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


The author/editor of the Eureka Miner owns common shares of local mining stocks, General Moly (GMO) 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, March 21, 2012

Gold, Copper & Shanghai Composite

Isn't it good, Norwegian wood? Devil's Gate, Eureka Nevada

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 = $1,654.4/oz (April contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 87.32 (gold value trending down)
Value Adjusted Gold Price© (VAGP) = $1,583.2/oz
COMEX - VAGP = $71.2/oz; gold is trading at a declining premium to key commodities; the gold-to-copper ratio remains below its 3-month average and compressing (Cu bullish)

Morning Miners!

It is 5:51 AM. Have a cup of Wōdnesdæg Lonesome. Yeah, that's how it feels in the break room - Old Miner Woden won't come out of his cave today. Fed Chairman Ben Bernanke is due to speak today and it seems lately every time he does gold drops another $50. Woden calls them "Bernanke Days" and calls in sick. The ole cuss just can't wait for the world to end and gold to go to $10,000 per ounce!

Gold, Copper & Shanghai Composite

Here are two 3-month charts to get you thinking; COMEX gold and copper versus the Shanghai Composite Index (orange). First, COMEX gold (blue) versus the Shanghai:

And then, COMEX copper (blue) versus the Shanghai:

As Europe recedes as a major worry (at least for now), China's 2012 growth prospects have become the topic du jour for metals & miners lately. I find it interesting that gold and the Shanghai composite roughly tracked each other up until late-February and now are descending together but gold at a quicker pace - in 3-months, gold is up 3.5% to Shanghai's 9%.

By contrast, copper has been showing price good strength in March compared to either gold or the Chinese market index - in 3-months, copper is up 13% to Shanghai's 9% and gold's 3.5%. With all the fretting about metals and China, better prospects in the U.S. and supply tightness seem to be keeping the red metal fairly buoyant. Just something to ponder on your break - have a good'un.

Daily Market Roundup

Mining Report

This morning's mining stocks...

Barrick (ABX) $43.97 up 0.41%
Newmont (NEM) $53.80 up 0.22%
McEwen Mining (MUX) 4.18 up 2.70% (formerly US Gold, UXG)
General Moly (Eureka Moly, LLC) (GMO) $3.46 up 0.87%
Thompson Creek (TC) $6.97 up 0.29%
Freeport-McMoRan (FCX) $39.44 up 0.74% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $n/a
Timberline Resources (TLR) $0.49 unchanged

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

ArcelorMittal (MT) $20.47 down 0.97% - global steel producer
POSCO (PKX) $86.59 down 1.97% - 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 199.30, up from last report's 199.30 and below the 1-month moving average of 204.30. 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 $7.4/oz at $1,654.4/oz (April contract, most active)

COMEX silver is up $0.311/oz at $32.145/oz (May contract, most active)

The gold-to-silver ratio (Au:Ag) is 51.467 oz/oz

Silver 1-month CRS© is 1.70% (bullish level); CRS© weak convergence (Ag neutral)

The Eureka Miner’s Gold Value Index© (GVI) is below-par at 87.32, up from last report's 87.07 and below its 1-month average of 88.92. Gold value is now trending down. The record high for 2010-2012 is 109.97 set on Oct. 4, 2011.

The Value Adjusted Gold Price© (VAGP) is $1,583.2/oz which is only $71.2/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 up $0.0225/lb at $3.8530/lb (May contract, most active)

The gold-to-copper ratio is 429.38 lb/oz; ratios in excess of 400 lb/oz are considered "recession levels"; the ratio is below its 3-month moving average of 450.41 (Cu bullish trend emerging in Price Domain B)

Copper 1-month CRS© is 2.97% (bullish level); convergence, compressing ratio (Cu bullish)

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

Metals Week Average:
As of March 19, 2012
(updated weekly)

Ryan's Notes Average:
As of March 16, 2012
(updated twice weekly)

European Molybdenum Oxide (Bloomberg average price, updated Wednesday & Friday):

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 $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 $106.51
ICE North Sea Brent crude $124.20
Spread (ICE- NYMEX) = $17.69 (last report, $17.31)

Here are the July contracts* with a narrower spread:

NYMEX light sweet crude $107.46
ICE North Sea Brent crude $123.30
Spread (ICE- NYMEX) = $15.84 (last report, $15.99)

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

NYMEX WTI 1-month CRS© is 2.64% (bullish level); CRS© divergent (Oil bearish)

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 70.8 down from last report's 76.4. 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 10.82 to 13,181.01; the S&P 500 is up 1.43 points at 1,406.95

The Eureka Miner's Grubstake Portfolio is down 0.39% at $1,456,198.46 (what's this?).


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

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