Gold, Silver, Copper New Highs - Are We Near the Top?

*** BREAKING NEWS *** New high - COMEX copper $3.6735/lb 11:40:00 ET December contract, most active - closing on April high: $3.68/lb 4/12/2010


Wōdnesdæg
Morning Miners!

It is 5:46 AM. Grab a cup a cup of hump day java, I'm over here at the break room sink. Old Miner Woden and the Colonel have had a standing bet on who would have the next "senior moment" between us. He won and I'm tasked with washing his winter long johns. It looks like I forgot some folks on distribution for this Monday's weekly roundup, Barrick $1500+ Gold for 2011 - Metals & Miners Weekly Roundup. If you missed it there's a good article on Barrick's gold outlook and a Cortez Hills update. Sorry, it happens to us old timers.

Here's a picture of Woden in long johns when he joined an Aussie expeditionary force many moons ago. He's the one with the mustache, right front row.



More new highs for gold, silver & copper

Another record breaking day. There are so many folks trying to access commodity price data that my link has been freezing up (InteractiveData) - it took 20 minutes to fetch the latest new highs:

COMEX gold $1314.8/oz 02:45:00 ET December contract, most active - record
COMEX silver $22.075/oz 02:45:00 ET December contract, most active - 30-yr high
COMEX copper $3.658/lb 03:15:00 ET December contract, most active - since 4/12/10 $3.68/lb

The new highs are lifted by a U.S. dollar that continues to fall (USD dollar index .DXY at 78.767 down again from yesterday's close at 79.014) while the euro pegs 1.3606. We are nearing the intervention level for the yen (USD/JPY 83.76 vs 83) and wait to see if Japan will try to weaken their currency further. This is a "race to debase" national currencies with our own Fed threatening to provide more quantitative easing to help our struggling economy.

Precious metals thrive on fiat currency instability as evidenced by the daily string of new highs. Japan is trying to help their exporters with a weaker sovereign currency while our Federal Reserve strives to introduce a "little" inflation to ward of the perceived horrors of deflation.

Tight supply and a weaker dollar is a perfect environment for dollarized commodities from cotton to copper. The inventories of all the primary base metals except nickel continue to decline at the London Metal Exchange (LME). Here is a chart for copper which saw inventory highs north of 550,000 tons in February.


According to my favorite London correspondents, copper sits at 375,100 tons, the lowest level since November 4, 2009. Here is their morning Bloomberg article on copper by Anna Stablum, edited by Claudia Carpenter:

Copper Climbs, Advances Above $8,000 a Ton for the First Time Since April (Anna Stablum, Bloomberg, 9/27/2010)

The Report thanks Claudia and Anna for helping the Colonel verify the April COMEX copper intraday high ($3.68/lb, May contract, most active).

On the demand side, a favorable Chinese purchasing managers’ index (PMI) is expected October 1st. The HSBC indendent PMI was released today set a five-month high of 52.9 from 51.9 in August. A higher PMI is supportive of the base metal complex.

I don't know if I can take too many more mornings like this.

Are we Near a Top?


Dennis Gartman, the "Commodity King", said on CNBC Business News that its hard to call tops but you know when they happen. He added that we shouldn't be surprised to wake up one morning to see gold gap up $50 then close for the day $30 lower, "that's when you know its over." Of course this will be an overdue correction with the longer term prospects for gold still looking quite bullish. COMEX silver had a suspicious "gap up" in the wee hours followed by a fairly decent drop ($21.830/oz versus $22.075/oz, 1.1% drop), we'll just have to wait and see. Remember silver goes up the stairs and down the elevator when it does rollover.

With everyone racing to precious metals and hating the U.S. dollar, the ole Colonel has decided to swim upstream. I bought a little dollar index (Powershares DB US Dollar Index Bullish, UUP) to throw in the buckboard for safe keeping. Stay tuned.

Daily Market Roundup

Enough talk, let's walk the walk:

The Eureka Miner's Index(EMI) is above-par at 260.25, up from yesterday's 233.65 and a long way from the 6/7/10 low of 50.7. Today's number is above the lower trend level of 253.32 and very comfortably above support at 186.51. The 1-month moving average is 201.15. The new 2010 record high for the EMI is 274.66 set Friday, 9/24/2010. Remember an EMI greater than 100 is good times (or at least better times) for the metals & miners relevant to Eureka County.

Eureka Outlook Dashboard

4-WD is OFF - improving roads in the marketplace; The VIX or "fear index" is below 25; metals & miners are on firm timber with bellwether Freeport-McMoRan (FCX) in the high-$80s above its 200-day average of $74.48 (our new warning level, 9/03 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment but there is still some deflationary caution now that we are sub-3%.

The YELLOW light is turned back on for Commodity Reflation. Although copper is trading above $3/lb, the 10-yr T-Note is below 3.00%

The GREEN light is turned on for Stable Markets with the VIX below the 30 level (what's this?)

The YELLOW light is turned on for Inflation/Deflation Watch as the Federal Reserve resumes buying back Treasurys and the 10-yr T-Note remains below 3.00%

The GREEN light is turned back on for Investor Confidence as investment returns to the equity markets but the bond markets still signal trouble ahead

The GREEN light is turned on our Fuel Gauge with oil below $80

A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, Miner's claim fee, Miner taxation, Cortez Hills, mercury emissions , General Moly Mt. Hope Water Rights, U.S. House committee debates miner workplace safety bill

Otherwise, all lights are green on the Eureka Outlook Dashboard (upper right, what's this?)

Commodity Market Morning Update

NYMEX/COMEX: Oil is down $0.15 in early trading at $76.03 (November contract, most active); Gold is up $1.4 to $1309.7 (December contract, most active); Silver is up 0.123 to $21.830 (December contract, most active); Copper is up $0.0075 to $3.6445 (December contract, most active)

Western Molybdenum Oxide is $15.00; European Molybdenum Oxide is $15.05; LME moly 3-month seller's contract is $15.42, LME cash seller is $15.15

Stock Market Morning Update

The DOW is down 37.88 points to 10820.26; the S&P 500 is down 4.57 to 1143.13. Miners are mixed:

Barrick (ABX) $46.85 up 0.19%
Newmont (NEM) $63.85 down 0.59%
US Gold (UXG) $5.08 down 0.39%
General Moly (Eureka Moly, LLC) (GMO) $3.57 up 0.28%
Thompson Creek (TC) $10.67 down 3.09%
Freeport-McMoRan (FCX) $87.05 up 0.02% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $32.87 down 2.46% - global steel producer
POSCO (PKX) $111/32 down 1.08% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.41% to $1,518,775.09 (what's this?).

Cheers,

Colonel Possum

Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market

Headline photograph by Mariana Titus