"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.

Tuesday, November 22, 2011

Gold, Silver & Copper Bounce - Miners Too

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 = $1,691.7/oz (December contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 98.11
Value Adjusted Gold Price© (VAGP) = $1,440.8/oz
COMEX - VAGP = $250.9/oz; gold is trading at a premium to key commodities; the gold-to-copper ratio continues to exceed recession levels

Morning Miners!

It is 6:28 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:
As of November 21, 2011
(updated weekly)

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

European Molybdenum Oxide (Bloomberg average price):

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?).


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

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