"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.

Thursday, April 26, 2012

"We are in a synchronized global slowdown..."

No reception, no bad news

Latest Nevada Gas 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: 2012 Copper and Gold - Is a Red Metal Crash Next? (4/16/2012)

My Latest International Business Times commentary: Silver & Gold, “Situation Normal…” (03/26/2012)

This morning's...
COMEX Gold price = $1,652.9/oz (June contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 90.03 (gold value moving sideways)
Value Adjusted Gold Price© (VAGP) = $1,534.1/oz
COMEX - VAGP = $118.8/oz; gold is trading at a premium to key commodities; the gold-to-copper ratio remains just below its 3-month average (Cu neutral)

Morning Miners!

It is 6:04 AM. Have a cup of Thor's Flash-no-Thunder java. Our favorite Norseman has been practicing how to make dark skies lighten without the usual thunder chorus - I think he may be taking lessons from Fed Chairman Ben Bernanke. After concluding their 2-day FOMC meeting there is a hint that the Fed is ready to lighten dark economic skies if necessary but the thunder of QE3 is moving farther and farther away, perhaps to be never heard. The FOMC kept gold alive, copper up and the dollar down but no spectacular moves by any - nice trick.

"We are in a synchronized global slowdown..."

Sometimes a market observer will coin a phrase that frames the big picture so well that it becomes a mainstay in the daily news patter. Pimco's CEO Mohamed El-Erian coined "new normal" to describe the difficult transition to a world of low returns and sputtering growth (see note 1).

News commentators have overused and abused the "new normal" part of El-Erian's thoughtful post-financial crisis remark to render it cliche and useless. Every week is a "new normal" if you watch too much business news.

I found a phrase this morning that may not have the staying power of "new normal" but offers a powerful global insight nonetheless. Allen Sykora of Kitco News covered it in one of his morning Market Nuggets:

Market Nuggets: FCStone: Gold Performance After FOMC Outcome Modestly Reassuring (Allen Sykora, Kitco News, Thursday April 26, 2012 8:40 AM)

FCStone commodities consultant Edward Meir found gold price resilience after the FOMC meeting "modestly reassuring." His broader observation is what caught my attention:

We think that in the days ahead, focus will revert to the still-festering European debt crisis and the fact that we are in a synchronized global slowdown, likely keeping pressure on the central banks to remain accommodative. In addition, European elections, at least from what we have been able to judge thus far, are generating a strong backlash towards austerity measures and a clear desire to pursue more definitive growth policies. Should the latter option be ‘voted in,’ it would mean that more expansionary fiscal and monetary policy will be placed on the table, something that should be constructive for the precious metals group going forward.

"Synchronized global slowdown" may never make CNBC's Closing Bell but I think Edward Meir coined a gem.

Daily Market Roundup

Mining Report

This morning's mining stocks...

Barrick (ABX) $39.73 down 0.60%
Newmont (NEM) $47.09 down 0.80%
McEwen Mining (MUX) 3.55 up 2.31% (formerly US Gold, UXG)
General Moly (Eureka Moly, LLC) (GMO) $3.23 unchanged
Thompson Creek (TC) $6.00 down 0.66%
Freeport-McMoRan (FCX) $37.17 down 0.40% (a bellwether mining stock spanning copper, gold & molybdenum)
Timberline Resources (TLR) $0.43 unchaged

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

ArcelorMittal (MT) $17.06 down 1.78% - global steel producer
POSCO (PKX) $84.14 down 1.12% - 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 below-par at 119.56, up from last report's 119.23 and below the 1-month moving average of 138.90. 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 $10.6/oz at $1,652.9/oz (June contract, most active)

COMEX silver is up $0.399/oz at $30.755/oz (May contract, most active)

The gold-to-silver ratio (Au:Ag) is 53.744 oz/oz

Silver 1-month CRS© is 1.38% (bullish stability level); very stable ratio; 1-month & 3-month < 3% (Ag bullish mid-term stability, overall indicators bearish)

The Eureka Miner’s Gold Value Index© (GVI) is below-par at 90.03, up from last report's 89.78 and above its 1-month average of 89.66. Gold value is oscillating about its average and moving sideways. The record high for 2010-2012 is 109.97 set on Oct. 4, 2011.

The Value Adjusted Gold Price© (VAGP) is $1,534.1/oz which is $118.8/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 $0.0345/lb at $3.7345/lb (May contract, most active)

The gold-to-copper ratio is 442.6 lb/oz; ratios in excess of 400 lb/oz are indicative of a bearish price domian; the ratio is below its 3-month moving average of 445.06 (Cu bullish trend in a bearishPrice Domain B)

Copper 1-month CRS© is 2.66% (bullish stability level); very stable ratio; 1-month & 3-month < 3% (Cu mid-term stability bullish, overall Cu neutral)

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

Metals Week Average:
As of April 23, 2012
(updated weekly)

Ryan's Notes Average:
As of April 24, 2012
(updated twice weekly)

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

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

US$14.29/lb (US$31,500/metric ton)

Daily Oil Watch

Latest Nevada Gas Prices (click this link)

Understanding the Price of Oil (click this link for a quick overview on crude oil prices)

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 $115/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 $104.13
ICE North Sea Brent crude $119.64
Spread (ICE- NYMEX) = $15.51 (last report, $14.54)

Here are the August contracts* with a narrower spread:

NYMEX light sweet crude $104.89
ICE North Sea Brent crude $118.78
Spread (ICE- NYMEX) = $13.89 (last report, $13.22)

* NYMEX futures contracts have rolled forward, we now show June and August.

NYMEX WTI 1-month CRS© is 1.19% (bullish stability level); CRS© stalled divergence (Oil neutral)

Prices remain high for 2012, we have $115+ Brent and $100+ 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; we continue to fall away from that 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 75.2 down from last report's 75.3. 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 38.86 points to 13,129.58; the S&P 500 is up 0.51 points at 1,391.20

The Eureka Miner's Grubstake Portfolio is down 0.01% at $1,352,504.19 (what's this?).


Colonel Possum

Note 1: The actual comment was, "a bumpy journey to a new normal."

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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