"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 22, 2011

Winter Solstice, Montagu Norman & Gold

Merry Christmas Eureka!

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 = $1,605.3/oz (December contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 93.36 (declining gold value trend)
Value Adjusted Gold Price© (VAGP) = $1,436.7/oz
COMEX - VAGP = $168.6/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 7:14 AM. Let the ole Colonel pour you a first cup of Winter. Winter Solstice was 5:30 AM Stone Henge time or 9:30 PM last night our time. Our favorite Norseman couldn't be happier. He stacked a pile of rocks in the parking lot that he calls Eureka Stone Henge blocking all access to the break room. Got to love that Thor...

Winter Solstice, Montagu Norman & Gold

Other than minus 1 degree (F) under the eaves, Winter Solstice hasn't brought out any market druids. Things are still pretty quiet ahead of the holidays. COMEX gold is hanging in above $1,600/oz, dropping 8 bucks to $1,605.3/oz; COMEX copper is up $0.0215 at $3.4160/lb - nothing too scary.

The ole Colonel is brushing up his 2012 gold, silver & copper predictions for next week - there will be some surprises and it has a lot to do with Europe, the Persian Gulf and of course China and India. All the same actors will be back next year for more thrills and chills.

To give the global economic outlook some perspective, I highly recommend an article in the Dec. 10-16 Economist. Their "Briefing Lessons of the 1930s - There could be trouble ahead" (printed version, pp. 76-78) is a terrific overview of what may lay ahead - a balanced analysis with plenty of hope (for optimists like me) and despair (for the less optimistic readers). Of particular interest is Montagu Norman, then governor of the Bank of England and possibly the great-grandfather of today's European Financial Stability Facility (EFSF). In the 1930s, his leveraged concept to save Europe from what would become Great Depression never got off the ground. Montagu's idea was to create an international lender with a fund capitalized with $250m to be leveraged up to $750m (3-to-1 leverage). This lender of last resort could provide money to governments and banks in need of capital. Sound familiar?

Today's EFSF starts with 440 billion euros to be leveraged up to 2 trillion euros (4.5-to-1 leverage). Montagu's scheme failed because France and America, owners of gold needed for leveraging, didn't like the concept. Gold no longer backs the US dollar or other fiat currencies like the euro so it won't get in the way this time. It is still a mystery, however, how the EFSF will create that much moola out of thin air. Let's forget historical booger bears until 2012, here's where the markets stand on this first day of winter...

Daily Market Roundup

Mining Report

This morning's mining stocks...

Barrick (ABX) $45.81 down 1.02%
Newmont (NEM) $60.87 down 3.20%
US Gold (UXG) $3.17 down 0.31%
General Moly (Eureka Moly, LLC) (GMO) $3.32 down 0.60%
Thompson Creek (TC) $6.88 down 1.29%
Freeport-McMoRan (FCX) $37.70 down 0.13% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $14.83 down 0.07%
Timberline Resources (TLR) $0.63 up 3.28%

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

ArcelorMittal (MT) $18.20 up 1.11% - global steel producer
POSCO (PKX) $84.27 up 0.45% - South Korean integrated steel producer

The Eureka Miner's Index© (EMI) is below-par at 87.84, up from last report's 86.51 and above the 1-month moving average of 74.67. 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 $8.3/oz at $1,605.3/oz (February contract, most active)

COMEX silver is down $0.154/oz at $29.095/oz (March contract, most active)

The gold-to-silver ratio (Au:Ag) is 55.174 oz/oz

Silver 1-month CRS© is 1.36%; bullish level, very stable (Ag bullish)

The Eureka Miner’s Gold Value Index© (GVI)

The Value Adjusted Gold Price© (VAGP) is $1,436.7/oz which is $168.6/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 $0.0215/lb at $3.4160/lb (March contract, most active)

The gold-to-copper ratio (Au:Cu) is 469.94 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 2.68%; 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 $99.60
ICE North Sea Brent crude $108.19
Spread (ICE- NYMEX) = $8.59(last report, $9.12)

Here are the April contracts* with a narrower spread:

NYMEX light sweet crude $99.92
ICE North Sea Brent crude $106.95
Spread (ICE- NYMEX) = $7.03 (last report, $7.78)

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

NYMEX WTI 1-month CRS© is 2.05%; bullish level; stalled convergence (Oil neutral)

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 102.4 down from last report's 110.8. 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 42.88 points to 12,150.62; the S&P 500 is up 6.74 points at 1250.46

The Eureka Miner's Grubstake Portfolio is down 0.64% at $1,366,470.60 (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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