"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.

Thursday, December 29, 2011

Gold & Silver Down Again; The Colonel Puts Up

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.

My Latest International Business Times commentary: Gold and Silver “Together Again” (12/05/2011)

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

This morning's...
COMEX Gold price = $1,533.8/oz (February contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 91.92 (declining gold value trend)
Value Adjusted Gold Price© (VAGP) = $1,394.2.0/oz
COMEX - VAGP = $139.6/oz; gold is trading at a premium to key commodities; the gold-to-copper ratio continues to exceed recession levels but is trending down

Morning Miners!

It is 5:54 AM. Have a cup of our favorite Norseman's Thorsday Thunder. With no storms in sight, Thor has been getting all his thrills watching the poor ole Colonel worrying about Italian debt auctions...

Gold & Silver Down Again; The Colonel Puts Up

A less than stellar Italian debt auction gave the markets another wiggle this morning. In the wee hours COMEX gold plumbed $1,523.9/oz and COMEX silver followed 5 minutes later to hit a low of $26.145/oz. Both have since recovered trading now at $1,533.8/oz and $26.560/oz respectively. The euro dropped below $1.29, touching an 11-month low against the dollar and 10-year low against the yen.

This report has been tracking silver's descent most of this short week - it was time to put up or shut up so the Colonel took a nibble at the fallen white metal as the broader markets opened. An easy way to buy silver is through the iShare Silver Trust exchange traded fund SLV. It tracks silver futures fairly accurately and was near the 52-week low of $25.65 when I pulled the trigger at $25.84. Considering the 52-week high was $48.35 (present price down more than 45%), this is probably a reasonable entry point although there could very well be additional downside. Please don't take this as investment advice - it may turn out to be a bad bet, at least in the short run. I remain long-term bullish on silver and tomorrow will reveal my 2012 predictions for Nevada's historic metal and its faithful companion gold.

Daily Market Roundup

Mining Report

This morning's mining stocks...

Barrick (ABX) $44.21 down 0.07%
Newmont (NEM) $58.94 down 0.81%
US Gold (UXG) $3.11 up 0.32%
General Moly (Eureka Moly, LLC) (GMO) $3.00 down 1.32%
Thompson Creek (TC) $6.83 up 0.15%
Freeport-McMoRan (FCX) $36.26 down 0.14% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $14.76 up 0.13%
Timberline Resources (TLR) $0.56 down 3.45%

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

ArcelorMittal (MT) $17.81 up 1.19% - global steel producer
POSCO (PKX) $81.61 down 0.28% - South Korean integrated steel producer

The Eureka Miner's Index© (EMI) is below-par at 68.79, down from last report's 70.78 and below the 1-month moving average of 80.08. 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 $30.3/oz at $1,533.8/oz (February contract, most active)

COMEX silver is down $0.674/oz at $26.560/oz (March contract, most active)

The gold-to-silver ratio (Au:Ag) is 57.748 oz/oz

Silver 1-month CRS© is 2.36%; bullish level, very stable (Ag bullish)

The Eureka Miner’s Gold Value Index© (GVI) is below-par at 91.92, down from last report's 92.97 and below its 1-month average of 95.21. The new record high for 2010-2011 is 109.97 set on Oct. 4, 2011.

The Value Adjusted Gold Price© (VAGP) is $1,394.2/oz which is $139.6/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 $0.0055/lb at $3.3710/lb (March contract, most active)

The gold-to-copper ratio (Au:Cu) is 455.00 lb/oz; ratios in excess of 400 lb/oz are considered "recession levels" (Cu bearish) but the ratio is trending down (Cu bullish).

Copper 1-month CRS© is 2.48%; bullish level, stalled convergence (Cu neutral)

The latest molybdenum oxide spot and futures prices:

Metals Week Average:
As of December 26, 2011
(updated weekly)

Ryan's Notes Average:
As of December 27, 2011
(updated twice weekly)

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

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

US$13.61/lb (US$30,000/metric ton)

Daily Oil Watch

Latest Nevada Fuel Prices (click this link)

On February 1st we identified North Sea Brent crude oil as a good barometer for the crises in the Middle East and North Africa (MENA). The next conflict could be in the Persian Gulf. Brent remains above $100/bbl with a narrowing spread with 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 $99.49
ICE North Sea Brent crude $107.53
Spread (ICE- NYMEX) = $8.04 (last report, $7.85)

Here are the April contracts* with a narrower spread:

NYMEX light sweet crude $99.81
ICE North Sea Brent crude $106.86
Spread (ICE- NYMEX) = $7.05 (last report, $6.43)

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

NYMEX WTI 1-month CRS© is 2.97%; bullish level; divergent (Oil bearish)

Prices are off their crisis highs and we have $105+ Brent and $95+ NYMEX in April favoring high oil prices throughout the winter and 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 107.5 down from last report's 111.5. A level above 200 is time for serious concern. We are now well 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 73.68 points to 12,225.09; the S&P 500 is up 6.93 points at 1256.57

The Eureka Miner's Grubstake Portfolio is down 0.35% at $1,310,106.81 (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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