"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.

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

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