Thursday, February 16, 2012
Dollar Up; Euro & Gold Down - Miners Grumpy
*** BREAKING NEWS **** The euro dramatically reversed its downward slide boosting broader markets and miners. A reversal in copper prices caused a 5% bounce in benchmark miner Freeport-McMoRan (FCX). Miners grumpy no more! (10:34 AM PT)
NEW FORMAT for 2012
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: Gold and Silver Move Uptown for 2012 (02/06/2011)
My latest Kitco commentary: Copper and Gold Plan Their 2012 World Tour (01/30/2012)
COMEX Gold price = $1,713.3/oz (April contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 92.52 (gold value sideways, trend indeterminate)
Value Adjusted Gold Price© (VAGP) = $1,547.4/oz
COMEX - VAGP = $165.9/oz; gold is trading at a premium to key commodities; the gold-to-copper ratio continues to exceed recession levels
It is 6:19 AM. Have a hot cup of Thor's famous Euro Thunder Blunder. Our favorite Norseman loves nothing more than to see a little chaos in the homeland, reminds him of those good ole days of yore...
Dollar Up; Euro & Gold Down - Miners Grumpy
As much as the Colonel would like to forget about the fate of Greece and the umpteenth chapter of the euro-zone debt crisis, it does drive gold price. This 3-month chart tells the story:
Gold price (orange) and the euro (gray) have been running together for the most part - euro up, gold up; euro down, gold down. The exceptions are bad headlines on Iran which put a bid under oil and gold prices or improving economic news from the U.S. which tends to lift base and precious metals. This morning we have a mixed bag with the Greek March bailout on shaky grounds (euro headed back to the $1.30 level boosting the U.S. dollar) and good news on the domestic employment front with number of U.S. workers applying for unemployment benefits falling to its lowest level in nearly four years (initial claims dropped by 13,000 to 348,000 beating an expected 365,000). The latter news is probably blunting the effect of the steep euro-decline with COMEX gold trading down only $14.8/oz at $1,713.3/oz.
This tug-of-war between gold bearish (bad Europe news) and gold bullish (tensions in the Persian Gulf, improving U.S. economy) forces explains why the Eureka Miner’s Gold Value Index© (GVI) has been moving sideways since mid-January.
Interestingly, our debt Crisis Index (DCI) moved up this morning to levels not seen since mid-January. A increasing DCI spells trouble, although at 96.4 we are still quite a ways from the dangerous 200-level (on Octber 4, 2011 the DCI peaked at an alarming 264.9).
How does this effect the mining sector? Mining stocks have been on a tear since the beginning of the year but this morning the Eureka Miner's Index© (EMI) fell below its one-month average (202 versus 204 average, see below) after peaking at 322 on Feb. 8. Taken all together the GVI, DCI and EMI are throwing up some warning flares as the broader markets shrug off all the bad news and seem determined to peg new highs for the year. The DOW almost broke 13,000 on Feb. 9 (intraday high of 12,924.71) and is back up today boosted by the employment report to 12,839.34.
I tend to believe the miners which appear headed down the correction elevator. COMEX copper prices have also been trending down for the last 5-market days sitting at $3.7495/lb on the COMEX after almost touching $4/lb earlier this month. Hang on pardner - the ole Colonel is still bullish for 2012 but we may have to go down before up again. Stay tuned.
Daily Market Roundup
This morning's mining stocks...
Barrick (ABX) $46.24 down 0.83%
Newmont (NEM) $59.03 down 0.96%
McEwen Mining (MUX) 4.97 down 0.80% (formerly US Gold, UXG)
General Moly (Eureka Moly, LLC) (GMO) $3.44 down 0.86%
Thompson Creek (TC) $8.53 down 0.70%
Freeport-McMoRan (FCX) $42.55 up 0.35% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $14.95 down 0.07%
Timberline Resources (TLR) $0.52 unchanged
The Steels (a "tell" for General Moly & Thompson Creek):
ArcelorMittal (MT) $20.68 down 1.05% - global steel producer
POSCO (PKX) $90.08 down 1.43% - 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 202.20, down last report's 235.31 and below the 1-month moving average of 203.82. 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
COMEX gold is down $14.8/oz at $1,713.3/oz (April contract, most active)
COMEX silver is down $0.573/oz at $32.835/oz (March contract, most active)
The gold-to-silver ratio (Au:Ag) is 52.179 oz/oz
Silver 1-month CRS© is 1.69% (bullish level); weak convergence (Ag neutral)
The Eureka Miner’s Gold Value Index© (GVI) is below-par at 92.52, up from last report's 92.34 and above its 1-month average of 92.41. The gold value has stalled, and the trend is again indeterminate. The record high for 2010-2012 is 109.97 set on Oct. 4, 2011.
The Value Adjusted Gold Price© (VAGP) is $1,574.4/oz which is $165.9/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
COMEX copper is down $0.0520/lb at $3.7495/lb (March contract, most active)
The gold-to-copper ratio is 456.94 lb/oz; ratios in excess of 400 lb/oz are considered "recession levels" (Cu bearish)
Copper 1-month CRS© is 1.50% (bullish level); weak convergence (Cu neutral)
The latest molybdenum oxide spot and futures prices (courtesy of Thompson Creek Metals):
Metals Week Average:
As of February 14, 2012
Ryan's Notes Average:
As of February 10, 2012
(updated twice weekly)
European Molybdenum Oxide (Bloomberg average price, updated Wednesday & Friday):
London metal Exchange (LME) molybdenum 3-month seller's contract:
US$15.20/lb (US$33,500/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 $101.61
ICE North Sea Brent crude $119.58
Spread (ICE- NYMEX) = $17.97 (last report, $15.69)
Here are the May contracts* with a narrower spread:
NYMEX light sweet crude $102.41
ICE North Sea Brent crude $118.65
Spread (ICE- NYMEX) = $16.24 (last report, $14.39)
* NYMEX futures contracts have rolled forward, we now show March and May for a 2-month look-ahead
NYMEX WTI 1-month CRS© is 2.82% (bullish level); ratio convergence (Oil bullish)
Prices are off their crisis highs but we have $115+ Brent and $100+ NYMEX in May favoring high oil prices this spring. 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 96.4 up from last report's 93.6. 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 58.39 to 12,839.34; the S&P 500 is up 2.10 points at 1,345.33
The Eureka Miner's Grubstake Portfolio is down 0.83% at $1,532,096.91 (what's this?).
Headline photo by Mariana Titus
Write Colonel Possum at firstname.lastname@example.org for answers to your questions or to request e-mail updates on the market