"The history of Eureka lies in its future." - Lambert Molinelli, 1878


The author/editor of the Eureka Miner owns common shares of local mining stocks, General Moly (GMO) and Newmont Mining (NEM); together with benchmark miner Freeport-McMoRan (FCX). Please do your own research, markets can turn on you faster than a feral cat.

Wednesday, 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

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:
As of November 28, 2011
(updated weekly)

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

European Molybdenum Oxide (Bloomberg average price, updated Wednesday & Friday):

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?).


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

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