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: Copper and Gold Plan Their 2012 World Tour (01/30/2012)
My Latest International Business Times commentary: Gold and Silver “Together Again” (12/05/2011)
This morning's...
COMEX Gold price = $1,751.4/oz (February contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 95.33 (rising gold value trend)
Value Adjusted Gold Price© (VAGP) = $1,535.1
COMEX - VAGP = $216.1/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 6:12 AM. Have a cup of Thor's All That Glitters java. Our favorite Norseman has hitched up the buckboard, he says there some glitter in the creek...
Buy Gold Now?
The ole Colonel wrote about this in a Kitco Commentary last summer:
Buy or Sell Gold Now? Check the VAGP First (Kitco Commentary, Aug 22 2011)
Here's an excerpt on the basic idea:
Presumably, it is a good time to buy gold at the bottom of a value cycle when it appears price and value are ready to rise together. On April 21 [2011] a Kitco News Market Nugget reported that Dennis Gartman, editor/publisher of the Gartman Letter, made bullish comments about gold to his subscribers. Bill O'Neil of Logic Advisors LLC made similar remarks on CNBC Business News the day before. This is significant because he and Gartman are much respected commodity traders and are often openly skeptical of gold seeking greater rewards elsewhere in the commodity space.
In the commentary, April 21 coincided with "point A" in the chart below which marked a trend reversal from declining to rising value:
If the present reversal has legs, we are in a similar situation as shown by "point A." One key difference from last April is that gold is presently trading at a premium (i.e. positive VAGP delta) to key commodities instead of a discount (i.e. negative VAGP Delta) which limits the gold upside in U.S. dollar price. Nonetheless, this reversal is a bullish change for gold - at least for a trade.
It is reassuring that Kitco News reported on the day that this Report first warned of a possible reversal, "Investor and newsletter writer Dennis Gartman says he is buying gold in euro terms again after stepping to the sideline during the metal’s correction late last year." Here is the complete report:
Market Nuggets: Gartman Returning To Gold/Euro, Still Holds Copper Position (27 January 2012, 8:09 a.m., By Kitco News
I threw a few shares of SPDR Gold Trust in the buckboard this morning at $170.99/share. Please do your own homework, the ole Colonel could be dead wrong.
Mining Tax Inititative
Last night the Elko Daily Free Press carried a nice piece from the Associated Press on at not-so-nice mining tax initiative that has surfaced lately for Nevada miners:
Inititative would raise mining tax cap (SANDRA CHEREB Associated Press, 2/1/2012)
The initiative proposes a constitutional amendment to raise the cap on Nevada mining taxes to 9 percent of net proceeds, up from the current 5 percent - here we go again, pardner...where's that goose that lays the golden eggs?
Daily Market Roundup
Mining Report
This morning's mining stocks...
Barrick (ABX) $49.44 up 0.37%
Newmont (NEM) $61.54 up 0.69%
McEwen Mining (MUX) 5.76 down 0.17% (formerly US Gold, UXG)
General Moly (Eureka Moly, LLC) (GMO) $3.84 unchanged
Thompson Creek (TC) $8.87 up 0.11%
Freeport-McMoRan (FCX) $46.17 up 0.02% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $15.03 down 0.07%
Timberline Resources (TLR) $0.53 down 1.85%
The Steels (a "tell" for General Moly & Thompson Creek):
ArcelorMittal (MT) $21.33 up 1.04% - global steel producer
POSCO (PKX) $93.22 up 1.06% - South Korean integrated steel producer
The Eureka Miner's Index© (EMI) is above-par at 206.91, up from last report's 198.26 and above the 1-month moving average of 143.54. The new record low for 2010-2012 was set Oct. 4, 2011 at 22.88. The 1-month average is currently 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 $1.9/oz at $1,751.4/oz (April contract, most active)
COMEX silver is down $0.057/oz at $33.750/oz (March contract, most active)
The gold-to-silver ratio (Au:Ag) is 51.893 oz/oz
Silver 1-month CRS© is 3.14% (bullish level); weak convergence (Ag neutral)
The Eureka Miner’s Gold Value Index© (GVI) is below-par at 95.33, up from last report's 94.07 and above its 1-month average of 92.35. The record high for 2010-2012 is 109.97 set on Oct. 4, 2011.
The Value Adjusted Gold Price© (VAGP) is $1,551.8/oz which is $195.0/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
COMEX copper is down $0.0370/lb at $3.8050/lb (March contract, most active)
The gold-to-copper ratio is 460.29 lb/oz; ratios in excess of 400 lb/oz are considered "recession levels" (Cu bearish)
Copper 1-month CRS© is 2.59% (bullish level); weakly divergent (Cu neutral)
The latest molybdenum oxide spot and futures prices (courtesy of Thompson Creek Metals):
Metals Week Average:
US$14.00
As of January 30, 2012
(updated weekly)
Ryan's Notes Average:
US$14.075
As of January 31, 2012
(updated twice weekly)
European Molybdenum Oxide (Bloomberg average price, updated Wednesday & Friday):
US$14.10/lb
London metal Exchange (LME) molybdenum 3-month seller's contract:
US$14.29/lb (US$31,500/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 $100/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 $96.52
ICE North Sea Brent crude $111.91
Spread (ICE- NYMEX) = $15.39 (last report, $13.26)
Here are the May contracts* with a narrower spread:
NYMEX light sweet crude $97.34
ICE North Sea Brent crude $111.16
Spread (ICE- NYMEX) = $13.82 (last report, $11.82)
* NYMEX futures contracts have rolled forward, we now show March and May for a 2-month look-ahead
NYMEX WTI 1-month CRS© is 4.92% (bearish level); divergent (Oil bearish)
Prices are off their crisis highs and we have $110+ Brent and $95+ NYMEX in May favoring high oil prices this 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 80.1 unchanged last report's 80.1. 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 unchanged to 12,716.46; the S&P 500 is up 1.89 points at 1325.98
The Eureka Miner's Grubstake Portfolio is up 0.06% at $1,608,206.03 (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
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