Copper Stumbles on China PMI; Silver Mojo?

Cuprum 29
Metallic Art by Mariana Titus

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 = $1,750.0/oz (December contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 96.93
Value Adjusted Gold Price© (VAGP) = $1,508.5/oz
COMEX - VAGP = $241.5/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 1-monthCRS© is 2.15%; bullish level, converging stability

Oil 1-month CRS© is 3.33%; bullish level, stalled divergence


Þūnresdæg
Morning Miners!

It is 5:54 AM. Have a cup of Thor's Thunder Brew. Our favorite Norseman is out chopping firewood with his battle axe. With a little peace and quiet in the break room let's checkout this cool photograph taken by Eureka's Deon Reynolds featured at the "Dreams Exhibition" in Fort Collins, Colorado (click here).

Copper Stumbles on China PMI; Silver Mojo?

Yesterday was a terrific day for markets spurred by global central banks bracing to inject liquidity in the sickly euro zone patient. Some of that exuberance has faded this morning for metals given signs of stalled manufacturing in China and Europe. Copper futures stumbled on weaker-than-expected official Chinese PMI data now showing contraction in their manufacturing sector and the euro zone contracting at its fastest rate in two years. Today's weaker dollar has muted the decline with COMEX copper now trading down only $0.0235/lb at $3.5520/lb. Reuter's Susan Thomas did a nice piece on the red metal:

METALS-Copper falls after China, euro zone factory data (Susan Thomas, Reuters, 12/1/2011)

The ole Colonel isn't too worried as long as we can hold copper in a $3.20/lb to $3.70/lb trading range to close the year.

Truthfully I'm getting a lot more excited about silver lately. This morning COMEX silver is up $0.336/oz at $33.140/oz on a day when gold is flat to slightly down sitting right around $1,750/oz. That gives us a gold-to-silver (Au:Ag) ratio of 52.8 which is close to the center of a declining channel that we've been in since Sept. 23 with a high of 57.0 on Sep. 26 and a low of 49.5 Oct. 28.

A declining Au:Ag ratio is a bullish sign showing silver gaining value relative to gold. When COMEX silver made its high of $49.889/oz of April 25, the Au:Ag was in the low-30s. Another bullish sign is silver-gold price sensitivity or beta. The three-month beta is presently 2.4 which means a 1% change in gold price delivers a 2.4% change in silver (on average). Stay tuned, pardner - if you think gold is headed higher, you might want a have little silver to ride shotgun. Please do your own head scratching, the ole Colonel could be dead wrong.

Daily Market Roundup

Mining Report

This morning's mining stocks...

Barrick (ABX) $52.92 up 0.08%
Newmont (NEM) $69.21 up 0.48%
US Gold (UXG) $4.18 up 0.72%
General Moly (Eureka Moly, LLC) (GMO) $3.27 down 2.39%
Thompson Creek (TC) $7.10 up 1.57%
Freeport-McMoRan (FCX) $39.92 up 0.81% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $10.84 down 0.45%
Timberline Resources (TLR) $0.62 unchanged

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

ArcelorMittal (MT) $19.35 up 2.44% - global steel producer
POSCO (PKX) $88.39 up 3.20% - South Korean integrated steel producer

The Eureka Miner's Index© (EMI) is below-par at 92.34, up from yesterday's 79.81 and above the 1-month moving average of 68.53. 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 $0.3/oz at $1,750.0/oz (February contract, most active)

COMEX silver is up $0.336/oz at $33.140/oz (March contract, most active)

The gold-to-silver ratio (Au:Ag) is 52.806 oz/oz

The Eureka Miner’s Gold Value Index© (GVI) is below-par at 96.93, down from yesterday's 97.47 and below its 1-month average of 98.90. The new record high for 2010-2011 is 109.97 set on Oct. 4, 2011.

The Value Adjusted Gold Price© (VAGP) is $1,508.5/oz which is $241.5/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/lb at $3.5520/lb (March contract, most active)

The gold-to-copper ratio (Au:Cu) is 492.68 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$13.45
As of Nov 29, 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 $100.24
ICE North Sea Brent crude $109.58
Spread (ICE- NYMEX) = $9.34 (last report, $10.48)

Here are the March contracts* with a narrower spread:

NYMEX light sweet crude $100.36
ICE North Sea Brent crude $108.82
Spread (ICE- NYMEX) = $8.46 (last report, $9.66)

* 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 $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 154.3 down from yesterday's 159.9. 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 4.66 points to 12,050.34; the S&P 500 is up 2.03 points at 1,248.99

The Eureka Miner's Grubstake Portfolio is up 0.36% at $1,462,759.36 (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