"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, December 21, 2011

Quiet Markets; Gold & Copper Resilient, Silver Weak

Opera House Reflection

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 = $1,610.5/oz (December contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 94.57 (declining gold value trend)
Value Adjusted Gold Price© (VAGP) = $1,423.0/oz
COMEX - VAGP = $187.5/oz; gold is trading at a premium to key commodities; the gold-to-copper ratio continues to exceed recession levels but is trending down

Morning Miners!

It is 7:29 AM. Have a cheerful cup of Rudolf Red. Even Old Miner Woden is in a good mood this morning. He's putting some miner's lamps on the break room Christmas tree and whistling Frosty the Snowman. Doesn't look like much to make a snowman this season but remember to put on your long johns tonight -  It's heading back down to 6 degrees...Brrrrrr.

Quiet Markets; Gold & Copper Resilient, Silver Weak

The markets are thinning out for the holidays and there's nothing too exciting going on. The U.S.dollar, gold and the euro did a little dance in the early hours on the announcement of the long term refinancing operation (LTRO) by the European Central Bank. Whether the LTRO can be viewed as the ECB's equivalent of QE (quantitative easing) is a subject of debate and probably caused the price wiggles in the big three this morning. True euro-QE would be euro bearish and presumably U.S. dollar & gold bullish. Currently COMEX gold has lost 7 bucks but is still hanging in above $1,600/oz trading at $1,610.5. Don't expect to see European pressure on our markets to go away anytime too soon. The red metal is at least showing some resilience up $0.0025/lb at $3.3720/lb on the COMEX.

Silver on the other hand has been weakening with respect to gold lately. There was a time that the ole Colonel said he would buy silver below $30/lb but now I'm not so sure. COMEX silver is down $0.176 at $29.360/oz.

A good gauge of weakness and strength is the gold-to-silver ratio (Au:Ag) that is included everyday in the Gold and Silver Report below. Kitco's Debbie Carlson reports Commerzbank on the subject this morning:

Market Nuggets: Gold-Silver Ratio Rises Back Over 55:1 – Commerzbank(Kitco Market Nugget, 21 December 2011, 8:34 a.m.)

This morning Au:Ag is just under 55 at 54.76. This report gets nervous about silver when the ratio exceeds 59 so we're not scary yet the ratio is trending up (silver bearish). Something to watch.

Daily Market Roundup

Mining Report

This morning's mining stocks...

Barrick (ABX) $46.65 up 1.22%
Newmont (NEM) $62.96 up 0.56%
US Gold (UXG) $3.23 down 0.31%
General Moly (Eureka Moly, LLC) (GMO) $3.30 up 1.23%
Thompson Creek (TC) $6.98 up 1.01%
Freeport-McMoRan (FCX) $37.65 up 0.19% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $14.66 up 0.07%
Timberline Resources (TLR) $0.63 up 1.61%

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

ArcelorMittal (MT) $18.05 down 0.28% - global steel producer
POSCO (PKX) $83.77 down 0.25% - South Korean integrated steel producer

The Eureka Miner's Index© (EMI) is below-par at 86.51, up from last report's 80.09 and above the 1-month moving average of 72.76. 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 $7.1/oz at $1,610.5/oz (February contract, most active)

COMEX silver is down $0.176/oz at $29.360/oz (March contract, most active)

The gold-to-silver ratio (Au:Ag) is 54.760 oz/oz

Silver 1-month CRS© is 1.30%; bullish level, very stable (Ag bullish)

The Eureka Miner’s Gold Value Index© (GVI) is below-par at 94.57, down from last report's 95.18 and below its 1-month average of 96.64. The new record high for 2010-2011 is 109.97 set on Oct. 4, 2011.

The Value Adjusted Gold Price© (VAGP) is $1,423.0/oz which is $187.5/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 up $0.0025/lb at $3.3720/lb (March contract, most active)

The gold-to-copper ratio (Au:Cu) is 477.61 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-monthCRS© is 2.72%; bullish level, converging stability (Cu bullish)

The latest molybdenum oxide spot and futures prices:

Metals Week Average:
As of December 19, 2011
(updated weekly)

Ryan's Notes Average:
As of December 20, 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 ongoing crises in the Middle East and North Africa (MENA). It remains above $100/bbl with a narroeing 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 $97.60
ICE North Sea Brent crude $106.72
Spread (ICE- NYMEX) = $9.12(last report, $9.94)

Here are the April contracts* with a narrower spread:

NYMEX light sweet crude $97.14
ICE North Sea Brent crude $105.5
Spread (ICE- NYMEX) = $7.78 (last report, $8.91)

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

NYMEX WTI 1-month CRS© is 1.78%; bullish level; stalled convergence (Oil neutral)

Prices are off their crisis highs and we have $100+ 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 110.8 down from last report's 114.8. 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 down 37.31 points to 12,066.27; the S&P 500 is down 4.86 points at 1236.44

The Eureka Miner's Grubstake Portfolio is up 0.21% at $1,375,289.00 (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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