"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.

Tuesday, January 3, 2012

Gold, Silver, Copper & Miners Off to a Good Start

Keyhole University Graduating Class 2011

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 = $1,598.2/oz (February contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 91.40 (declining gold value trend)
Value Adjusted Gold Price© (VAGP) = $1,461.0/oz
COMEX - VAGP = $137.2/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. What a great way to start a new market year - Raine's Red Label coffee and sweet Ruby T trucking in one helluva rally! Better-than-expected U.S., Chinese and European manufacturing data gave world markets a good bid - eighteen of nineteen global markets are in the green this morning with good advances in precious and base metals as well as the miners.

Stocks got a boost Tuesday after a report showed the U.S. manufacturing sector continued to expand in December. The Institute for Supply Management's manufacturing index rose to 53.9 last month, from 52.7 in November. A reading above 50 indicates expanding activity.

The market was also encouraged by China's official PMI, which rose to 50.3 in December, a return to expansionary territory after dipping below 50 in November.

In Europe there is no expansion but manufacturing activity in December contracted at a slower rate in both the euro zone and Germany - a more positive outcome than predicted.

Good enough news for the ole Colonel, hope you had a terrific New Year's break!

Gold, Silver, Copper & Miners Off to a Good Start

It has been a long while since the Eureka Miner's Million Dollar Portfolio jumped more than 4% on the open. The S&P 500 is up 2.1% and the DOW has added nearly 250 points to its 2011 close.

COMEX gold is trading up $31.4/oz at $1,598.2 and silver is nearly a buck up at $28.815/oz. COMEX copper joins the party nearly breaking the $3.5/lb level at $3.4970/lb. What's not to like? Unless you've got a rig pumping in your backyard, NYMEX WTI cruse at $102.52/bbl might be a little scary but what the heck, it's a good move for commodities across the board.

Our favorite miners are all up 3-5% except for Quadra which is only touching green at 0.3%. US gold leads the pack with at 7.7% surge.


Daily Market Roundup

Mining Report

This morning's mining stocks...

Barrick (ABX) $46.84 up 3.51%
Newmont (NEM) $62.09 up 3.47%
US Gold (UXG) $3.62 up 7.74%
General Moly (Eureka Moly, LLC) (GMO) $3.22 up 4.21%
Thompson Creek (TC) $7.24 up 4.02%
Freeport-McMoRan (FCX) $38.73 up 5.27% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $15.01 up 0.33%
Timberline Resources (TLR) $0.59 up 3.51%

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

ArcelorMittal (MT) $19.72 up 8.41% - global steel producer
POSCO (PKX) $85.07 up 3.62% - South Korean integrated steel producer

The Eureka Miner's Index© (EMI) is below-par at 85.54, up from last report's 75.67 and above the 1-month moving average of 81.29. 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.

Here is the Eureka Miner's Index© (EMI) through Friday's close (a larger more readable plot is near the bottom of the blog page):

Today's EMI is moving ever closer to the 100-level. The 1-month moving average is also headed north but needs to get above 100 to return our miners to bull pasture.

Gold & Silver Report

This morning's...

COMEX gold is up $31.4/oz at $1,598.2/oz (February contract, most active)

COMEX silver is up $0.0.900/oz at $28.815/oz (March contract, most active)

The gold-to-silver ratio (Au:Ag) is 55.464 oz/oz

Silver 1-month CRS© is 2.46% (bullish level); diminishing stability (Ag neutral)

The Eureka Miner’s Gold Value Index© (GVI) is below-par at 91.40, down from last report's 92.11 and below its 1-month average of 94.64. The new record high for 2010-2011 was 109.97 set on Oct. 4, 2011.

The Value Adjusted Gold Price© (VAGP) is $1,461.0/oz which is $137.2/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.

The Eureka Miner’s Gold Value Index© (GVI) is presently declining. Here is plot of the GVI at Friday's close (also near the bottom of the blog page):

To get the metals & miners back on their feet, we need gold to give up more relative value to copper, oil and silver. Remember, the GVI and EMI typically (but not always) have an inverse relation; as the GVI falls, the EMI rises. It is bullish for miners then to see the GVI 1-month average (dark line) trending down. Presently, the GVI at 91.40 is below an average of 94.64 and down 16.9% from its 2010-2011 high of 109.97.

Copper & Molybdenum Report

This morning's...

COMEX copper is up $0.0610/lb at $3.4970/lb (March contract, most active)

The gold-to-copper ratio is 457.02 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 2.39%; 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 $102.52
ICE North Sea Brent crude $111.35
Spread (ICE- NYMEX) = $8.83 (last report, $8.06)

Here are the April contracts* with a narrower spread:

NYMEX light sweet crude $102.94
ICE North Sea Brent crude $110.31
Spread (ICE- NYMEX) = $7.37 (last report, $6.95)

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

NYMEX WTI 1-month CRS© is 3.74% (neutral level); divergent (Oil bearish)

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 106.2 down from last report's 106.5. 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 and continuing into 2012.

Stock Market Morning Update

The DOW is up 246.73 points to 12,464.29; the S&P 500 is up 26.31 points at 1283.91

The Eureka Miner's Grubstake Portfolio is up 4.04% at $1,396,874.71 (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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