"The history of Eureka lies in its future." - Lambert Molinelli, 1878

DISCLOSURE

The author/editor of the Eureka Miner owns common shares of local mining stocks, General Moly (GMO), McEwen Ming (MUX) 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, February 29, 2012

Yo-Yo Gold Drops $70; General Moly Places Haul Truck Fleet Order

CAT 793s out for a spin

NEW FORMAT for 2012

Morning Commentary
Daily Market Roundup
- Gold & Silver Report
- Copper & Molybdenum Report
- Oil Watch
- Debt Crisis Watch
- Stock Market Morning Update
- Eureka Miner's Million Dollar Grubstake Portfolio


My Latest International Business Times commentary: Silver to Gold, “Whither Thou Goest…” (02/27/2011)

My latest Kitco commentary: A Foreboding Alignment in the Copper-Gold Firmament (02/21/2012)

Latest Nevada Fuel Prices (click this link)

This morning's...
COMEX Gold price = $1,736.1/oz (April contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 89.00 (gold value weakly trending down)
Value Adjusted Gold Price© (VAGP) = $1,629.9/oz
COMEX - VAGP = $106.2/oz; gold is trading at a premium to key commodities; the gold-to-copper ratio is falling away from its 3-month average (Cu bullish)



Wōdnesdæg
Morning Miners!

It is 7:31 AM. Happy Leap Day! Have a cup of CAT 793 Java, you might need two hands to pick up that big yellow cup. Old Miner Woden and I have been been up for a long time trying to digest all the news that is pushing gold around like a yo-yo.

The European Central Bank announced their second Long Term Refinancing Operation (LTRO or "lee-tro") in the wee hours. These are more 3-year loans to firewall the European banks from sovereign debt Armageddon. A few hours later the Commerce Department revised higher its estimate for U.S. GDP in the fourth quarter last year to 3.0%, from an initial estimate of 2.8%. At least all appears quiet in the Persian Gulf for the time being as oil prices continue to fall.

Our last news event started at 7:00 AM PT when Federal Reserve Chairman Ben Bernanke began his semiannual 2-day testimony to the House Financial Committee. This is on CNBC Business News while I'm typing this report. Whatever he is saying seems to have turned another rally in the broader markets to the downside and gold in the can. Before we try to analyze all this let's start with some good news...

General Moly Places Haul Truck Fleet Order with Caterpillar

General Moly (GMO) announced yesterday afternoon that they placed an order for "18 Caterpillar 793 Haul Trucks (250 tons of payload capacity each) through Caterpillar's Nevada-based dealer, Cashman Equipment Company. All 18 trucks will be delivered to and commissioned at the Mt. Hope site beginning in late 2013 and early 2014 to complete mine pre-operation development. The total value of the Caterpillar order, including support equipment, is anticipated to be approximately $75 million."

Here's a link to the entire press release:

General Moly Places Haul Truck Fleet Order with Caterpillar (Press release, 2/29/2012)

If you want to appreciate the size and power of the CAT 793 monster truck, checkout this YouTube video presumably filmed in Australia:

Monster Truck

Pretty awesome, where did you park your pickup?

Gold Yo-Yo

This morning was a terrific example of what headlines do to the price of gold. There are two parts to this commentary:

PART I - Written before Bernanke testimony, this is what the Colonel observed:

Two events and one nonevent this morning tell the gold story:

1. ECB LTRO near consensus (529.5B versus 500B euros) wiggled gold but price swings ended up fairly neutral:

5:30 AM high $1,789.4/oz
LTRO announcement
5:45 AM low 1,782.2/oz
then roughly $1,787/oz which is where it was earlier in the morning trading

2. Better-than-expected U.S. GDP revision for 4Q11

8:30 AM gold drops to $1,779.5
then comes back to $1,783.2/oz within $4/oz of where it was after LTRO news settled out.

3. Nonevent = Persian Gulf relatively calm today

I continue to believe the Persian Gulf situation is the greatest potential gold driver driver and it has quieted down some with WTI & Brent off their highs.

Conclusion: Europe news is fairly gold neutral (so far); U.S. doing better is slightly gold negative

With respect to key commodities:

Silver continues to strengthen relative to gold
Copper no longer appears to be on the brink of bearish correction
Gold:oil rolling correlation is continuing to strengthen on a 3-month basis (+0.46) supporting my Persian Gulf thesis.

PART II - Written after Bernanke begins his testimony...

Chairman Bernanke started talking at 7:00 AM and COMEX Gold DROPPED $67/oz by 7:50 AM to $1,720.20/oz. He's still talking and gold has come up up a bit to trade presently at $1,736.1/oz. Silver took a pretty good hit presently down $1.225/oz at $35.980/oz (the Colonel's stop limit on silver triggered minutes after Bernanke began speaking fortunately preserving recent white metal profits).

So what is Uncle Ben saying? Apparently some market participants believe his comments so far have diminished greatly another round of quantitative easing (i.e. additional QE is generally perceived to be bullish for gold and commodities). The other force is end-of-month profit-taking that may have started regardless of the Fed chairman’s remarks. Personally, I haven't heard anything too earth shattering coming from the television other than he thinks gas prices will settle back down and the employment picture is getting better than expected.

Go figure...yo-yo gold on Leap Day. Looks like the miners are getting hammered too (see below). By-the-by, my observations above remain materially unchanged:

Gold with respect to key commodities:

Silver continues to strengthen relative to gold
Copper no longer appears to be on the brink of bearish correction
Gold:oil rolling correlation is continuing to strengthen on a 3-month basis (+0.45 vs 0.46 reported above)

Stay tuned, pardner. Let's go fire up a 793...

Daily Market Roundup


Mining Report

This morning's mining stocks...

Barrick (ABX) $47.84 down 3.28%
Newmont (NEM) $59.66 down 3.77%
McEwen Mining (MUX) 5.42 down 4.75% (formerly US Gold, UXG)
General Moly (Eureka Moly, LLC) (GMO) $3.50 down 1.69%
Thompson Creek (TC) $7.18 down 2.45%
Freeport-McMoRan (FCX) $42.72 down 2.15% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $15.18 up 0.13%
Timberline Resources (TLR) $0.58 down 3.33%

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

ArcelorMittal (MT) $21.15 down 2.40% - global steel producer
POSCO (PKX) $92.30 up 0.05% - South Korean integrated steel producer

The Eureka Miner's Index© (EMI) was re-calibrated 2/8 to reflect current 200-day moving averages for benchmark miners.

The EMI is above-par at 209.85, down from last report's 226.61 and below the 1-month moving average of 232.41. The 1-month average is safely above the key 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

This morning's...

COMEX gold is down $52.3/oz at $1,736.1/oz (April contract, most active)

COMEX silver is down $1.225/oz at $35.980/oz (May contract, most active)

The gold-to-silver ratio (Au:Ag) is 48.252 oz/oz

Silver 1-month CRS© is 1.83% (bullish level); CRS© divergent (bullish compression)

The Eureka Miner’s Gold Value Index© (GVI) is below-par at 89.00, down from last report's 90.37 and below its 1-month average of 92.38. Gold value is now weakly trending down after briefly trending up mid-month. The record high for 2010-2012 is 109.97 set on Oct. 4, 2011.

The Value Adjusted Gold Price© (VAGP) is $1,629.9/oz which is $106.2/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 $0.0145/lb at $3.9070/lb (May contract, most active)

The gold-to-copper ratio is 444.36 lb/oz; ratios in excess of 400 lb/oz are considered "recession levels"; the ratio is now falling away from its 3-month moving average of 462.16 (Cu bullish in Price Domain B)

Copper 1-month CRS© is 1.67% (bullish level); CRS© convergence (Cu bullish)

The latest molybdenum oxide spot and futures prices (courtesy of Thompson Creek Metals):

Metals Week Average:
US$14.775
As of February 27, 2012
(updated weekly)

Ryan's Notes Average:
US$14.70
As of February 28, 2012
(updated twice weekly)

European Molybdenum Oxide (Bloomberg average price, updated Wednesday & Friday):
US$14.82/lb

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

US$14.82/lb (US$32,500/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 $120/bbl maintaining a spread above 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 $105.82
ICE North Sea Brent crude $122.07
Spread (ICE- NYMEX) = $16.25 (last report, $15.17)

Here are the June contracts* with a narrower spread:

NYMEX light sweet crude $106.71
ICE North Sea Brent crude $120.28
Spread (ICE- NYMEX) = $13.57(last report, $12.20)

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

NYMEX WTI 1-month CRS© is 3.19% (bullish level); CRS© weak divergence (Oil neutral)

Prices are near highs for 2012, we have $120+ Brent and $105+ NYMEX in June favoring high oil prices this spring into summer. A front-month spread >$20/bbl is a trouble sign, OK for now.

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 81.1 up from last report's 79.1. 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 40.41 to 12,964.71; the S&P 500 is down 3.94 points at 1,368.24

The Eureka Miner's Grubstake Portfolio is down 3.20% at $1,563,666.35 (what's this?).

Cheers,

Colonel Possum


Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market

Tuesday, February 28, 2012

Silver Breaks $36; Thompson Creek (TC) & Moly Blues

Silver Shines

*** BREAKING NEWS *** COMEX silver moved above $37 presently trading at $37.080 per ounce. With COMEX gold at $1,790.1 per ounce the GSR is a bullish 48.28 (see below) - 9:43 AM PT

NEW FORMAT for 2012

Morning Commentary
Daily Market Roundup
- Gold & Silver Report
- Copper & Molybdenum Report
- Oil Watch
- Debt Crisis Watch
- Stock Market Morning Update
- Eureka Miner's Million Dollar Grubstake Portfolio


My Latest International Business Times commentary: Silver to Gold, “Whither Thou Goest…” (02/27/2011)

My latest Kitco commentary: A Foreboding Alignment in the Copper-Gold Firmament (02/21/2012)

Latest Nevada Fuel Prices (click this link)

This morning's...
COMEX Gold price = $1,782.0/oz (April contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 90.37 (gold value weakly trending up)
Value Adjusted Gold Price© (VAGP) = $1,647.6/oz
COMEX - VAGP = $134.4/oz; gold is trading at a premium to key commodities; the gold-to-copper ratio is staying near but below its 3-month average (Cu neutral)



Morning Miners!

It is 6:08 AM. Have a cup of Ruby T's famous Blue Skies. Our dauntless market bull is looking forward to a good day in the markets as silver shines but there are a few clouds in her blue sky for moly miners and Big Mo...

Silver Breaks $36

COMEX silver (May contract most active) broke $36 at 4:30 AM PT and is continuing to gap up trading presently at $36.205 per ounce. Although COMEX gold is also up $7.1 at $1,782.0 per ounce, silver is showing greater relative strength as the gold-to-silver (GSR) ratio drops below 50 into 40-territory currently at 49.220. The GSR has not been below 50 since shortly before gold set its record high Sept.26 of last year. I wouldn't be surprised to see silver reach the mid-$36 per ounce range later today.

The Report threw up another bullish flag for the white metal after a strong close last week as I explained in my latest International Business Times commentary: Silver to Gold, “Whither Thou Goest…”. The present price is a long way from from last year's bearish close at $27.915 per ounce; silver is now up nearly 30% at this morning's price. This report has had its eye on the white one since the Colonel's Christmas barbeque thanks to my good friend John. There should be more room to run; my 2012 peak price prediction is $40+ with a nominal price of $35.

Thompson Creek (TC) & Moly Blues

I wish things were doing as well for benchmark moly miner Thompson Creek (TC). They had their quarterly conference call early this morning and TC is presently down 12.4% at $7.61 - Ouch!

A faithful contributor to this report made these insightful comments a short while ago:

Was up early listening to TC conf. call.....didn't go well at all.

Analysts were not happy at all because the cost estimates for Mt. Milligan were dramatically
understated...

Loughery and Saxton tried to say that's mining cost inflation because of demand but I don't think the analysts were buying it...look for lots of downgrades...but it's already happened in the share price.

Unfortunately I didn't hear much talk about moly and it's demand going forward..and that was my main reason for the conf. call.


Here is yesterday's TC Press release:

Thompson Creek Reports 2011 Record Molybdenum Sales of 40.1 Million Pounds and Revenue of $669.1 Million (Press release, 2/28/2012)

I can't speak directly to future demand but the London Metal Exchange (LME) moly futures contracts have been trending down lately. Yesterday, the LME 3-month seller fell to $14.51 per pound ($32,000 per metric ton) placing it in backwardation to both Western and European spot prices ($14.78-$14.90 and $14.88 per pound respectively). The 15-month contract is still keeping its head above $15 per pound at $15.16 ($33,425 per metric ton). Here's a 3-month plot of the 3-month seller's contract:


General Moly (GMO) is off today too but faring much better; down 0.82% at $3.63.

Daily Market Roundup


Mining Report

This morning's mining stocks...

Barrick (ABX) $48.77 up 0.54%
Newmont (NEM) $61.35 down 0.28%
McEwen Mining (MUX) 5.64 up 2.17% (formerly US Gold, UXG)
General Moly (Eureka Moly, LLC) (GMO) $3.66 down 0.82%
Thompson Creek (TC) $7.61 down 12.43%
Freeport-McMoRan (FCX) $43.72 up 0.95% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $15.02 down 0.07%
Timberline Resources (TLR) $0.60 unchanged

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

ArcelorMittal (MT) $21.43 up 0.85% - global steel producer
POSCO (PKX) $92.18 down 0.31% - South Korean integrated steel producer

The Eureka Miner's Index© (EMI) was re-calibrated 2/8 to reflect current 200-day moving averages for benchmark miners.

The EMI is above-par at 226.61, down from last report's 230.09 and below the 1-month moving average of 232.07. The 1-month average is safely above the key 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

This morning's...

COMEX gold is up $7.1/oz at $1,782.0/oz (April contract, most active)

COMEX silver is up $0.610/oz at $36.205/oz (May contract, most active)

The gold-to-silver ratio (Au:Ag) is 49.220 oz/oz

Silver 1-month CRS© is 1.32% (bullish level); CRS© divergent (bullish compression)

The Eureka Miner’s Gold Value Index© (GVI) is below-par at 90.37, down from last report's 91.05 and below its 1-month average of 92.54. Gold value is weakly trending up after moving sideways for much of this month. The record high for 2010-2012 is 109.97 set on Oct. 4, 2011.

The Value Adjusted Gold Price© (VAGP) is $1,647.6/oz which is $134.4/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 $0.0315/lb at $3.9205/lb (May contract, most active)

The gold-to-copper ratio is 454.53 lb/oz; ratios in excess of 400 lb/oz are considered "recession levels"; the ratio is near its 3-month moving average of 463.00 (Cu bearish, Price Domain B)

Copper 1-month CRS© is 1.64% (bullish level); CRS© weak convergence (Cu neutral)

The latest molybdenum oxide spot and futures prices (courtesy of Thompson Creek Metals):

Metals Week Average:
US$14.775
As of February 27, 2012
(updated weekly)

Ryan's Notes Average:
US$14.90
As of February 21, 2012
(updated twice weekly)

European Molybdenum Oxide (Bloomberg average price, updated Wednesday & Friday):
US$14.88/lb

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

US$14.51/lb (US$32,000/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 $120/bbl maintaining a spread above 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 $108.13
ICE North Sea Brent crude $123.30
Spread (ICE- NYMEX) = $15.17 (last report, $15.56)

Here are the June contracts* with a narrower spread:

NYMEX light sweet crude $109.07
ICE North Sea Brent crude $121.90
Spread (ICE- NYMEX) = $12.20 (last report, $13.15)

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

NYMEX WTI 1-month CRS© is 3.19% (bullish level); CRS© weak divergence (Oil neutral)

Prices are near highs for 2012, we have $120+ Brent and $105+ NYMEX in June favoring high oil prices this spring into summer. A front-month spread >$20/bbl is a trouble sign, OK for now.

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 79.1 down from last report's 84.9. 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 20.02 to 13,001.53; the S&P 500 is up 3.11 points at 1,370.70

The Eureka Miner's Grubstake Portfolio is up 0.09% at $1,608,487.05 (what's this?).

Cheers,

Colonel Possum

Headline Photograph by Mariana Titus

Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market

Monday, February 27, 2012

Silver to Gold, “Whither Thou Goest…”; Your Mt. Hope Input for the BLM

Would Someone Check the Fuse Box?

NEW FORMAT for 2012

Morning Commentary
Daily Market Roundup
- Gold & Silver Report
- Copper & Molybdenum Report
- Oil Watch
- Debt Crisis Watch
- Stock Market Morning Update
- Eureka Miner's Million Dollar Grubstake Portfolio


My Latest International Business Times commentary: Silver to Gold, “Whither Thou Goest…” (02/27/2011)

My latest Kitco commentary: A Foreboding Alignment in the Copper-Gold Firmament (02/21/2012)

Latest Nevada Fuel Prices (click this link)

This morning's...
COMEX Gold price = $1.773.8/oz (April contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 91.05 (gold value weakly trending up)
Value Adjusted Gold Price© (VAGP) = $1,627.8/oz
COMEX - VAGP = $146.0/oz; gold is trading at a premium to key commodities; the gold-to-copper ratio is moving about its 3-month average with upward momentum (Cu bearish)


Morning Miners!

It is 6:06 AM. Have a Monday Morning cup of Dragon Breath, you may need it - 17 of 19 global markets are in the red this morning. You guessed it, Europe is back in the mix. Finance ministers and central bankers from the Group of 20 advanced and developing economies kicked the decision-on-international-aid-for-Europe can a little further down the road.

Actually, I don't blame them. The G20 participants are reluctant to pony up until the euro-zone rescue fund is large enough to assure financial markets. In the frank words of U.K.'s Chancellor of the Exchequer, Geoorge Osborne, "We have to see the colour of the Euro-zone's money first..."

Go it goes. Say, there may be something to be happy about silver going forward...

Silver to Gold, “Whither Thou Goest…”

The International Business Times just posted the ole Colonel's latest thoughts on the white metal:

Silver to Gold, “Whither Thou Goest…” (IBT, 02/27/2012)

Silver has had quite a run this year after closing in the doldrums for 2011. Last Friday COMEX silver closed up 26.6% year-to-date at $35.338 per ounce. It added another 1.2 cents this morning trading presently at $35.350 per ounce on a morning when a lot of things including gold and copper are in the red. Check it out, I think there is more room to run for Nevada's namesake metal.

I must thank my good friend John for reminding me to think about silver at the Colonel's Christmas barbeque.

Please do your own homework, this report could be dead wrong - silver prices can be very volatile.

Your Mt. Hope Input for the BLM

A faithful follower of this report made the Colonel aware of an easy way to input your support for General Moly's Mt. Hope molybdenum project. It is carried on the Northwest Mining Association's website as an "Action Alert". Here's the link:

Support The U.S. Economy -- Support the Mt. Hope Mine (Northwest Mining Association)

In their words:

Now is the time to put people back to work! Please take a moment to send a message to the Nevada BLM letting them know you support General Moly's Mount Hope Mine.

Below is a pre-drafted letter [editor's note: form on the Action Alert] you can email to the BLM. It's even more effective if you change the letter and add your own, personalized comments. Thank you for taking the time to support American mining.
(Northwest Mining Association Action Alert)

This report respects the right of Eureka County's miners, ranchers and farmers to have differing views on the future of the Mt. Hope project. The ole Colonel plans to write a letter of support for the moly mine via this convenient format.

Check it out, deadline is this Thursday, March 1st.

Daily Market Roundup


Mining Report

This morning's mining stocks...

Barrick (ABX) $48.64 down 0.14%
Newmont (NEM) $62.29 down 0.35%
McEwen Mining (MUX) 5.55 down 1.77% (formerly US Gold, UXG)
General Moly (Eureka Moly, LLC) (GMO) $3.62 down 3.98%
Thompson Creek (TC) $8.56 down 2.95%
Freeport-McMoRan (FCX) $43.20 down 1.62% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $14.92 down 0.07%
Timberline Resources (TLR) $0.61 up 1.67%

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

ArcelorMittal (MT) $20.81 down 2.80% - global steel producer
POSCO (PKX) $91.42 down 1.44% - South Korean integrated steel producer

The Eureka Miner's Index© (EMI) was re-calibrated 2/8 to reflect current 200-day moving averages for benchmark miners.

The EMI is above-par at 230.09, down from last report's 262.47 and below the 1-month moving average of 231.53. The 1-month average is safely above the key 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

This morning's...

COMEX gold is down $2.6/oz at $1,773.8/oz (April contract, most active)

COMEX silver is up $0.012/oz at $35.350/oz (March contract, most active)

The gold-to-silver ratio (Au:Ag) is 50.178 oz/oz

Silver 1-month CRS© is 0.96% (bullish level); CRS© divergent (Ag bearish)

The Eureka Miner’s Gold Value Index© (GVI) is below-par at 91.05, up from last report's 90.63 and below its 1-month average of 92.60. Gold value is weakly trending up after moving sideways for much of this month. The record high for 2010-2012 is 109.97 set on Oct. 4, 2011.

The Value Adjusted Gold Price© (VAGP) is $1,627.8/oz which is $146.0/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 $0.0295/lb at $3.8335/lb (March contract, most active)

The gold-to-copper ratio is 462.47 lb/oz; ratios in excess of 400 lb/oz are considered "recession levels"; the ratio is near its 3-month moving average of 464.07 (Cu bearish, Price Domain B)

Copper 1-month CRS© is 1.72% (bullish level); CRS© convergence (Cu bullish)

The latest molybdenum oxide spot and futures prices (courtesy of Thompson Creek Metals):

Metals Week Average:
US$14.775
As of February 27, 2012
(updated weekly)

Ryan's Notes Average:
US$14.90
As of February 21, 2012
(updated twice weekly)

European Molybdenum Oxide (Bloomberg average price, updated Wednesday & Friday):
US$(n/a)/lb

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

US$14.74/lb (US$32,500/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 $120/bbl maintaining a spread above 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 $108.83
ICE North Sea Brent crude $124.39
Spread (ICE- NYMEX) = $15.56 (last report, $15.21)

Here are the June contracts* with a narrower spread:

NYMEX light sweet crude $109.78
ICE North Sea Brent crude $122.93
Spread (ICE- NYMEX) = $13.15 (last report, $12.72)

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

NYMEX WTI 1-month CRS© is 3.06% (bullish level); CRS© weak divergence (Oil neutral)

Prices are near highs for 2012, we have $120+ Brent and $105+ NYMEX in June favoring high oil prices this spring into summer. A front-month spread >$20/bbl is a trouble sign, OK for now.

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 84.9 up from last report's 79.7. 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 62.2 to 12,920.73; the S&P 500 is down 7.37 points at 1,358.37

The Eureka Miner's Grubstake Portfolio is down 1.18% at $1,603,036.13 (what's this?).

Cheers,

Colonel Possum

Headline Photograph by Mariana Titus

Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market

Friday, February 24, 2012

The Colonel's Friday Thoughts on Gold, Silver & Copper; Euro-Moly Updates

Raine's Reflections

NEW FORMAT for 2012

Morning Commentary
Daily Market Roundup
- Gold & Silver Report
- Copper & Molybdenum Report
- Oil Watch
- Debt Crisis Watch
- Stock Market Morning Update
- Eureka Miner's Million Dollar Grubstake Portfolio


My latest Kitco commentary: A Foreboding Alignment in the Copper-Gold Firmament (02/21/2012)

My Latest International Business Times commentary: Gold and Silver Move Uptown for 2012 (02/06/2011)

This morning's...
COMEX Gold price = $1,778.9/oz (April contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 91.53 (gold value weakly trending up)
Value Adjusted Gold Price© (VAGP) = $1,624.0/oz
COMEX - VAGP = $154.9/oz; gold is trading at a premium to key commodities; the gold-to-copper ratio is moving above its 3-month average (Cu bearish)



Morning Miners!

It is 6:04 AM. Have a welcome cup of Raine's Reflections. Scott Raine tells me that this coffee is his Red Label aged in the market cellar in barrels made of local piñon pine - talk about a tasty brew! Have a good weekend.

The Colonel's Friday Thoughts on Gold, Silver & Copper

Although gold has pulled back some today and copper is higher, I believe this is just a pause in a gold-higher/copper-lower environment as flagged in Tuesday's Kitco commentary. I felt some reassurance to learn that Dennis Gartman, editor and publisher of The Gartman Letter, is preparing to change equal positions of copper and gold - swapping copper for more gold.

Here is my input to the Weekly Kitco Gold Survey:

Q. Where do you see gold’s price headed next week, up, down or unchanged?
A. Up - $1,810+/oz target

Q. Why?
A. Increasing tensions with Iran could send both oil and gold much higher and copper lower. Given present trends, $135 per barrel Brent crude is compatible with $120 per barrel WTI crude, $2,000+ per ounce gold and $40+ per ounce silver. Copper could dip to $3.25 per pound but probably not much lower given supply tightness. We will likely get to these levels in steps so next week may only take out the next resistance level for gold putting us in $1,810+ territory. With some irony, May 2008 was the last “DOW 13,000” period and Brent crude was $135 per barrel for very different reasons; gold was $950 per ounce giving some measure of the gold-friendly environment of late.

The gold-to-copper ratio crossed its 3-month average to the upside yesterday, a noticeably bearish development for the red metal. Favorable resolution of the Iran situation could quickly reverse all these present trends.


For $1,810/oz gold we can expect to see oil (WTI) in a range of $108-$110/bbl; silver, $35-$38/oz; and copper, $3.6-$3.8/lb.

Background Notes:

1. My Gold Value Index© (GVI) equals 91.53 this morning down 17.0% from the Oct. 4 high of 109.97 and slightly down from last week (GVI =92.70, 2/17/2012).
2. The GVI, which has been oscillating up and down about its average is beginning to weakly trend higher which is bullish gold, bearish key commodities (except for oil).
3. The gold-to-copper ratio today is 465.86 pounds per ounce and above its 3-month moving average for a second day (today’s average is 464.98 pounds per ounce), the red metal has entered bear country.

Euro-Moly Update

For the moly watchers of this report, you may have noticed that there haven't been any updates on euro-moly oxide prices recently. The link to the Bloomberg site appeared broken so the ole Colonel contacted Editor Claudia Carpenter of London Bloomberg News. Claudia follows this report is my very favorite observer of markets across the pond. She is having their IT folks look into it and kindly provided this update for February:

Euro-moly in US$ per pound (date, price, change, % change):

2/22/12 14.95 --

2/17/12 14.95 --

2/15/12 14.95 --

2/10/12 14.95 +.55 +3.82%

2/ 8/12 14.40 +.30 +2.13%

2/ 3/12 14.10 --

2/ 1/12 14.10 +.05 +0.36%

General Moly (GMO) on European Stainless Producers

I asked General Moly's Investor Relations Director Seth Foreman to comment on European stainless producers (big users of molybdenum as an alloy) given a note I read in Steel Business Briefing (SBB). Below is the discussion, thanks Seth!

EM: Any thoughts on what this is all about?

New stainless giant could end alloy surcharge volatility - Steel Business Breifing (02/23/2012):

If approved by Europe’s competition authorities – and market sources think the merger will probably go through without too much of a mauling – the proposed Outokumpu/Inoxum stainless tie-up will give Europe a clear market leader in a field of three producers in flat rolled stainless. This could provide an opportunity to set a strong agenda on aspects like balancing European commodity stainless sheet supply with demand and pricing. (SBB, 2/23/2012)


GMO: European stainless producers have always suffered from overcapacity and have always struggled to be profitable. Outokumpu has always been a stainless co, but Inoxum is the ThyssenKrupp stainless division. In addition to those two players there is/was the ArcelorMittal APERAM unit as well as a few others that I am struggling to remember right now.

Anyhow, all these stainless guys are being spun out / merged in hopes that overall, as an industry, they can find a way to consolidate, reduce production, and get to a more sustainable market. So I think that is what they are talking about “ending volatility.”

EM: Nice to see the LME 3-month move back up to $33,000/tonne

GMO: Nice little run in the Mo price to start the year.

Daily Market Roundup


Mining Report

This morning's mining stocks...

Barrick (ABX) $49.05 down 1.07%
Newmont (NEM) $62.24 down 2.54%
McEwen Mining (MUX) 5.75 down 0.69% (formerly US Gold, UXG)
General Moly (Eureka Moly, LLC) (GMO) $3.82 down 0.78%
Thompson Creek (TC) $8.96 down 0.11%
Freeport-McMoRan (FCX) $44.47 up 1.58% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $14.98 up 0.07%
Timberline Resources (TLR) $0.60 up 5.26%

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

ArcelorMittal (MT) $21.63 up 1.50% - global steel producer
POSCO (PKX) $92.51 up 0.88% - South Korean integrated steel producer

The Eureka Miner's Index© (EMI) was re-calibrated 2/8 to reflect current 200-day moving averages for benchmark miners.

The EMI is above-par at 283.06, up last report's 256.99 and above the 1-month moving average of 229.04. The 1-month average is safely above the key 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

This morning's...

COMEX gold is down $7.4/oz at $1,778.9/oz (April contract, most active)

COMEX silver is down $0.101/oz at $35.455/oz (March contract, most active)

The gold-to-silver ratio (Au:Ag) is 50.173 oz/oz

Silver 1-month CRS© is 0.87% (bullish level); CRS© weak divergence (Ag neutral)

The Eureka Miner’s Gold Value Index© (GVI) is below-par at 91.53, down from last report's 92.84 and below its 1-month average of 92.63. Gold value is weakly trending up after moving sideways for most of this month. The record high for 2010-2012 is 109.97 set on Oct. 4, 2011.

The Value Adjusted Gold Price© (VAGP) is $1,624.0/oz which is $154.9/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 $0.0125/lb at $3.8185/lb (March contract, most active)

The gold-to-copper ratio is 465.86 lb/oz; ratios in excess of 400 lb/oz are considered "recession levels"; the ratio is above its 3-month moving average of 464.98 (Cu bearish, Price Domain B)

Copper 1-month CRS© is 1.90% (bullish level); CRS© weak convergence (Cu neutral)

The latest molybdenum oxide spot and futures prices (courtesy of Thompson Creek Metals):

Metals Week Average:
US$14.775
As of February 24, 2012
(updated weekly)

Ryan's Notes Average:
US$14.90
As of February 21, 2012
(updated twice weekly)

European Molybdenum Oxide (Bloomberg average price, updated Wednesday & Friday):
US$14.95/lb

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

US$14.97/lb (US$33,000/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 $110/bbl maintaining a spread above 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 $108.50
ICE North Sea Brent crude $123.71
Spread (ICE- NYMEX) = $15.21 (last report, $17.37)

Here are the June contracts* with a narrower spread:

NYMEX light sweet crude $109.27
ICE North Sea Brent crude $121.99
Spread (ICE- NYMEX) = $12.72 (last report, $14.45)

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

NYMEX WTI 1-month CRS© is 2.75% (bullish level); CRS© weak divergence (Oil neutral)

Prices are near highs for 2012, we have $120+ Brent and $105+ NYMEX in June favoring high oil prices this spring into summer. A front-month spread >$20/bbl is a trouble sign, OK for now.

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 77.4 down from last report's 87.7. 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 17.86 to 13,002.55; the S&P 500 is up 4.4 points at 1,367.60

The Eureka Miner's Grubstake Portfolio is down 0.15% at $1,632,650.91 (what's this?).

Cheers,

Colonel Possum

Headline Photograph by Mariana Titus

Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market

Thursday, February 23, 2012

The Colonel's Second Warning on Copper; LME Moly UP

Blue Skies Behind Locked Doors?

NEW FORMAT for 2012

Morning Commentary
Daily Market Roundup
- Gold & Silver Report
- Copper & Molybdenum Report
- Oil Watch
- Debt Crisis Watch
- Stock Market Morning Update
- Eureka Miner's Million Dollar Grubstake Portfolio


My latest Kitco commentary: A Foreboding Alignment in the Copper-Gold Firmament (02/21/2012)

My Latest International Business Times commentary: Gold and Silver Move Uptown for 2012 (02/06/2011)

This morning's...
COMEX Gold price = $1,782.0/oz (April contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 92.84 (gold value weakly trending up)
Value Adjusted Gold Price© (VAGP) = $1,603.7/oz
COMEX - VAGP = $178.3/oz; gold is trading at a premium to key commodities; the gold-to-copper ratio continues to exceed recession levels



Þūnresdæg
Morning Miners!

It is 6:04 AM. Have a cup of Thor's Thorsday Cold Lightning. Our favorite Norseman is making coffee as bad as Old Miner Woden lately, step into the shop and I'll pour you a better cup of Red Label. We need our dear Ruby, it's getting hard to put up with two market bears - I'm wondering if this bear flu is contagious...

The Colonel's Second Warning on Copper

The Report has focused on copper most of this week starting with my first warning on the red metal Tuesday, A Foreboding Alignment in the Copper-Gold Firmament (Kitco news, 2/21/2012). It is still a backbench position but I'm getting some company. This is what the Wall Street Journal said this morning:

Copper, which has been given the nickname “Dr. Copper” for being a bellwether for the health of the global economy, has quietly left the party early. The metal peaked on Feb. 9 after a failed attempt to break the $4-per-pound mark. It has since fallen about 5% to $3.81 a pound, while the Dow Jones Industrial Average has edged up 0.1% and earlier this week flirted with 13000. (Wall Street Journal, 2/23/20120)

Yesterday, the Report made a similar connection with the DOW and stated, "I'm running against the crowd on the near-term prospects for copper price (e.g., Gartman Cu bullish) but I think a correction is coming."

It is scary to run counter to the wisdom of the Commodity King who presently owns equal positions of gold and copper - at least Dennis Gartman stopped adding to his red metal position for the time being!

My thesis has been that the gold-to-copper ratio has been threatening to break its 3-month average from below which is a very bearish indicator in my world. Well pardner, it did this morning: 467.47 lbs of copper per ounce of gold versus an average of 465.82.

One point does not a trend make. The ratio needs to stay above its average for awhile to confirm a bearish condition going forward - nonetheless, a warning sign indeed. Here is an updated chart from my Tuesday Kitco commentary (a larger and more readable plot can be found near the bottom of the blog page):


Here are the key bearish indications updated for this morning's trading in both copper and gold:

1. The gold-to-copper ratio (red-brown triangles and interconnecting lines) is trading this morning at nearly the same level as Sept. 6, 2011 when COMEX gold made its record high of $1,923.7 per ounce (467 pounds-per-ounce versus 468)

2. After the September gold record, copper dropped a dollar in less than a month from roughly $4 per pound to a lowly $3.

3. The current gold-to-copper ratio just broke its 3-month moving average (solid red-brown line) to the upside as shown by the red arrow on the right. This is a bearish direction; 467 pounds per ounce versus an average of 466.

4. The last break from below the 3-month average on Aug. 2, 2011 (red arrow on the left) presaged the U.S. debt downgrade and worsening conditions in Europe followed by the calamitous crash in copper prices. Before the early August break, the gold-to-copper ratio enjoyed a return to levels of late November 2010; a halcyon period when gold- to-copper, -oil and -silver ratios returned to near historical norms after the churn of the 2008-2009 financial crises (e.g. dotted line depicting 363 pounds per ounce on Nov. 26, 2010).

As I said yesterday, "I don't think we are currently at that frightening market threshold [i.e. item 4 post-August 2011 calamity] but high crude prices are sobering and probably kept the DOW from breaking through 13,000 at the close."

This morning the DOW is up 17.56 points at 12,956.23 so it is possible that the DOW will close above the key 13,0000 psychological level today or tomorrow - even with Texas WTI at $106/bbl (global benchmark Brent cruse is presently trading at $123/bbl). COMEX gold is up $10.7 at $1,782.0 per ounce and COMEX copper is down just 2.15 cents at $3.8120 per pound, hanging in there so far.

I hope I'm wrong about the copper correction and continue to hold on to my Freeport-McMoran (FCX) position with both hands - let's see where we end at Friday's close. Stay tuned.

Please do your own research, the Colonel could be dead wrong.

LME Moly UP

Please note in the Copper & Molybdenum Report below that the LME 3-month seller contract added $1,000 per metric ton yesterday making up for some of its recent losses. It is presently at $33,000 per metric ton ($14.97 per pound) just ahead of western spot prices $14.80-$14.90 per pound - a bullish sign.

Daily Market Roundup


Mining Report

This morning's mining stocks...

Barrick (ABX) $49.60 up 0.34%
Newmont (NEM) $63.15 up 0.59%
McEwen Mining (MUX) 5.78 up 1.94% (formerly US Gold, UXG)
General Moly (Eureka Moly, LLC) (GMO) $3.77 unchanged
Thompson Creek (TC) $8.96 unchanged
Freeport-McMoRan (FCX) $43.92 down 0.45% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $14.99 unchanged
Timberline Resources (TLR) $0.60 unchanged

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

ArcelorMittal (MT) $21.11 down 0.47% - global steel producer
POSCO (PKX) $91.39 down 0.49% - South Korean integrated steel producer

The Eureka Miner's Index© (EMI) was re-calibrated 2/8 to reflect current 200-day moving averages for benchmark miners.

The EMI is above-par at 246.50, up last report's 244.83 and above the 1-month moving average of 222.50. The 1-month average is safely above the key 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

This morning's...

COMEX gold is up $10.7/oz at $1,782.0/oz (April contract, most active)

COMEX silver is up $0.567/oz at $34.830/oz (March contract, most active)

The gold-to-silver ratio (Au:Ag) is 51.163 oz/oz

Silver 1-month CRS© is 0.67% (bullish level); CRS© convergence (Ag bullish)

The Eureka Miner’s Gold Value Index© (GVI) is below-par at 92.84, up from last report's 91.93 and above its 1-month average of 92.62. Gold value is weakly trending up after moving sideways for most of this month. The record high for 2010-2012 is 109.97 set on Oct. 4, 2011.

The Value Adjusted Gold Price© (VAGP) is $1,603.7/oz which is $178.3/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 $0.0215/lb at $3.8120/lb (March contract, most active)

The gold-to-copper ratio is 467.47 lb/oz; ratios in excess of 400 lb/oz are considered "recession levels" (Cu bearish, Price Domain B)

Copper 1-month CRS© is 1.83% (bullish level); CRS© weak convergence (Cu neutral)

The latest molybdenum oxide spot and futures prices (courtesy of Thompson Creek Metals):

Metals Week Average:
US$14.80
As of February 20, 2012
(updated weekly)

Ryan's Notes Average:
US$14.90
As of February 21, 2012
(updated twice weekly)

European Molybdenum Oxide (Bloomberg average price, updated Wednesday & Friday):
US$(n/a)/lb

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

US$14.97/lb (US$33,000/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 $110/bbl maintaining a spread above 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 $106.11
ICE North Sea Brent crude $123.48
Spread (ICE- NYMEX) = $17.37 (last report, $15.99)

Here are the June contracts* with a narrower spread:

NYMEX light sweet crude $107.15
ICE North Sea Brent crude $121.60
Spread (ICE- NYMEX) = $14.45 (last report, $13.28)

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

NYMEX WTI 1-month CRS© is 2.58% (bullish level); CRS© convergence (Oil bullish)

Prices are near highs for 2012, we have $120+ Brent and $105+ NYMEX in June favoring high oil prices this spring into summer. A front-month spread >$20/bbl is a trouble sign, OK for now.

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 89.2 up from last report's 87.3. 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 17.56 to 12,956.23; the S&P 500 is down 1.05 points at 1,356.61

The Eureka Miner's Grubstake Portfolio is up 0.50% at $1,629,917.86 (what's this?).

Cheers,

Colonel Possum

Headline Photograph by Mariana Titus

Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market

Wednesday, February 22, 2012

Is the Dragon Dragging? Ask Dr. Copper...

It's MY year! by Barry Keller, Ph.D. - Geologist & Artist extraordinaire

NEW FORMAT for 2012

Morning Commentary
Daily Market Roundup
- Gold & Silver Report
- Copper & Molybdenum Report
- Oil Watch
- Debt Crisis Watch
- Stock Market Morning Update
- Eureka Miner's Million Dollar Grubstake Portfolio


My latest Kitco commentary: A Foreboding Alignment in the Copper-Gold Firmament (02/21/2012)

My Latest International Business Times commentary: Gold and Silver Move Uptown for 2012 (02/06/2011)

This morning's...
COMEX Gold price = $1,753.6/oz (April contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 91.93 (gold value sideways, trend indeterminate)
Value Adjusted Gold Price© (VAGP) = $1,593.9/oz
COMEX - VAGP = $159.7/oz; gold is trading at a premium to key commodities; the gold-to-copper ratio continues to exceed recession levels



Wōdnesdæg
Morning Miners!

It is 6:57 AM. Have a cup of Woden's Wonder Brew. Believe me, it's better than Old Miner Woden's Cold Reality java. Our market bear seems to be in pretty fine spirits today and is busy hanging up a new painting for the break room - featured as our headline image this morning, "It's MY year!".

The Chinese dragon showed up at the door yesterday, a present from our dear friend Dr. Barry Keller, geologist & artist extraordinaire. This Rock Doc is from my generation and still has the mojo to surf at his home in Chile when he is not surfing in his other abodes in Santa Barbara and San Diego. Somehow he also finds time between geological pursuits and surfing to create terrific art which includes mermaids and dolphins as well as Chinese dragons and, of course, perfect waves.

With respect to today's art, Rock Doc says:

The pencil sketch for that was actually drawn in China. The Chinese characters in the lower left were done (later) by one of the Chinese women with us [Colonel's note: Barry and his wonderful wife Rosie] on the trip and say "Golden Dragon" (or at least she SAID they did!)

The things in the dragon's hands are flaming pearls. Normal dragons only carry ONE, so this is a bit of "artistic license" (or double dipping?).


I plan to adopt today's gift as our Monday icon for the year 2012. It is appropriate because we are in the Chinese Year of the Dragon and their lunar new year kicked of on a Monday, the 23rd of January. This also was the day when planet Mars went into its present retrograde motion which will continue until April 14. Not to be outdone, planet Mercury will commence its backwards trek in the heavens March 12 and run until April 4. With these two planets in retrograde simultaneously, the ole Colonel suggests you check food and water rations in your trusty escape cave. It's a good drill remembering that the end of the Mayan long calendar and life as we know it is only 10 months away (December 21, 2012).

Is the Dragon Dragging? Ask Dr. Copper...

Commodity King Dennis Gartman often reminds us that copper and the other base metals taken collectively have a Ph.D. in economics. "Dr. Copper," as other traders refer to the red metal, is particularly savvy about the prospects for global recovery given its vast industrial and power grid applications and extensive use in new construction.

China's use of the red metal stands out since it consumes roughly 40% of the world's copper. As China goes, go goes copper and so go the markets is a familiar mantra. Copper has had a good run and is up more than 11% this year. Mr. Gartman remains bullish on the red metal and maybe that's all we need to know for now.

The ole Colonel has been swimming against this rising red metal tide and threw up a warning flare in my Kitco commentary yesterday, A Foreboding Alignment in the Copper-Gold Firmament. Maybe, I'm just getting caught up in the astrology of late.

The irony is that I refuse to listen to my own advice and am tenaciously holding on to my position in copper giant Freeport-McMoRan (FCX)!

My colleague in Mumbai is also bullish on copper, he and I did a commentary on gold this summer, What is the Value of Gold? India Beckons . Sumera Sala of Nathabhai & Sons had this to say about my present copper dilemma:

Having tracked copper prices since March 2010, the metal gave an average compounded monthly return of 0.85%. With this ROI, the price comes down to Rs.392 ($3.613 at today's dollar rate). A price below this would mean a fresh buying opportunity. As long as the cash market looks healthy, I second your thoughts and hold onto my investments but also look forward to exiting positions every time the ROI spikes over 5% towards 8% in a month's cycle given the turbulent economic conditions.

A wise man. Mr. Sala's reply came after I gave him a laundry list of my concerns:

1. I believe we are locked into what I called "Price Domain B" in my Jan. 30,2012 commentary, a period as you correctly identify as, "cautious and mostly gold-friendly"

2. Copper is probably saying, "mild recession in Europe buoyed by Germany, better-than-expected recovery in the U.S. and slowing demand in China offset to some degree by their latest central bank accommodations"

3. Much is made over here about the DOW briefly touching 13,000 today; a level not since May, 2008. I checked historical data and Brent crude was spiking up to $135+/bbl then (sound familiar?); gold was around $950/oz and COMEX copper traded at roughly $4/lb. We all know what happened next as the 2008-2009 financial crisis evolved.

4. I don't think we are currently at that frightening market threshold but high crude prices are sobering and probably kept the DOW from breaking through 13,000 at the close [referring to yesterday's close, 2/20/20120, today the DOW is still struggling to break 13,000 touching 12,977.72 at 10:18 AM ET].

5. I'm running against the crowd on the near-term prospects for copper price (e.g., Gartman Cu bullish) but I think a correction is coming.

6. As far as gold price in U.S.dollars, it seems in-line historically with oil and silver (Au:WTI 16-17 bbl/oz, Au:Ag 51-52) but not copper (Au:Cu >400 lbs/oz) => copper strength with respect to gold is required to rectify the imbalance - I think not until Iran clears.

7. Technically, the Au:Cu chart is troubling although today [i.e. 2/21] offered needed relief for copper.


So how is big copper consumer China doing? There are indications that the Dragon may be dragging given the latest downbeat export figures and HSBC PMI projections countered by a backdrop of Chinese central bank easing. Its a mixed picture but here are two articles to ponder:

METALS-Copper falls on demand concerns, China data (Reuters, Wed Feb 22, 2012 1:28pm GMT)

Market Nuggets: TDS: Lower Chinese Reserve Ratio Not Enough To Sustain Rally In Industrial Metals (Allen Sykora, Kitco News, 22 February 2012, 7:56 a.m. ET)

COMEX copper is down today but not by a lot: 2.8 cents lower at a respectable $3.8085/lb. The gold-to-copper ratio is 460.44 lb/oz; the 3-month average is 466.47 lb/oz. For my bearishness to be confirmed, the ratio needs to rise and stay above the average. So far, we're safe - maybe I should listen to Mssrs. Gartman and Sala and stop fretting about wayward planets and Mayan calendars.

Stay tuned, pardner.

Daily Market Roundup


Mining Report

This morning's mining stocks...

Barrick (ABX) $48.11 down 0.70%
Newmont (NEM) $61.36 down 0.29%
McEwen Mining (MUX) 5.55 up 0.54% (formerly US Gold, UXG)
General Moly (Eureka Moly, LLC) (GMO) $3.79 down 0.52%
Thompson Creek (TC) $8.93 up 0.22%
Freeport-McMoRan (FCX) $44.22 up 0.55% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $14.95 up 0.13%
Timberline Resources (TLR) $0.59 up 3.51%

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

ArcelorMittal (MT) $21.4 down 2.28% - global steel producer
POSCO (PKX) $92.07 down 0.04% - South Korean integrated steel producer

The Eureka Miner's Index© (EMI) was re-calibrated 2/8 to reflect current 200-day moving averages for benchmark miners.

The EMI is above-par at 244.83, up last report's 234.35 and above the 1-month moving average of 218.89. The 1-month average is safely above the key 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

This morning's...

COMEX gold is down $4.9/oz at $1,753.6/oz (April contract, most active)

COMEX silver is down $0.409/oz at $34.020/oz (March contract, most active)

The gold-to-silver ratio (Au:Ag) is 51.546 oz/oz

Silver 1-month CRS© is 0.70% (bullish level); CRS© convergence (Ag bullish)

The Eureka Miner’s Gold Value Index© (GVI) is below-par at 91.93, down from last report's 92.29 and below its 1-month average of 92.54. Gold value has stalled, and the trend is presently indeterminate. The record high for 2010-2012 is 109.97 set on Oct. 4, 2011.

The Value Adjusted Gold Price© (VAGP) is $1,593.9/oz which is $159.7/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 $0.0280/lb at $3.8085/lb (March contract, most active)

The gold-to-copper ratio is 460.44 lb/oz; ratios in excess of 400 lb/oz are considered "recession levels" (Cu bearish, Price Domain B)

Copper 1-month CRS© is 1.73% (bullish level); CRS© convergence (Cu bullish)

The latest molybdenum oxide spot and futures prices (courtesy of Thompson Creek Metals):

Metals Week Average:
US$14.80
As of February 20, 2012
(updated weekly)

Ryan's Notes Average:
US$14.95
As of February 17, 2012
(updated twice weekly)

European Molybdenum Oxide (Bloomberg average price, updated Wednesday & Friday):
US$(n/a)/lb

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

US$14.52/lb (US$32,000/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 $110/bbl maintaining a spread above 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 $105.94
ICE North Sea Brent crude $121.93
Spread (ICE- NYMEX) = $15.99 (last report, $15.48)

Here are the June contracts* with a narrower spread:

NYMEX light sweet crude $106.90
ICE North Sea Brent crude $120.18
Spread (ICE- NYMEX) = $13.28 (last report, $13.37)

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

NYMEX WTI 1-month CRS© is 2.49% (bullish level); CRS© convergence (Oil bullish)

Prices are near highs for 2012, we have $120+ Brent and $105+ NYMEX in June favoring high oil prices this spring into summer. A front-month spread >$20/bbl is a trouble sign, OK for now.

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 87.3 down from last report's 88.2. 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 3.86 to 12,969.55; the S&P 500 is down 0.93 points at 1,361.28

The Eureka Miner's Grubstake Portfolio is down 0.06% at $1,607,087.73 (what's this?).

Cheers,

Colonel Possum



Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market

Tuesday, February 21, 2012

Copper, Gold & Miners Feel the Mardi Gras Spirit (but...)

The Colonel & Loquita sense something amiss in the heavens...Oh-oh Mars retrograde!

*** BREAKING NEWS **** the DOW broke the psychologically important level of 13,000 at 11:24 AM ET - a level not seen since May 19, 2008. COMEX gold touched $1,758.4/oz just minutes before.

NEW FORMAT for 2012

Morning Commentary
Daily Market Roundup
- Gold & Silver Report
- Copper & Molybdenum Report
- Oil Watch
- Debt Crisis Watch
- Stock Market Morning Update
- Eureka Miner's Million Dollar Grubstake Portfolio


My latest Kitco commentary: A Foreboding Alignment in the Copper-Gold Firmament (02/21/2012)

My Latest International Business Times commentary: Gold and Silver Move Uptown for 2012 (02/06/2011)

This morning's...
COMEX Gold price = $1,748.9/oz (April contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 92.29 (gold value sideways, trend indeterminate)
Value Adjusted Gold Price© (VAGP) = $1,583.3/oz
COMEX - VAGP = $165.6/oz; gold is trading at a premium to key commodities; the gold-to-copper ratio continues to exceed recession levels



Morning Miners!

It is 6:14 AM. Ruby T is handing out Mardi Gras beads to everyone in the break room - right now that's just me. Have a cup of strong French Brew and Laissez les bons temps rouler!. Looks like we got a good'un in the making.

Copper, Gold & Miners Feel the Mardi Gras Spirit

(Agence France - Presse)

This Report refrains from using news images for obvious copyright reasons. The ole Colonel thereby asks the greatest forgiveness from Agence France - Presse for posting the above photo of IMF chief Christine Lagarde looking sternly at Greek Prime Minister Lucas Papademos - I simply think it is the best image to come from Europe's multi-year sovereign debt drama. Pictures say a thousand words. Bravo Agence France!

News that a deal has been reached to bailout Greece from its upcoming March debt obligation has lifted markets worldwide as one might expect.

Although it has paused at the open, the DOW stands a good chance of busting 13,000 today, a level not seen since May, 2008. COMEX gold and copper futures bounced nicely in early morning trading; the former breaking $1,750.0 per ounce briefly. Presently COMEX gold is up $23.0 at $1,748.9/oz and COMEX copper is up $0.1080 at $3.8160/lb. COMEX silver is feeling good too up $0.609/oz at $33.825/oz.

Miners are slapping high fives too with Barrick (ABX) up 1.42% at $47.70, copper giant Freeport-McMoRan (FCX) up 1.39% and General Moly (GMO) up 0.54% at $3.74. My bet is that they'll move even higher later to day.

(but...)

I hate to bring up anything negative on such a joyous occasion but Kitco News has just posted some of my premonitions about the red metal, A Foreboding Alignment in the Copper-Gold Firmament. In short, there are some troubling signs in the gold-to-copper ratio that may spell trouble for copper price in the short-term.

The Colonel also can't fail to notice that Texas WTI crude is above $105/bbl in morning trading and Brent has crested $120/bbl (see Daily Oil Watch, below) as things again heat up in the Persian Gulf region.

Gas prices are heading higher too, pardner. The most expensive regular gallon in Nevada this morning is $4.29 at the Exxon station on Kingsbury Grade near US HWY 50. Ouch!

What about moly prices? I'm a little concerned that LME moly futures took a $1,500/metric ton dip last week placing the 3-month seller in backwardation to U.S. spot prices:

LME 3-month seller $32,000 ($14.52/lb)

LME 15-month seller $33,200 ($15.06/lb)

U.S. spot prices: $14.80-$14.95

Before that pullback, it appeared everything was slowly but inexorably marching to higher prices (see full moly report below).

Not trying to be a downer, especially for Mardi Gras, just things to watch.

Laissez les bons temps rouler!

Daily Market Roundup


Mining Report

This morning's mining stocks...

Barrick (ABX) $47.70 up 1.42%
Newmont (NEM) $59.85 up 0.67%
McEwen Mining (MUX) 5.17 up 2.17% (formerly US Gold, UXG)
General Moly (Eureka Moly, LLC) (GMO) $3.74 up 0.54%
Thompson Creek (TC) $8.77 down 0.23%
Freeport-McMoRan (FCX) $43.64 up 1.39% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $14.99 up 0.13%
Timberline Resources (TLR) $0.55 unchanged

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

ArcelorMittal (MT) $21.81 up 1.82% - global steel producer
POSCO (PKX) $91.65 up 0.37% - South Korean integrated steel producer

The Eureka Miner's Index© (EMI) was re-calibrated 2/8 to reflect current 200-day moving averages for benchmark miners.

The EMI is above-par at 234.35, down last report's 236.73 and above the 1-month moving average of 215.08. The 1-month average is safely above the key 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

This morning's...

COMEX gold is up $23.0/oz at $1,748.9/oz (April contract, most active)

COMEX silver is up $0.609/oz at $33.825/oz (March contract, most active)

The gold-to-silver ratio (Au:Ag) is 51.704 oz/oz

Silver 1-month CRS© is 0.80% (bullish level); CRS© convergence (Ag bullish)

The Eureka Miner’s Gold Value Index© (GVI) is below-par at 92.29, down from last report's 92.70 and below its 1-month average of 92.54. Gold value has stalled, and the trend is presently indeterminate. The record high for 2010-2012 is 109.97 set on Oct. 4, 2011.

The Value Adjusted Gold Price© (VAGP) is $1,583.3/oz which is $165.6/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 $0.0880/lb at $3.7960/lb (March contract, most active)

The gold-to-copper ratio is 460.72 lb/oz; ratios in excess of 400 lb/oz are considered "recession levels" (Cu bearish)

Copper 1-month CRS© is 1.67% (bullish level); CRS© convergence (Cu bullish)

The latest molybdenum oxide spot and futures prices (courtesy of Thompson Creek Metals):

Metals Week Average:
US$14.80
As of February 20, 2012
(updated weekly)

Ryan's Notes Average:
US$14.95
As of February 17, 2012
(updated twice weekly)

European Molybdenum Oxide (Bloomberg average price, updated Wednesday & Friday):
US$(n/a)/lb

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

US$14.52/lb (US$32,500/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 $110/bbl maintaining a spread above 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 $104.78
ICE North Sea Brent crude $120.26
Spread (ICE- NYMEX) = $15.48 (last report, $16.50)

Here are the June contracts* with a narrower spread:

NYMEX light sweet crude $105.72
ICE North Sea Brent crude $119.09
Spread (ICE- NYMEX) = $13.37 (last report, $14.76)

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

NYMEX WTI 1-month CRS© is 2.49% (bullish level); CRS© convergence (Oil bullish)

Prices are near highs for 2012, we have $115+ Brent and $105+ NYMEX in June favoring high oil prices this spring into summer. A front-month spread >$20/bbl is a trouble sign.

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 88.2 up from last report's 83.1. 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 4.39 to 12,945.48; the S&P 500 is up 0.34 points at 1,361.57

The Eureka Miner's Grubstake Portfolio is up 1.10%% at $1,580,223.62 (what's this?).

Cheers,

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