRan (FCX) is up 7.63% at $39.37/share (9:36 AM PT)

My latest Kitco commentary:
Copper and Gold, "What a Long Strange Trip It's Been" (10/17/2011)


My Latest International Business Times commentary: What is Up (or Down) with Silver and Gold?
(10/6/2011)


This morning's...
COMEX Gold price = $1,658.7/oz (December contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 99.98
Value Adjusted Gold Price© (VAGP) = $1,385.6/oz
COMEX - VAGP = $272.4/oz; gold is trading at a premium; the gold:copper ratio exceeds recession levels but is trending down again (bullish move)


Morning Miners!

It is 5:38 AM. Have a cup of Europhoria, drink it quickly - it won't stay hot very long. I wish Ruby T were here, it looks like a good day in the markets for our miners and favorite metals...

"Europhoria", China & CAT Lift Metals & Miners

A 3-way convergence of happy events will no doubt benefit those things we hold dear in this report. Unfortunately, some of these factors may prove fleeting. Over the weekend the thirteenth emergency summit of European leaders did show some progress in their plan-for-a-plan to rescue Europe from its sovereign debt crisis. I listened to an excellent analysis of how to best understand this process by Principal Global Investors Jim McCaughan on CNBC Business News. Here is the video link to the interview, McCaughan has a terrific Scottish accent:

Principal Global Investors Jim McCaughan on the Europe Debt Crisis (CNBC Business News, 10/21/2011)

His view is that good progress is being made but only a small percentage of a total plan has been achieved. There will be a follow-up meeting to add a few more pieces Wednesday. We're two years into this mess across the pond and by his view, there will be at least two more to go with a real possibility of bringing the currency presses back online at some future stage - both euro and U.S. dollar (the latter brought up by the CNBC interview panel). If you ever needed an argument to hold on to your gold and silver this may be it.

Nonetheless, there is enough bubbly from the weekend meeting to lift both gold and commodities which have been running side-by-side lately. COMEX gold is up $22.5/oz at $1,658.2/oz. COMEX copper got a better than 3% pop in the spot market and is trading up $0.1045/lb at $3.3275/lb. Part of this lift is also coming from China's manufacturing sector which expanded moderately in October breaking three months of contraction. The data points to a resilient and robust domestic demand but is tempered by slower growth due to tighter credit conditions.

The third piece of good news comes from Caterpillar (CAT) which reported better-than-expected earnings and a fairly upbeat forecast. The broader markets are now open and copper giant Freeport-McMoRan (FCX) and Caterpillar are both up more than 5%. Not a bad morning for the metals & miners and industrial stocks.

Checking our Indices

Here is the Eureka Miner's Index© (EMI) through Friday's close (a larger more readable plot is near the bottom of the blog page):


This morning the EMI (magenta line) is above its 1-month average (blue line) and poised to break out of the declining channel (dotted lines). The EMI and average are still solidly below the 100-level; the dividing line between cold and hot markets. Friday's closing EMI was 48.25 and today we're at 56.13 above an average of 43.68. The EMI needs to break out of its declining channel and move above 100 before this ole Colonel drinks any European champagne.

The Eureka Miner’s Gold Value Index© (GVI) tells a similar tale. Here is the companion plot to the EMI (also near the bottom of the blog page):


To sustain a rally for the metals & miners, we need gold to give up some relative value to key commodities copper, oil and silver. Remember, the GVI and EMI typically (but not always) have an inverse relation; as the GVI falls the EMI rises. It is good then to see the GVI just below its 1-month average (dark line) and the EMI just above. Presently, the GVI is 99.98 sitting underneath an average of 103.08 and down 9.1% from its 2010-2011 high of 109.97 set on Oct. 4.


Daily Market Roundup

Enough talk, let's walk the walk:

Eureka Miner's Index(EMI)

This morning the Eureka Miner's Index© (EMI) is below-par at 56.13, up from Friday's close 48.25 and above the 1-month moving average of 43.68. The new record low for 2010-2011 was set Oct. 4, 2011 at 22.88. The 1-month average is currently below the 100-level putting us solidly in bear country for the metals & miners.

The EMI gives us the market temperature for the factors that have the greatest impact on mining in Eureka County. The record high for the EMI is 816.78 set 01/04/2011. An EMI of 100 is the boundary between hot and cold markets for the metals & miners.

200-day averages are used to update mining equity norms in the EMI on a monthly basis.

Gold Value Index (GVI)

The Eureka Miner’s Gold Value Index© (GVI) is above-par at 99.98, down from Friday's close 100.62 and below its 1-month average of 103.08. The new record high for 2010-2011 is 109.97 set on Oct. 4, 2011.Value Adjusted Gold Price© (VAGP) is $1,385.6/oz which is $272.4/oz below the current COMEX gold price.

The GVI initially trended down from 6/7/2010 when it had a value of 100; gold regained value reversing the trend, moved sideways for a time and and headed back up with vigor. A sustained presence around the 100-level is bearish but no longer necessarily recessionary.

The GVI gauges the value of gold in relation to oil, copper and silver independent of currency. These three commodities were chosen for relative value comparison because 1) oil derivatives are a common cost element for all miners, 2) copper has proven to be a reliable proxy for global growth and 3) silver is a precious and industrial metal that now competes with gold for investment and as a hedge against fiat currencies.

The Value Adjusted Gold Price (VAGP) is a level that supports current oil, copper & oil prices based on historical commodity norms. If the daily COMEX price is less than the VAGP, then gold is undervalued; if above, overvalued.

Daily Debt Crisis Watch

July 26th we introduced the Debt Crisis Index (DCI). The DCI is computed in the mornings and at the market close Friday in much the same way we do the EMI and GVI indices. Today, the DCI has a value of 190.3 down from yesterday's 197.9. Our benchmark is 100, a value of the DCI at a level above 200 is time for serious concern. We are now above that level.

Daily Oil Watch

Latest Nevada Fuel Prices

On February 1st we identified North Sea Brent crude oil as a good barometer for the ongoing crises in the Middle East and North Africa (MENA). It is now above $100/bbl with a 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 the region.

Here are the key front-month contracts as of this morning:

NYMEX light sweet crude $88.29
ICE North Sea Brent crude $110.44
Spread (ICE- NYMEX) = $22.15 (last report, $22.91)

Here are the February contracts* with a narrower spread:

NYMEX light sweet crude $88.35
ICE North Sea Brent crude $108.34
Spread (ICE- NYMEX) = $19.99 (last report, $20.49)

* NYMEX futures contracts have rolled forward, we now show December and February for a 2-month look-ahead

Prices are off their crisis highs and we have $100+ Brent and $85+ NYMEX in February favoring high oil prices throughout the late fall and winter.

Eureka Outlook Dashboard

4-WD is ON - The miners are on very rough roads; The VIX or "fear index" is above 25; in early morning trading, bellwether Freeport-McMoRan (FCX) is seriously below its 200-day moving average of $49.56(our new key level, 10/18 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment.

The ORANGE light is turned on for Commodity Reflation with copper trading below $3.50/lb

The YELLOW light is turned on for Stable Markets with the VIX above the 30 level (what's this?)

The YELLOW light is turned on for Inflation Watch The Federal Reserve phased out buying Treasurys June 30 (aka QE2) but will maintain low interest rates until mid-2013. Presently they are engaged in a bond program called "Operation Twist" to control long interest rates.

The ORANGE light is turned back on for Investor Confidence with investors slightly less adverse to commodity-sensitive equities

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, Democrats seek to repeal mining tax from the constitution, Rhoads, Ellison oppose repeal of net proceeds tax, Proposal could change net proceeds tax, 'You get to deduct WHAT???' Nevada lawmakers ask gold miners

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

Commodity Market Morning Update

NYMEX/COMEX: Oil is up $0.89 in early trading at $88.29 (November contract, most active); Gold is up $22.5 to $1658.2 (December contract, most active); Silver is up $0.402 to $31.595 (December contract, most active); Copper is up $0.1045 at $3.3275 (December contract, most active)

Western Molybdenum Oxide (General Moly update) is $13.50/lb to $14.20/lb; European Molybdenum Oxide (Bloomberg) is $12.95/lb; LME cash seller is $13.15/lb, LME moly 3-month seller's contract is $13.15/lb

Stock Market Morning Update

The DOW is up 48.44 points to 11,857.23; the S&P 500 is up 6.52 points at 1244.77

Miners are happy:

Barrick (ABX) $45.55 up 2.15%
Newmont (NEM) $63.02 up 0.64%
US Gold (UXG) $4.02 up 1.01%
General Moly (Eureka Moly, LLC) (GMO) $3.19 up 1.92%
Thompson Creek (TC) $7.02 up 3.08%
Freeport-McMoRan (FCX) $38.67 up 5.71% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $10.63 up 3.88%
Timberline Resources (TLR) $0.65 unchanged

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

ArcelorMittal (MT) $19.58 up 3.16% - global steel producer
POSCO (PKX) $80.20 up 1.39% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is up 2.12% at $1,385,003.79 (what's this?).

Cheers,

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 (source: Wikipedia)

Note 2 - The impact of the U.S. debt ceiling debate affected investment decisions for weeks before its resolution August 2nd and was followed by an S&P credit downgrade. Global sovereign debt issues have been an overhang on markets for many, many months starting with the Dubai crisis in late November, 2009 and spreading to the euro-zone in 2010-2011.

Headline photo by Mariana Titus

Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market