The Eureka Miner: November 2011

Wednesday, November 30, 2011

Gold, Metals & Miners Jump on Coordinated Central Bank Move

Barrick Ruby Hill Gold Mine, Eureka - Air Survey 16 Mar 2010
Photo by Scott Raine

NEW FORMAT for 2012

The Eureka Miner's Market Report has a new format. Three daily reports, "Mining", "Gold & Silver" and "Copper & Molybdenum" consolidate key morning market information for metals and mining relevant to Eureka County and surrounding areas with new expanded detail on moly prices.

The "Daily Market Roundup" also includes an "Oil Watch" and "Debt Crisis Watch" to monitor the impacts of global events on oil and fuel prices and the unfolding debt crises here and in Europe. Finally, "Stock Market Morning Update" provides the latest on the broader markets as well as the Eureka Miner's Million Dollar Grubstake Portfolio.

Have a good read and welcome back!

My latest Kitco commentary:
What does CRS© tell us about Gold, Copper & Oil? (11/28/2011)

This morning's...
COMEX Gold price = $1,749.9/oz (December contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 97.47
Value Adjusted Gold Price© (VAGP) = $1,500.0/oz
COMEX - VAGP = $249.9/oz; gold is trading at a premium to key commodities; the gold-to-copper ratio continues to exceed recession levels but is trending down (bullish)

Copper CRS© is 2.35%; bullish level, converging stability

Oil CRS© is 3.39%; bullish level, divergent

Wōdnesdæg
Morning Miners!

It is 6:10 AM. Scott Raine came to the break room bright and early with some of his special brew Red Label and some tremendous pictures of the Ruby Hill and Cortez mines. They were taken during aerial surveys conducted March 16, 2010 (Ruby Hill) and November 19, 2009 (Cortez). COMEX gold was $1,123/oz the morning Scott took the Ruby Hill pictures; this morning we have a $30+ pop taking us to $1,749.9/oz. Even Old Miner Woden is whistling, what's going on?

Barrick Ruby Hill pit
16 March 2010
Photo by Scott Raine

Gold, Metals & Miners Jump on Coordinated Central Bank Move

In a surprise move, central banks from developed nations took coordinated action to shore up the global financial system in response to Europe's debt crisis. This news hit the wires around 5:00 AM PT and gold bounced from $1,718.1/oz to 1,738.2/oz and then added another $10+/oz by 6:00 AM PT. Spot copper shot up 4% and the broader markets are opening with a broad based rally - presently the DOW is up 410.51 points to 11,966.14 and the S&P 500 is up a startling 40.88 points to 1,236.07. Barrick Gold (ABX) and Quadra FNX (TSE:QUX) hopped 4%; General Moly (GMO) leaped 8%.

The action included the U.S. Federal Reserve, the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank and the Swiss National Bank making it easier for European banks that hold dollar-denominated securities or make dollar loans to access U.S. currency. Earlier this morning China's central bank said it will cut banks' reserve requirement ratio by half a percentage point to further support raising liquidity amid the global market turmoil.

Although none of this solves the fundamental problems in Europe, it is a substantial boost to global liquidity and gives a lift to the precious and base metals. Kitco News reported that Charles Nedoss, senior market strategist at Olympus Futures, said, “This shows the world’s printing presses are all in coordination.” (Kitco Market Nugget, 11/30/2011)

The Colonel says it's one heck of a good way to close a choppy November.

Intersection of HWY 50 & 278 looking towards Devil's Gate, Eureka
19 November 2009
Photo by Scott Raine

Cortez photos from the air tomorrow...thanks Scott!

Daily Market Roundup

Mining Report

This morning's mining stocks...

Barrick (ABX) $51.96 up 4.07%
Newmont (NEM) $67.22 up 2.96%
US Gold (UXG) $4.21 up 10.79%
General Moly (Eureka Moly, LLC) (GMO) $3.27 up 8.28%
Thompson Creek (TC) $6.92 up 6.79%
Freeport-McMoRan (FCX) $39.13 up 1.14% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $10.30 up 3.98%
Timberline Resources (TLR) $0.63 up 5.00%

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

ArcelorMittal (MT) $18.50 up 11.58% - global steel producer
POSCO (PKX) $85.39 up 6.02% - South Korean integrated steel producer

The Eureka Miner's Index© (EMI) is below-par at 57.59, up from yesterday's 55.25 and below the 1-month moving average of 71.38. 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.

The EMI gives us the market temperature for the factors that have the greatest impact on mining in Eureka County. The record 2010-2011 high for the EMI is 816.78 set 01/04/2011; the low was set 10/4/2011 at 22.88. An EMI of 100 is the boundary between hot and cold markets for the metals & miners.

Gold & Silver Report

This morning's...

COMEX gold is up $31.0/oz at $1,749.9/oz (February contract, most active)

COMEX silver is up $0.385/oz at $32.335/oz (March contract, most active)

The gold-to-silver ratio (Au:Ag) is 54.118 oz/oz

The Eureka Miner’s Gold Value Index© (GVI) is below-par at 97.47, down from yesterday's 98.45 and below its 1-month average of 98.93. The new record high for 2010-2011 is 109.97 set on Oct. 4, 2011.

The Value Adjusted Gold Price© (VAGP) is $1,500.0/oz which is $249.9/oz below the current COMEX gold price.

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.

Copper & Molybdenum Report

This morning's...

COMEX copper is up $0.1340/lb at $3.5245/lb (March contract, most active)

The gold-to-copper ratio (Au:Cu) is 496.50 lb/oz; ratios in excess of 400 lb/oz are considered "recession levels" but the ratio is now trending down (bullish).

Western molybdenum oxide (price per pound):

Metals Week Average:
US$13.60
As of November 28, 2011
(updated weekly)

Ryan's Notes Average:
US$13.625
As of Nov 22, 2011
(updated twice weekly)

European Molybdenum Oxide (Bloomberg average price, updated Wednesday & Friday):
US$13.50/lb

London metal Exchange (LME) molybdenum 3-month seller's contract:

US$13.83/lb (US$30,500/metric ton)

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 remains 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 this morning:

NYMEX light sweet crude $101.09
ICE North Sea Brent crude $111.57
Spread (ICE- NYMEX) = $10.48 (last report, $11.35)

Here are the March contracts* with a narrower spread:

NYMEX light sweet crude $101.24
ICE North Sea Brent crude $110.90
Spread (ICE- NYMEX) = $9.66 (last report, $9.23)

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

Prices are off their crisis highs and we have $110+ Brent and $100+ NYMEX in March favoring high oil prices throughout the winter and into spring.

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 159.9 down from yesterday's 182.3. A level above 200 is time for serious concern. We are now below that level.

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.

Stock Market Morning Update

The DOW is up 410.51 points to 11,966.14; the S&P 500 is up 40.88 points at 1,236.07

The Eureka Miner's Grubstake Portfolio is up 5.26% at $1,437,520.25 (what's this?).

Cheers,

Colonel Possum

Headline photo by Scott Raine

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

Tuesday, November 29, 2011

$1.6/lb Copper & $1,000/oz Gold?

Morning Miners!

It is 5:53 AM. Have a cup of Black Swan Java. Ruby T is up in Elko at the dentist today so the ole Colonel had to fire up Tuesday by his lonesome. Let's go out and see what's floating in the pond of extreme possibilities...

$1.6/lb Copper & $1,000/oz Gold?

While we're walking make a note to checkout Adella Harding's article on Gold Bar when you get a chance:

US Gold plans to mine Gold Bar (Adella Harding, Elko Daily Free Press, 11/28/2011)

This adds some more information to our discussion yesterday.

OK, we're almost there. Read this Kitco Morning Market Nugget and we'll be at the edge of the pond:

Market Nuggets: Copper Market 'Tail-Risk' Consistent With Cash Costs – Goldman

(Kitco News) - In a “tail-risk” scenario, Goldman Sachs estimates that copper prices would fall to about the 90th percentile of the cash-cost curve, which is very close to current options market pricing, the firm says. In a “tail-risk” event, the copper market would move into surplus as end-use demand growth in China and Europe would slow and U.S. demand would fall back to 2009 levels. The options market give s a 5% probability to the likelihood that copper will fall as far as $3,700 a metric ton (about $7,400 a ton now), which is the 90th percentile of the cost curve and that is where the bank would expect prices to fall in a “tail-risk scenario.” (By Debbie Carlson of Kitco News, 29 November 2011)

Ouch.

I contacted Kitco's Debbie Carlson this morning with my reaction to the Goldman analysis:

The Goldman tail-risk nugget is a black swan indeed. $3,700/tonne ($1.68/lb) copper would place us in the darkest pool since 2008-2009 and would be scary for gold if any historical relations hold their ground.

Two thoughts:

1. The edge of the history envelope (most generous for gold price) applies the record high gold-to-copper ratio of Feb 20, 2009 and markets revisit $1,000/oz gold*
2. A new era for copper & gold with copper-to-gold ratios in excess of 1,000 lb/oz (present gold prices or higher + Goldman's black swan copper). I've thought about this some, a quantum mechanical shift.

Frightening possibilities. I'd rather follow Hans Christian Anderson back to the white swan park and leave both these ugly ducklings behind.

* Note: 2/20/2009 COMEX gold 1027.5/oz; COMEX copper $1.6545/lb gold-to-copper ratio record high = 621 lb/oz

She replied that this is a deflation scenario and there are some folks that believe this is the reason why gold hasn't rallied on the "eurozone wobbles."

Keep your powder dry, pardner. Our market bull Ruby T would have my scalp if she knew the ole Colonel was even thinking about less-than-two-buck copper. $1,000/oz gold isn't much of a happy for Old Miner Woden either.

Daily Market Roundup

Mining Report

This morning's mining stocks...

Barrick (ABX) $49.96 up 0.85%
Newmont (NEM) $65.87 up 0.97%
US Gold (UXG) $4.10 up 0.99%
General Moly (Eureka Moly, LLC) (GMO) $3.13 unchanged
Thompson Creek (TC) $6.38 up 1.27%
Freeport-McMoRan (FCX) $36.35 up 1.14% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $9.81 up 2.12%
Timberline Resources (TLR) $0.60 down 1.64%

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

ArcelorMittal (MT) $16.71 down 0.48% - global steel producer
POSCO (PKX) $80.90 up 2.41% - South Korean integrated steel producer

The Eureka Miner's Index© (EMI) is below-par at 57.59, up from yesterday's 55.25 and below the 1-month moving average of 71.38. 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.

The EMI gives us the market temperature for the factors that have the greatest impact on mining in Eureka County. The record 2010-2011 high for the EMI is 816.78 set 01/04/2011; the low was set 10/4/2011 at 22.88. An EMI of 100 is the boundary between hot and cold markets for the metals & miners.

Gold & Silver Report

This morning's...

COMEX gold is down $1.6/oz at $1,712.9/oz (February contract, most active)

COMEX silver is down $0.402/oz at $31.840/oz (March contract, most active)

The gold-to-silver ratio (Au:Ag) is 53.797 oz/oz

The Eureka Miner’s Gold Value Index© (GVI) is below-par at 98.45, up from yesterday's 98.26 and below its 1-month average of 98.89. The new record high for 2010-2011 is 109.97 set on Oct. 4, 2011.

The Value Adjusted Gold Price© (VAGP) is $1,453.8/oz which is $259.1/oz below the current COMEX gold price.

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.

Copper & Molybdenum Report

This morning's...

COMEX copper is down $0.0035/lb at $3.3680/lb (March contract, most active)

The gold-to-copper ratio (Au:Cu) is 508.58 lb/oz; ratios in excess of 400 lb/oz are considered "recession levels" but the ratio is now trending down a bit (bullish).

Western molybdenum oxide (price per pound):

Metals Week Average:
US$13.60
As of November 28, 2011
(updated weekly)

Ryan's Notes Average:
US$13.625
As of Nov 22, 2011
(updated twice weekly)

European Molybdenum Oxide (Bloomberg average price, updated Wednesday & Friday):
US$13.55/lb

London metal Exchange (LME) molybdenum 3-month seller's contract:

US$13.83/lb (US$30,500/metric ton)

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 remains 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 this morning:

NYMEX light sweet crude $98.74
ICE North Sea Brent crude $110.09
Spread (ICE- NYMEX) = $11.35 (last report, $10.00)

Here are the March contracts* with a narrower spread:

NYMEX light sweet crude $98.92
ICE North Sea Brent crude $108.15
Spread (ICE- NYMEX) = $9.23 (last report, $7.92)

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

Prices are off their crisis highs and we have $100+ Brent and $95+ NYMEX in March favoring high oil prices throughout the winter and into spring.

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 182.3 down from yesterday's 187.3. A level above 200 is time for serious concern. We are now just below that level.

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.

Stock Market Morning Update

The DOW is up 93.51 points to 11,616.52; the S&P 500 is up 10.38 points at 1,202.93

The Eureka Miner's Grubstake Portfolio is up 0.50% at $1,383,805.52 (what's this?).

Cheers,

Colonel Possum

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, November 28, 2011

Gold & Markets Rally; Positive News for Gold Bar

NEW FORMAT for 2012

The Eureka Miner's Market Report has a new format. Three daily reports, "Mining", "Gold & Silver" and "Copper & Molybdenum" consolidate key morning market information for metals and mining relevant to Eureka County and surrounding areas with new expanded detail on moly prices.

The "Daily Market Roundup" also includes an "Oil Watch" and "Debt Crisis Watch" to monitor the impacts of global events on oil and fuel prices and the unfolding debt crises here and in Europe. Finally, "Stock Market Morning Update" provides the latest on the broader markets as well as the Eureka Miner's Million Dollar Grubstake Portfolio.

Have a good read and welcome back!

My latest Kitco commentary:
What does CRS© tell us about Gold, Copper & Oil? (11/28/2011)

This morning's...
COMEX Gold price = $1,718.4/oz (December contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 98.26
Value Adjusted Gold Price© (VAGP) = $1,461.2/oz
COMEX - VAGP = $257.2/oz; gold is trading at a premium to key commodities; the gold-to-copper ratio continues to exceed recession levels

Copper CRS© is 3.16%; bullish level, converging stability

Oil CRS© is 3.24%; bullish level, some divergence

Morning Miners!

It is 5:55 AM. Have a hot cup of Last Turkey Sandwich Monday. Let's get to work, looks like a great day in the markets...

Markets Rally; Positive News for Gold Bar

Nothing like starting the week with a $30+ gold pop and 19 global markets in the green. Why is everybody happy? Two things: Black Friday gave the U.S. a strong start to the holiday shopping season and euro-zone leaders are cooking up a new-new Big Plan to stem Europe's sovereign-debt crisis. Spot copper even enjoyed a 3% bounce as investors remind us that the U.S. is the number two consumer of the red metal (see Copper & Molybdenum Report below).

And for us old timers that have fond memories of the Atlas Gold Bar mine from the late 1980s-early 1990s, there is positive news from US Gold (UXG) this morning:

US Gold Announces Positive Preliminary Feasibility Study for Gold Bar Project, Nevada (Press Release, 11/28/2011)

Here's the summary findings from their Preliminary Feasibility Study for resuming operations at the old site:

1) Average annual production of approximately 51,000 ounces of gold over an 8-year mine life (total 410,400 ounces), at a cash cost of $665 per ounce (oz).

2) Open-pit mine with conventional oxide heap leach processing. Projected gold recovery of 82% after primary crushing to 5 centimeters (2 inches) and a 90-day leach cycle.

3) After-tax Net Present Value (NPV) of $36.4 million at $1,200 per oz gold and 8% discount rate, giving an Internal Rate of Return (IRR) of 29%. Based on today’s spot gold price ($1,700 per oz) the after-tax NPV and IRR increase to $109.1 million and 61% respectively.

4) Estimated initial capital expenditures of $55.8 million and sustaining capital of $38.5 million, for total life-of-mine (LoM) capital expenditures of $94.3 million. Pay-back period of 2.6 years at $1,200 per oz gold, or 1.4 years based on the spot gold price ($1,700 per oz).

I wrote a little piece about the Atlas Gold Bar good times (and bad for some) back in 2009:

Johnny Horton and Atlas Mine Memories (Eureka Miner, 11/2/2009)

Here's hoping!

Daily Market Roundup

Mining Report

This morning's mining stocks...

Barrick (ABX) $49.88 up 5.14%
Newmont (NEM) $65.55 up 2.79%
US Gold (UXG) $4.08 up 8.22%
General Moly (Eureka Moly, LLC) (GMO) $3.18 up 15.64%
Thompson Creek (TC) $6.26 up 5.56%
Freeport-McMoRan (FCX) $35.82 up 5.91% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $9.72 up 6.14%
Timberline Resources (TLR) $0.63 up 1.61%

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

ArcelorMittal (MT) $16.85 up 9.27% - global steel producer
POSCO (PKX) $79.25 up 5.25% - South Korean integrated steel producer

The Eureka Miner's Index© (EMI) is below-par at 55.25, up from Friday's 42.63 and below the 1-month moving average of 72.66. 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.

The EMI gives us the market temperature for the factors that have the greatest impact on mining in Eureka County. The record 2010-2011 high for the EMI is 816.78 set 01/04/2011; the low was set 10/4/2010 at 22.88. An EMI of 100 is the boundary between hot and cold markets for the metals & miners.

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):

Today's EMI would pull us back to the the top rail of the descending channel (dotted lines) which we had left with great conviction in late October. Unfortunately that momentum was lost and the average (blue line) is falling back. The 1-month moving average needs to move above 100 to take our miners back to bull pasture. A few more rally days and this miners could reverse to the upside again. However, this morning's average at 72.66 says we're still in deep bear country.

Gold & Silver Report

This morning's...

COMEX

COMEX silver is up $1.146/oz at $32.160/oz (December contract, most active)

The gold-to-silver ratio (Au:Ag) is 53.433 oz/oz

The Eureka Miner’s Gold Value Index© (GVI) is below-par at 98.26, down from Fridays's 99.03 and above its 1-month average of 98.78. The new record high for 2010-2011 is 109.97 set on Oct. 4, 2011.

The Value Adjusted Gold Price© (VAGP) is $1,411.0/oz which is $268.9/oz below the current COMEX gold price.

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.

The Eureka Miner’s Gold Value Index© (GVI) is presently moving sideways. Here is plot of the GVI at Friday's close (also near the bottom of the blog page):

To get the metals & miners back on their feet, 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 bullish for miners then to see the GVI 1-month average (dark line) trending down. Presently, the GVI at 98.26 is just below an average of 98.78 and down 10.7% from its 2010-2011 high of 109.97.

Copper & Molybdenum Report

The best morning article on copper comes from London Bloomberg's dauntless metals expert Maria Kolesnikova:

Copper Advances the Most in Two Weeks on Record-High Holiday Sales in U.S. (London Bloomberg News, 11/28/2011)

This morning's...

COMEX copper is up $0.1075 at $3.3775/lb (December contract, most active)

The gold-to-copper ratio (Au:Cu) is 508.78 lb/oz; ratios in excess of 400 lb/oz are considered "recession levels" but the ratio is now trending down a bit (bullish).

Western molybdenum oxide (price per pound):

Metals Week Average:
US$13.85
As of November 21, 2011
(updated weekly)

Ryan's Notes Average:
US$13.625
As of Nov 22, 2011
(updated twice weekly)

European Molybdenum Oxide (Bloomberg average price, updated Wednesday & Friday):
US$13.55/lb

London metal Exchange (LME) molybdenum 3-month seller's contract:

US$13.83/lb (US$30,500/metric ton)

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 remains 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 this morning:

NYMEX light sweet crude $99.24
ICE North Sea Brent crude $109.24
Spread (ICE- NYMEX) = $10.00 (last report, $10.83)

Here are the March contracts* with a narrower spread:

NYMEX light sweet crude $99.50
ICE North Sea Brent crude $107.24
Spread (ICE- NYMEX) = $7.92 (last report, $9.43)

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

Prices are off their crisis highs and we have $100+ Brent and $95+ NYMEX in March favoring high oil prices throughout the winter and into spring.

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 187.3 down from Friday's closing 201.6. A level above 200 is time for serious concern. We are now just below that level.

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.

Stock Market Morning Update

The DOW is up 319.01 points to 11,550.79; the S&P 500 is up 37.36 points at 1,196.03

The Eureka Miner's Grubstake Portfolio is up 5.70% at $1,381,642.01 (what's this?).

Cheers,

Colonel Possum

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, November 25, 2011

The Colonel's Friday Thoughts on Gold

Morning Miners!

It is 6:22 AM. Have a cup of delicious Raine's Red Label TGIF brew, the tryptophan is wearing off! I hope you had a relaxing Thanksgiving, the ole Colonel is actually feeling a little chipper about gold's prospects even though its down another 16 bucks this morning...

The Colonel's input to the Weekly Kitco Gold Survey

Here is my weekly input to the Kitco gold survey.

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

A: Up. $1,725+/oz territory.

Q: Why?

A: If the euro is truly headed for sub-1.30 by year's end, there is more than a good chance that safe haven sentiment will shift back to gold. The present market fear and downward pressure on precious and base metals is reminiscent of early December 2008 when there was credible fear of a run on U.S. banks following the Lehman collapse that September. On arguably one of the worst weeks for the metals & miners, gold dipped to $779.4/oz on Dec. 5, 2008 only to rally back to $900+ by Dec. 29 and then up more than 30% from the December low to $1,027.5/oz on Feb. 20, 2009. On that day, copper giant Freeport-McMoRan enjoyed an 80+% rise from its Dec. 5, 2009 low even though copper prices were still less than $2/lb. Copper and gold were early recovery stories before most equities found their nadir later in March, 2009.

Background notes:

Brown Brothers Harriman year-end euro target of 1.29 (Kitco Nugget, 11/25/2011)

9/15/2008 Lehman collapse; COMEX gold $816.2/oz; COMEX copper $3.3845/lb

9/22/2008 COMEX gold closes at $938.2/oz

12/5/2008 COMEX gold dips to $779.4/oz, FCX plummets to $7.85 (as adjusted for later stock split); COMEX copper $1.6145/lb

12/29/2008 COMEX gold $902.5/oz (up 15.8%)

2/20/2009 COMEX gold 1027.5/oz (up 31.8%): COMEX copper $1.6545/lb; FCX $14.30

3/6/2009 S&P 500 intraday bottom (666.79); COMEX gold $968/oz; COMEX copper $1.9105/lb; FCX $16.94

Have a good weekend!

Daily Market Roundup

Mining Report

This morning's mining stocks...

Barrick (ABX) $48.44 up 1.00%
Newmont (NEM) $64.42 up 0.33%
US Gold (UXG) $3.87 down 0.51%
General Moly (Eureka Moly, LLC) (GMO) $2.80 down 0.36%
Thompson Creek (TC) $6.18 up 1.64%
Freeport-McMoRan (FCX) $34.40 up 0.06% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $9.28 up 2.00%
Timberline Resources (TLR) $0.61 down 1.61%

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

ArcelorMittal (MT) $15.64 up 2.84% - global steel producer
POSCO (PKX) $75.88 up 0.49% - South Korean integrated steel producer

The Eureka Miner's Index© (EMI) is below-par at 48.03, up from Wednesday's 45.94 and below the 1-month moving average of 73.14. 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.

The EMI gives us the market temperature for the factors that have the greatest impact on mining in Eureka County. The record 2010-2011 high for the EMI is 816.78 set 01/04/2011; the low was set 10/4/2010 at 22.88. An EMI of 100 is the boundary between hot and cold markets for the metals & miners.

Gold & Silver Report

This morning's...

COMEX gold is down $16.0/oz at $1,679.9/oz (December contract most active)

COMEX silver is down $0.764/oz at $31.120/oz (December contract, most active)

The gold-to-silver ratio (Au:Ag) is 53.981 oz/oz

The Eureka Miner’s Gold Value Index© (GVI) is below-par at 99.48, down from Wednesday's 99.63 and above its 1-month average of 98.78. The new record high for 2010-2011 is 109.97 set on Oct. 4, 2011.

The Value Adjusted Gold Price© (VAGP) is $1,411.0/oz which is $268.9/oz below the current COMEX gold price.

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.

Copper & Molybdenum Report

This morning's...

COMEX copper is down $0.0235 at $3.2555/lb (December contract, most active)

The gold-to-copper ratio (Au:Cu) is 516.02 lb/oz; ratios in excess of 400 lb/oz are considered "recession levels"

Western molybdenum oxide (price per pound):

Metals Week Average:
US$13.85
As of November 21, 2011
(updated weekly)

Ryan's Notes Average:
US$13.625
As of Nov 22, 2011
(updated twice weekly)

European Molybdenum Oxide (Bloomberg average price, updated Wednesday & Friday):
US$13.55/lb

London metal Exchange (LME) molybdenum 3-month seller's contract:

US$13.83/lb (US$30,500/metric ton)

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 remains 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 this morning:

NYMEX light sweet crude $95.92
ICE North Sea Brent crude $106.75
Spread (ICE- NYMEX) = $10.83 (last report, $11.34)

Here are the March contracts* with a narrower spread:

NYMEX light sweet crude $96.17
ICE North Sea Brent crude $105.60
Spread (ICE- NYMEX) = $9.43 (last report, $10.24)

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

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

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 196.0 up from Wednesday's 181.6. A level above 200 is time for serious concern. We are now just below that level.

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.

Stock Market Morning Update

The DOW is up 81.06 points to 11,338.61; the S&P 500 is up 8.60 points at 1,170.39

The Eureka Miner's Grubstake Portfolio is up 0.26% at $1,328,338.39 (what's this?).

Cheers,

Colonel Possum

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, November 23, 2011

Happy Thanksgiving! Looking Back One Year

November, 2010

NEW FORMAT for 2012

The Eureka Miner's Market Report has a new format. Three daily reports, "Mining", "Gold & Silver" and "Copper & Molybdenum" consolidate key morning market information for metals and mining relevant to Eureka County and surrounding areas with new expanded detail on moly prices.

The "Daily Market Roundup" also includes an "Oil Watch" and "Debt Crisis Watch" to monitor the impacts of global events on oil and fuel prices and the unfolding debt crises here and in Europe. Finally, "Stock Market Morning Update" provides the latest on the broader markets as well as the Eureka Miner's Million Dollar Grubstake Portfolio.

Have a good read and welcome back!

This morning's...
COMEX Gold price = $1,693.3/oz (December contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 99.63
Value Adjusted Gold Price© (VAGP) = $1,402.1/oz
COMEX - VAGP = $273.2/oz; gold is trading at a premium to key commodities; the gold-to-copper ratio continues to exceed recession levels

Wōdnesdæg
Morning Miners!

It is 6:22 AM. The Colonel caught Old miner Woden trying to brew up some of that horrible Cold Reality coffee this morning. It is safely down the oil sump and there is some Red Label a'brewing. The cranky codger has left for his cave in a huff. Our market bear should be happy with all the downside today if gold wasn't getting whacked too...

Looking Back One Year

It was eery to read last year's day-before-Thanksgiving blog. Here is an excerpt:

The scary bit is continued sovereign-debt contagion fears in Europe which has kept the euro on the slide against the U.S. dollar and Japanese yen. This time Ireland is in the hot seat with troubles brewing in Spain and Portugal. You may remember that the sovereign debt booger bear appeared one year ago with the Dubai crisis followed by Greece well into 2010. Both had a devastating effect on the metals & miners with the Eureka Miner's Index (EMI) hitting a low of 50.7 in early June. The index has been above the 400s this month (see below), let's hope we're not headed down the same road as last November - stay tuned. (The Eureka Miner's Market Report, 11/24/2010)

This morning the EMI is below the worst day in 2010 at 45.94 but thankfully still above the Oct. 4 low of 22.88. Nuts.

Whoever compared watching a debt crisis develop to slow train wreck knew what they were talking about - real slow. This morning a surprisingly weak German 10-year bond auction drove the U.S. dollar to a 7-week high as it emerges as one of the safest havens for worried investors. Strong dollar; weak gold and commodities - been there done that.

The European debt crisis has now moved from the profligate peripherals to the euro zone core countries, Germany and France. This combined with dismal manufacturing data from China is sending the global markets packing into the cave with Old Miner Woden.

I thought it might be interesting to compare some of this morning's prices with the Nov. 24, 2010 data. Here is a sample:

COMEX gold $1,375.4/oz (then) $1,693.3/oz (now)
COMEX silver $27.270/oz (then) $31.695/oz (now)

COMEX copper $3.7395/lb (then) $3.2670/lb (now)

Western moly oxide $15.75/lb (then) $13.85/lb (now, Metals Weekly)

Barrick Gold (ABX) $51.06 (then) $47.89 (now)
General Moly (GMO) $5.52 (then) $2.90 (now)

And the Eureka Miner's Million Dollar Grubstake Portfolio:

(then) $1,702,262.24
(now) $1,330,312.72 down 21.9%

Ouch!

Time for some turkey tryptophan!

The report wishes you a Happy Thanksgiving and thank you again for following the crazy markets with the ole Colonel.

Daily Market Roundup

Mining Report

This morning's mining stocks...

Barrick (ABX) $47.89 down 2.38%
Newmont (NEM) $64.48 down 1.99%
US Gold (UXG) $3.87 down 5.15%
General Moly (Eureka Moly, LLC) (GMO) $2.90 down 5.54%
Thompson Creek (TC) $5.91 down 0.84%
Freeport-McMoRan (FCX) $34.92 down 2.02% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $9.19 down 3.52%
Timberline Resources (TLR) $0.63 down 3.08%

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

ArcelorMittal (MT) $15.54 down 4.70% - global steel producer
POSCO (PKX) $76.54 down 3.76% - South Korean integrated steel producer

The Eureka Miner's Index© (EMI) is below-par at 45.94, down from yesterday's 54.53 and below the 1-month moving average of 73.38. 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.

The EMI gives us the market temperature for the factors that have the greatest impact on mining in Eureka County. The record 2010-2011 high for the EMI is 816.78 set 01/04/2011; the low was set 10/4/2010 at 22.88. An EMI of 100 is the boundary between hot and cold markets for the metals & miners.

Gold & Silver Report

This morning's...

COMEX gold is down $9.1/oz at $1,693.3/oz (December contract most active)

COMEX silver is down $1.256/oz at $31.695/oz (December contract, most active)

The gold-to-silver ratio (Au:Ag) is 53.425 oz/oz

The Eureka Miner’s Gold Value Index© (GVI) is below-par at 99.63, up from yesterday's 98.11 and below its 1-month average of 98.63. The new record high for 2010-2011 is 109.97 set on Oct. 4, 2011.

The Value Adjusted Gold Price© (VAGP) is $1,402.1/oz which is $273.2/oz below the current COMEX gold price.

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.

Copper & Molybdenum Report

This morning's...

COMEX copper is down $0.0660 at $3.2670/lb (December contract, most active)

The gold-to-copper ratio (Au:Cu) is 518.30 lb/oz; ratios in excess of 400 lb/oz are considered "recession levels"

Western molybdenum oxide (price per pound):

Metals Week Average:
US$13.85
As of November 21, 2011
(updated weekly)

Ryan's Notes Average:
US$13.625
As of Nov 22, 2011
(updated twice weekly)

European Molybdenum Oxide (Bloomberg average price, updated Wednesday & Friday):
US$13.75/lb

London metal Exchange (LME) molybdenum 3-month seller's contract:

US$13.83/lb (US$30,500/metric ton)

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 remains 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 this morning:

NYMEX light sweet crude $96.22
ICE North Sea Brent crude $107.56
Spread (ICE- NYMEX) = $11.34 (last report, $10.02)

Here are the March contracts* with a narrower spread:

NYMEX light sweet crude $96.57
ICE North Sea Brent crude $106.81
Spread (ICE- NYMEX) = $10.24 (last report, $9.17)

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

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

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 197.5 up from yesterday's 181.6. A level above 200 is time for serious concern. We are now just below that level.

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.

Stock Market Morning Update

The DOW is down 163.40 points to 11,330.32; the S&P 500 is down 19.69 points at 1,168.35

The Eureka Miner's Grubstake Portfolio is down 3.03% at $1,330,312.72 (what's this?).

Cheers,

Colonel Possum

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, November 22, 2011

Gold, Silver & Copper Bounce - Miners Too

Morning Miners!

It is 6:28 AM. It is terrific to have sweet Ruby T back in the break room fixing her delicious brew. Have a cup and let's checkout what our market bull has trucked in on her lo-boy this morning...

Two Views of Eureka

Before we head outside with Ruby, Eric Pastorino sent the Report two great views of Eureka taken from the new T.V. District tower by the town water tank. The first is looking east - the rhyolite deposit that was once used to quarry building stones for Eureka is the faint white spot near the center of the photo:

This view is looking north as the sun highlights a distant section of Diamond Valley:

Pour Eric another cup.

Gold, Silver & Copper Bounce - Miners Too

Like waiting to exhale, precious and base metals felt compelled to recover this morning from their brutal Monday. We know now that the super committee isn't so super and sovereign debt yields in Europe are sky-rocketing but the world still turns. Of course, we knew the same facts earlier this month as the twelve budget elders squabbled and Italian 10-year yields blew past 7% - it just seems a little less painful as turkey day draws near. As Ruby says, "don't fight a rally" even though this one may be over before the Colonel presses the send key.

Being an optimist, I actually wouldn't be surprised to see a year end rally for the metals & miners similar to last year. This isn't just hopeful thinking, there are not many fund managers that have made money in 2011 - it might soon be time to for a turkey run to the finish, just watch out for January.

A positive note for copper prices is steadily declining inventories at the London Metal Exchange (LME) as seen in this 30-day chart:

London Reuter's presents a good argument for underlying demand for copper for this morning:

METALS-Copper bounces after 3-day fall, physical demand supports (London Reuters, 11/22/2011)

Daily Market Roundup

Mining Report

This morning's mining stocks...

Barrick (ABX) $49.03 up 1.95%
Newmont (NEM) $66.75 up 2.24%
US Gold (UXG) $4.14 up 3.76%
General Moly (Eureka Moly, LLC) (GMO) $3.20 up 2.89%
Thompson Creek (TC) $6.16 up 1.48%
Freeport-McMoRan (FCX) $36.13 down 0.03% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $9.84 down 0.29%
Timberline Resources (TLR) $0.65 unchanged

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

ArcelorMittal (MT) $16.54 down 0.72% - global steel producer
POSCO (PKX) $80.07 up 0.26% - South Korean integrated steel producer

The Eureka Miner's Index© (EMI) is below-par at 54.53, up from yesterday's 45.70 and below the 1-month moving average of 73.85. 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.

The EMI gives us the market temperature for the factors that have the greatest impact on mining in Eureka County. The record 2010-2011 high for the EMI is 816.78 set 01/04/2011; the low was set 10/4/2010 at 22.88. An EMI of 100 is the boundary between hot and cold markets for the metals & miners.

Gold & Silver Report

This morning's...

COMEX gold is up $13.1/oz at $1,691.7/oz (December contract most active)

COMEX silver is up $0.644/oz at $31.760/oz (December contract, most active)

The gold-to-silver ratio (Au:Ag) is 53.265 oz/oz

The Eureka Miner’s Gold Value Index© (GVI) is below-par at 98.11, down from yesterday's 100.00 and below its 1-month average of 98.65. The new record high for 2010-2011 is 109.97 set on Oct. 4, 2011.Value Adjusted Gold Price© (VAGP) is $1,440.8/oz which is $250.9/oz below the current COMEX gold price.

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.

Copper & Molybdenum Report

This morning's...

COMEX copper is up $0.0280 at $3.3310/lb (December contract, most active)

The gold-to-copper ratio (Au:Cu) is 507.87 lb/oz; ratios in excess of 400 lb/oz are considered "recession levels"

Western molybdenum oxide (price per pound):

Metals Week Average:
US$13.85
As of November 21, 2011
(updated weekly)

Ryan's Notes Average:
US$13.70
As of Nov 18, 2011
(updated twice weekly)

European Molybdenum Oxide (Bloomberg average price):
US$14.05/lb

London metal Exchange (LME) molybdenum 3-month seller's contract:

US$13.83/lb (US$30,500/metric ton)

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 remains 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 this morning:

NYMEX light sweet crude $97.73
ICE North Sea Brent crude $107.75
Spread (ICE- NYMEX) = $10.02 (Friday, $9.49)

Here are the March contracts* with a narrower spread:

NYMEX light sweet crude $97.88
ICE North Sea Brent crude $107.05
Spread (ICE- NYMEX) = $9.17 (Friday, $9.95)

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

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

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 181.6 down from yesterday's 199.1. A level above 200 is time for serious concern. We are now just below that level.

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.

Stock Market Morning Update

The DOW is down 34.17 points to 11,513.14; the S&P 500 is down 2.18 points at 1,190.80

The Eureka Miner's Grubstake Portfolio is down 1.36% at $1,385,079.24 (what's this?).

Cheers,

Colonel Possum

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, November 21, 2011

New Season for the Eureka Miner

*** BREAKING NEWS *** COMEX gold plunged $48.6/oz to $1,676.4/oz at 9:30 AM PT

NEW FORMAT for 2012

The Eureka Miner's Market Report has a new format. Three daily reports, "Mining", "Gold & Silver" and "Copper & Molybdenum" consolidate key morning market information for metals and mining relevant to Eureka County and surrounding areas with new expanded detail on moly prices.

The "Daily Market Roundup" also includes an "Oil Watch" and "Debt Crisis Watch" to monitor the impacts of global events on oil and fuel prices and the unfolding debt crises here and in Europe. Finally, "Stock Market Morning Update" provides the latest on the broader markets as well as the Eureka Miner's Million Dollar Grubstake Portfolio.

Have a good read and welcome back!

This morning's...
COMEX Gold price = $1,711.3/oz (December contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 100.00
Value Adjusted Gold Price© (VAGP) = $1,430/oz
COMEX - VAGP = $281.3/oz; gold is trading at a premium to key commodities; the gold-to-copper ratio continues to exceed recession levels

Morning Miners!

It is 6:05 AM. Have a hot cup of Raine's Red Label as we start a new season with our six hundredth daily market report for Eureka County. It's been a long ride in the markets since that first report in March 2009 but we've come a fer piece. Unfortunately, all of Europe's woes are still with us as increasing sovereign debt concerns drive the U.S. dollar higher and precious and base metals lower.

This week the inability of the Super-committee to reach a compromise on U.S deficit and debt reduction is adding to a "risk-off" sentiment to global markets. We start this holiday week with 10-year Treasury yields once again below 2% and the closely watched gold-to-silver ratio trending higher - both bearish signs moving forward. There could be a lot more bumps in the road for the metals & miners, pardner...

Daily Market Roundup

Mining Report

This morning's mining stocks...

Barrick (ABX) $47.78 down 2.17%
Newmont (NEM) $64.66 down 1.22%
US Gold (UXG) $4.07 down 4.91%
General Moly (Eureka Moly, LLC) (GMO) $3.22 down 3.30%
Thompson Creek (TC) $6.02 down 2.75%
Freeport-McMoRan (FCX) $36.09 down 2.30% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $9.60 down 3.57%
Timberline Resources (TLR) $0.65 down 4.41%

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

ArcelorMittal (MT) $16.74 down 4.72% - global steel producer
POSCO (PKX) $80.04 down 3.91% - South Korean integrated steel producer

The Eureka Miner's Index© (EMI) is below-par at 45.70, down from Friday's closing 56.36 and below the 1-month moving average of 73.56. 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.

The EMI gives us the market temperature for the factors that have the greatest impact on mining in Eureka County. The record 2010-2011 high for the EMI is 816.78 set 01/04/2011; the low was set 10/4/2010 at 22.88. An EMI of 100 is the boundary between hot and cold markets for the metals & miners.

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):

Although the EMI (magenta line) broke out of a descending channel (dotted lines) in late October the average (blue line) is losing upward momentum. The 1-month moving average needs to move above 100 to take our miners back to bull pasture. This morning's average at 73.56 says we're still in deep bear country.

Gold & Silver Report

This morning's...

COMEX gold is down $13.8/oz at $1,711.3/oz (December contract most active)

COMEX silver is down $1.147/oz at $31.270/oz (December contract, most active)

The gold-to-silver ratio (Au:Ag) is 54.727 oz/oz

The Eureka Miner’s Gold Value Index© (GVI) is par or 100.00, up from Friday's closing 98.72 and above its 1-month average of 98.76. The new record high for 2010-2011 is 109.97 set on Oct. 4, 2011.Value Adjusted Gold Price© (VAGP) is $1,430.0/oz which is $281.3/oz below the current COMEX gold price.

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.

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

Unfortunately, the present trajectory direction toward the yellow "-, +" quadrant may signal another lap around the track which would be a decidedly bearish development.

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 remains 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 $96.74
ICE North Sea Brent crude $107.11
Spread (ICE- NYMEX) = $9.49 (Friday, $10.39)

Here are the March contracts* with a narrower spread:

NYMEX light sweet crude $96.82
ICE North Sea Brent crude $106.77
Spread (ICE- NYMEX) = $9.95 (Friday, $9.19)

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

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

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 199.9 up from Friday's closing 183.9. A level above 200 is time for serious concern. We are now just below that level.

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.

Stock Market Morning Update

The DOW is down 262.85 points to 11,533.31; the S&P 500 is down 26.14 points at 1,189.51

The Eureka Miner's Grubstake Portfolio is down 3.63% at $1,360,416.83 (what's this?).

Cheers,

Colonel Possum

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