Thursday, January 12, 2012
Dragon & Spain Lift Gold & Copper
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)
COMEX Gold price = $1,660.6/oz (February contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 91.68 (declining gold value trend)
Value Adjusted Gold Price© (VAGP) = $1,513.4/oz
COMEX - VAGP = $147.2/oz; gold is trading at a premium to key commodities; the gold-to-copper ratio continues to exceed recession levels but is trending down
It is 6:47 AM. Have a cup of Thor's Thunder Java. Apparently, a little thunder got into the ole Colonel's computer yesterday and the Eureka Miner skipped a beat. By God and Gates, I hope this report won't suffer another disruption. Thank you for your patience...
Dragon & Spain Lift Gold & Copper
Strong physical buying in China ahead of the Year of the Dragon has put a nice bid under COMEX gold futures bouncing another $21/oz on the February contract to presently trade at $1,660.6/oz. Gold, which has been running with the commodity pack lately, was also lifted by a weakening U.S. dollar and rising oil price. This morning NYMEX WTI crude jumped nearly 2-bucks to $102.70/bbl; global benchmark Brent crude moved even higher adding $2.42 to trade at $114.66/bbl.
The ever present European debt crisis has put a damper on base metal prices for months but a better-than-expected Spanish debt auction eased some immediate concerns about the profligate peripherals. Copper rose to its highest level in more than a month - this morning COMEX copper is up $0.1210/lb at $3.6670/lb. Market participants are also trying to figure out what Chinese metal traders will do when they return from the lunar holiday break; Chinese celebrations commence January 23 and the party lasts 15 days.
China's annual inflation fell to its lowest level in 15 months in December and traders hope an easing in inflation may stimulate domestic buying after the Lunar New Year celebrations. More importantly. The Chinese government is expected to focus less on putting a brake on prices and more on stimulus measures which should be bullish for base metals prices.
What fun! Even euro-moly oxide is up to $13.90/lb just behind the LME 3-month seller's contract at $13.95/lb.
Daily Market Roundup
This morning's mining stocks...
Barrick (ABX) $49.30 up 1.09%
Newmont (NEM) $64.42 up 1.71%
US Gold (UXG) $3.95 up 0.77%
General Moly (Eureka Moly, LLC) (GMO) $3.35 up 1.21%
Thompson Creek (TC) $7.70 up 0.52%
Freeport-McMoRan (FCX) $41.93 up 0.67% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $14.95 up 0.20%
Timberline Resources (TLR) $0.61 unchanged
The Steels (a "tell" for General Moly & Thompson Creek):
ArcelorMittal (MT) $19.63 up 1.55% - global steel producer
POSCO (PKX) $84.59 up 1.15% - South Korean integrated steel producer
The Eureka Miner's Index© (EMI) is above-par at 118.86, up from last report's 112.54 and above the 1-month moving average of 86.18. The new record low for 2010-2012 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 2010-2012 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
COMEX gold is up $21.0/oz at $1,660.6/oz (February contract, most active)
COMEX silver is up $0.685/oz at $30.575/oz (March contract, most active)
The gold-to-silver ratio (Au:Ag) is 54.312 oz/oz
Silver 1-month CRS© is 1.99% (bullish level); stalled convergence (Ag neutral)
The Eureka Miner’s Gold Value Index© (GVI) is below-par at 91.68, down from last report's 93.43 and below its 1-month average of 93.58. The record high for 2010-2012 is 109.97 set on Oct. 4, 2011.
The Value Adjusted Gold Price© (VAGP) is $1,513.4/oz which is $147.2/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
COMEX copper is up $0.1210/lb at $3.6670/lb (March contract, most active)
The gold-to-copper ratio is 452.85 lb/oz; ratios in excess of 400 lb/oz are considered "recession levels" (Cu bearish) but the ratio continues to trend down (Cu bullish).
Copper 1-month CRS© is 2.17% (bullish level); stalled convergence (Cu neutral)
The latest molybdenum oxide spot and futures prices (courtesy of Thompson Creek Metals):
Metals Week Average:
As of January 9, 2012
Ryan's Notes Average:
As of January 10, 2012
(updated twice weekly)
European Molybdenum Oxide (Bloomberg average price, updated Wednesday & Friday):
London metal Exchange (LME) molybdenum 3-month seller's contract:
US$13.95/lb (US$30,750/metric ton)
Daily Oil Watch
Latest Nevada Fuel Prices (click this link)
On February 1st, 2011, 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 now having tending up 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 $102.70
ICE North Sea Brent crude $114.66
Spread (ICE- NYMEX) = $11.96 (last report, $10.85)
Here are the April contracts* with a narrower spread:
NYMEX light sweet crude $103.15
ICE North Sea Brent crude $113.97
Spread (ICE- NYMEX) = $10.82 (last report, $9.79)
* NYMEX futures contracts have rolled forward, we now show February and April for a 2-month look-ahead
NYMEX WTI 1-month CRS© is 3.25% (neutral level); converging stability (Oil neutral)
Prices are off their crisis highs and we have $110+ Brent and $100+ 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 98.0 down from last report's 98.8. 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 and continuing into 2012.
Stock Market Morning Update
The DOW is down 48.70 points to 12,400.75; the S&P 500 is down 5.16 points at 1287.32
The Eureka Miner's Grubstake Portfolio is up 0.96% at $1,456,869.46 (what's this?).
Headline photo by Mariana Titus
Write Colonel Possum at email@example.com for answers to your questions or to request e-mail updates on the market