"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, January 5, 2012

Euro Below $1.28; Gartman Gold Bullish Again; Copper Thoughts


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 = $1,603.8/oz (February contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 92.95 (declining gold value trend)
Value Adjusted Gold Price© (VAGP) = $1,441.6/oz
COMEX - VAGP = $162.2/oz; gold is trading at a premium to key commodities; the gold-to-copper ratio continues to exceed recession levels but is trending down

Morning Miners!

It is 7:14 AM. Have a hot cup of Thor's Village Raid. European banks must feel like the Vikings are back in town plundering their treasure. It didn't take long to remember that not much has changed across the pond since last year. It's not supply and demand that is moving gold and base metal prices...

Euro Below $1.28; Gartman Gold Bullish Again; Copper Thoughts

I truly respect lunar cycles and found it somewhat ominous that the moon was half-and-half at the beginning of 2012 with the bight side low. At least it is a waxing and not waning phase with a full moon on January 9. Chinese lunar New Year is early this year beginning with the new moon on January 23. The Report will soon be talking about how this annual event affects copper prices but presently Europe remains the big gorilla in the commodity living room.

This morning the euro dropped below $1.28 for a low of $1.2796, territory not seen September 2010. Even more shocking, the euro pegged an eleven-year low with the yen at ¥98.31. Of the three major reserve currencies, the euro is calling in sick for 2012. The culprits are the same; concern about the liquidity and solvency of European banks and the ever expanding sovereign debt crisis with Hungary now added to the shaky list.

A strong dollar is putting pressure on gold and base metals although the tension between the United states and Iran is giving the former some support. Importantly, Commodity King Dennis Gartman has turned bullish on gold again as reported by Debbie Carlson in a Kitco Market Nugget this morning:

Market Nuggets: Gold Priced In Euros Makes New High – Gartman (Kitco market Nugget, 1/5/2012)

Gartman says, “The bear run that began in August has now officially ended, for the string of lower lows and lower highs is over. This does not help us in hoping for/expecting/indeed demanding some weakness into which to buy, but it does give us ‘permission’ to become officially bullish once again.”

Gartman on a bright side of the moon in January.

Closing with the red metal, two things are curious to me technically: 1) its COMEX price has been less volatile relative to COMEX gold over the last three months and 2) the gold-to-copper ratio, although declining, remains stubbornly high historically.

Nonetheless I remain cautiously bullish on our red metal friend. Let's see what the Chinese lunar New Year brings, it is the year of the dragon...

Daily Market Roundup

Mining Report

This morning's mining stocks...

Barrick (ABX) $47.55 down 1.39%
Newmont (NEM) $61.32 down 0.92%
US Gold (UXG) $3.46 down 3.89%
General Moly (Eureka Moly, LLC) (GMO) $3.11 down 2.20%
Thompson Creek (TC) $7.21 down 2.70%
Freeport-McMoRan (FCX) $39.04 down 1.98% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $14.81 unchanged
Timberline Resources (TLR) $0.58 up 1.75%

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

ArcelorMittal (MT) $18.98 down 2.37% - global steel producer
POSCO (PKX) $84.44 down 0.55% - South Korean integrated steel producer

The Eureka Miner's Index© (EMI) is below-par at 85.63, down from last report's 86.01 and below the 1-month moving average of 81.04. 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 $8.9/oz at $1,603.8/oz (February contract, most active)

COMEX silver is down $0.257/oz at $28.840/oz (March contract, most active)

The gold-to-silver ratio (Au:Ag) is 55.610 oz/oz

Silver 1-month CRS© is 2.34% (bullish level); slightly divergent (Ag bearish)

The Eureka Miner’s Gold Value Index© (GVI) is below-par at 92.95, up from last report's 91.52 and below its 1-month average of 94.23. The new record high for 2010-2011 is 109.97 set on Oct. 4, 2011.

The Value Adjusted Gold Price© (VAGP) is $1,441.6/oz which is $162.2/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

This morning's...

COMEX copper is down $0.0.0440/lb at $3.3905/lb (March contract, most active)

The gold-to-copper ratio is 473.03 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 2.28% (bullish level); stalled convergence (Cu neutral)

The latest molybdenum oxide spot and futures prices:

Metals Week Average:
As of January 2, 2012
(updated weekly)

Ryan's Notes Average:
As of January 3, 2012
(updated twice weekly)

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

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

US$13.61/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 $102.35
ICE North Sea Brent crude $102.76
Spread (ICE- NYMEX) = $10.85 (last report, $9.94)

Here are the April contracts* with a narrower spread:

NYMEX light sweet crude $113.20
ICE North Sea Brent crude $112.55
Spread (ICE- NYMEX) = $9.79 (last report, $8.72)

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

NYMEX WTI 1-month CRS© is 3.82% (neutral level); stalled convergence (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 110.9 down from last report's 113.4. 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 86.58 points to 12,331.84; the S&P 500 is down 7.49 points at 1269.81

The Eureka Miner's Grubstake Portfolio is down 1.41% at $1,380,233.61 (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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