"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.

Monday, March 26, 2012

Bernanke Breaks the Spell; Gold & Metals Up; Euro-Steel Update

Alaskite and Lichen, Devil's Gate, Eureka, Nevada

*** BREAKING NEWS *** The S&P 500 made a new multi-year high of 1,415.15 at 12:16 PM PT (see story below)

*** BREAKING NEWS *** COMEX gold moved higher to $1,689.50 per ounce at 11:50 AM PT further extending today's rally (April contract)

*** BREAKING NEWS *** COMEX gold touched $1,687.50 per ounce at 8:20 AM PT further extending today's rally (April contract)

Latest Nevada Fuel Prices (click this link)

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 Bids Adieu to Gold and Silver (3/19/2011)

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

This morning's...
COMEX Gold price = $1,678.0/oz (April contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 88.07 (gold value pause from trending down)
Value Adjusted Gold Price© (VAGP) = $1,519.9/oz
COMEX - VAGP = $86.1/oz; gold is trading at a declining premium to key commodities; the gold-to-copper ratio remains below its 3-month average, compression stalling (Cu neutral)


Morning Miners!

It is 6:01 AM. Have a Monday cup of Accommodative Caffeine compliments of the Federal Reserve. It looks like Chairman Bernanke has broken the gold curse...

Bernanke Breaks the Spell; Gold & Metals Up

Starting on Leap Day and continuing into mid-March, you could bet that any comments from Federal Reserve Chairman Ben Bernanke would drop gold $50 to $100 per ounce. this morning he spoke and gold and our favorite metals are up - the spell has been broken! At 8:00 AM ET gold jumped from $1,658.7 per ounce to $1,684.0 in 45 minutes. Presently the yellow metal is trading down a bit at $1,678.0 per ounce but still a healthy $15.6 per ounce from Friday's settle price. COMEX silver and copper got a bid too trading now at $32.640 per ounce and $3.8515 per pound.

So what were the magic words? The Wall Street Journal reports Uncle Ben as saying,

“Further significant improvements in the unemployment rate will likely require a more-rapid expansion of production and demand from consumers and businesses, a process that can be supported by continued accommodative policies...”

Nothing to it, forget supply and demand fundamentals - just say "continued accommodative policies" and markets will move. The broader markets are now open and moments ago the S&P500 came within less than 2 points of reaching a new multi-year high (1,412.06 versus 1,414.00 set March 19). Pardner, the stock market has not been in this pasture since May, 2008.

I think I'll go out and utter "continued accommodative policies" to Casper, my 1972 F-250. I bet she starts right up even with a dead battery.

I'm not going to analyze this further, let's just be happy Barrick Gold (ABX) has bounced 1.23% to $44.30 and bellwether miner Freeport-McMoRan (FCX) is up 1.01% at $38.87- a good start to the week!

Euro-Steel Update

Here's a bit more good news for moly watchers as reported by the Steel Business Briefing (SBB) this morning:

European steel consumption likely to improve in H2: analysts
Steel demand in Europe in the first quarter of 2012 remains soft, and is likely to be down on year-earlier levels, industry analysts told Platts Steel Business Briefing Friday. However, the slump in demand that some had feared has not occurred, and real activity and final demand have held up, observers said.

“Although demand in Europe overall is likely to be slightly lower, we see signs of improvement for the second half of the year,” an analyst at a medium-sized European steelmaker said.
(SBB, 03/26/2012)

Europe steel makers use molybdenum to produce high-strength steels.

Daily Market Roundup


Mining Report

This morning's mining stocks...

Barrick (ABX) $44.30 up 1.23%
Newmont (NEM) $53.42 up 0.19%
McEwen Mining (MUX) 4.20 up 1.94% (formerly US Gold, UXG)
General Moly (Eureka Moly, LLC) (GMO) $3.41 unchanged
Thompson Creek (TC) $7.05 up 0.86%
Freeport-McMoRan (FCX) $38.87 up 1.01% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $n/a
Timberline Resources (TLR) $0.51 unchanged

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

ArcelorMittal (MT) $19.64 down 0.71% - global steel producer
POSCO (PKX) $84.18 down 0.72% - 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 199.77, up from last report's 188.71 and below the 1-month moving average of 196.24. The 1-month average is falling but still 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 $15.6/oz at $1,678.0/oz (April contract, most active)

COMEX silver is up $0.368/oz at $32.640/oz (May contract, most active)

The gold-to-silver ratio (Au:Ag) is 51.409 oz/oz

Silver 1-month CRS© is 1.72% (bullish level); CRS© weak convergence (Ag neutral)

The Eureka Miner’s Gold Value Index© (GVI) is below-par at 88.07, up from last report's 87.96 and just below its 1-month average of 88.32. Gold value is taking a pause from trending down. The record high for 2010-2012 is 109.97 set on Oct. 4, 2011.

The Value Adjusted Gold Price© (VAGP) is $1,591.9/oz which is only $86.1/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 $0.0430/lb at $3.8515/lb (May contract, most active)

The gold-to-copper ratio is 435.67 lb/oz; ratios in excess of 400 lb/oz are considered "recession levels"; the ratio is below its 3-month moving average of 448.73 (Cu bullish trend has paused in Price Domain B)

Copper 1-month CRS© is 2.43% (bullish level); convergence, compression stalling (Cu neutral)

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

Metals Week Average:
US$14.00
As of March 26, 2012
(updated weekly)

Ryan's Notes Average:
US$14.00
As of Mar 23, 2012
(updated twice weekly)

European Molybdenum Oxide (Bloomberg average price, updated Wednesday & Friday):
US$14.05/lb

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

US$14.06/lb (US$31,000/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 $105.56
ICE North Sea Brent crude $123.75
Spread (ICE- NYMEX) = $18.49 (last report, $18.19)

Here are the July contracts* with a narrower spread:

NYMEX light sweet crude $106.58
ICE North Sea Brent crude $122.50
Spread (ICE- NYMEX) = $16.24 (last report, $15.92)

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

NYMEX WTI 1-month CRS© is 2.40% (bullish level); CRS© weak divergence (Oil neutral)

Prices are near highs for 2012, we have $120+ Brent and $105+ NYMEX in July favoring high oil prices this spring into summer. A front-month spread between Brent and WTI >$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 is 69.4 down from last report's 71.0. A level above 200 is time for serious concern - we are now well below that level. The highest level recorded since inception was 271.0 Aug. 9, 2011; the lowest level is 65.1 on Mar. 13, 2012

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 103.84 to 13,184.57; the S&P 500 is up 12.06 points at 1,409.17

The Eureka Miner's Grubstake Portfolio is up 0.74% at $1,454,167.09 (what's this?).

Cheers,

Colonel Possum

Headline photograph supplied 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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