Metals & Miners Busted

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Morning Miners!

It is 5:40 AM. The pot is brewing double-strong this morning, pardner. Have a cup and help me wrassle our favorite Norseman to the parking lot. Thor has been more pain than usual taking full credit for having Old Miner Woden bounced from senior housing. To make matters worse he's setting up a lousy day for the metals & miners. Out...you tiresome old thunderbolt chucker!

Gold, silver, copper & oil flop together

COMEX gold and copper held hands today as they plumbed a morning low at 5:45 AM PT of $1,345/oz and $4.2870/lb respectively. Silver followed dropping nearly a buck from yesterday's close to $27.725/oz at 6:10 AM PT. All three are now up but not by much with gold at $1,347.5/oz, silver at $27.820/oz and copper at $4.2955/lb. Here is how gold and silver moved on the The London spot market:



Let me see if I can say something positive about these declines. At least gold and copper are falling together dropping about 1.7%. Silver followed gold and fell a tad more than twice as far declining 3.4%. This is the way these three should behave except we feel lot better when they're heading up, rather than down, the mineshaft. Oh, another good thing...oil followed the metals down and is now trading below $90/bbl at $89.87/bbl.

When gold and copper move in lock-step, our lustrous friend is reacting to the market moods as a commodity. This has not been the case lately with gold wallowing around in the global currency desert as an abandoned safe haven while the red metal soared to new highs.

Last Friday was another down day for precious metals but gold followed silver with the latter showing surprising resilience. Copper decided to rise on their decline and although oil faltered, it remained safely above $90/bbl. This bass-ackwards behavior led to my comment in the Elko Daily Free press last week:

"I believe that copper and oil cannot continue to rise on falling gold. The recent divergence of our lustrous friend from copper and oil and the uncharacteristic resilience of silver compared to gold's weakness may signal a near-term correction for the overall metals and mining sector.." (Adella Harding article "Gold prices end week down", Elko Daily Free Press, 01/14/2011)

The main culprit behind the market's two-day oopsy-doopsy is increasing fears about China's future monetary policy given their rising inflation. Bloomberg's Stephen Kirkland gives a good summary account of yesterday's market decline and what to expect today:

Stocks Drop on China Concern; U.S. Futures Pare Losses on Jobs (Stephen Kirkland, Bloomberg News, O1/20/2011,
5:46 AM PT)

My favorite gold analyst fills in the blanks for gold and silver. As of this report, COMEX gold has fallen below his resistance level of $1350/oz:

Comex Gold Lower amid General Commodity Market Weakness on China News (Jim Wyckoff, Kitco News, 01/20/2011, 5:31 AM PT)

Uh-oh, the broader markets just opened and it's a rough-toughie for miners...

Metals & Miners Busted

If you had just one number to look at to figure out how mining companies are doing, checkout Freeport-McMoRan (FCX) share price. The copper giant is THE bellwether stock that mines not only the red metal but also gold and molybdenum. FCX is now trading down over 4% and more significantly has just broken its 50-day moving average ($110.49 versus the 50-day of $111.08). Although we're still safely above its 200-day average, this morning's action is not good.

All of our other mining stocks in the Eureka Miner's Grubstake Portfolio are down too with only Newmont (NEM) showing some resilience falling less than 2%. General Moly is down 4.30% to $5.56; Barrick (ABX) is down 3.38% to $46.09. The Grubstake is down nearly 3%. The Eureka Miner's Index(EMI) has set a new low for the year of 499.5 falling more than 200 points from yesterday's 703.4 (see below).

Is the ole Colonel crazy?

Yesterday, I suggested looking at our big gold miners on the pullbacks. On a day as bad as this you may reasonably ask if I've lost my senses. Maybe I have but I continue to think we're in a correction of fairly short duration and the metals & miners will come back kicking this spring.

On this most horrible day, Canacccord Genuity just upped their 52-week price target for Barrick Gold (ABX) from $65.50 to $66.50. At this morning's $46.09 you may want to keep your eyes open. Of course there could be more pain ahead - heck, I ain't scared. Stay tuned.

Daily Market Roundup

Enough talk, let's walk the walk:

Eureka Miner's Index(EMI)

This morning the Eureka Miner's Index(EMI) is above-par at 499.50, down significantly from yesterday's 703.36. We are below the 1-month moving average of 695.48 and the upward trend of the EMI has now reversed.

The record high for the EMI is 816.78 set 01/04/2011; the low was set 6/7/2010 at 50.7. An EMI greater than 100 signals better times for the metals & miners relevant to Eureka County.

200-day averages are used in the EMI to normalize current mining company share price and are updated monthly. Upper and lower trend lines are updated weekly.

Eureka Outlook Dashboard

4-WD is ON - The metals & miners ave hit a rough patch; The VIX or "fear index" is below 25; bellwether Freeport-McMoRan (FCX) in the low-$110s breaks its 50-day moving average but still is well above its 200-day average of $83.07 (our new warning level, 01/05 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment.

The GREEN light is turned back on for Commodity Reflation with copper trading comfortably above $3.50/lb

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 Watch as the Federal Reserve resumes buying Treasurys (aka QE2)

The GREEN light is turned back on for Investor Confidence as investment returns to the equity markets

The YELLOW light is turned on our Fuel Gauge with oil above $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 $1.94 in early trading at $89.87 (March contract, most active); Gold is down $22.7 to $1347.5 (February contract, most active); Silver is down $0.981 to $27.820 (March contract, most active); Copper is down $0.0745 to $4.2955 (March contract, most active)

Western Molybdenum Oxide is $16.00; European Molybdenum Oxide is $17.35; LME moly 3-month seller's contract is $17.10, LME cash seller is $17.69

Stock Market Morning Update

The DOW is down 40.37 points to 11,784.92; the S&P 500 is down 5.19 at 1276.73. Miners are down-down:

Barrick (ABX) $46.09 down 3.38%
Newmont (NEM) $54.56 down 1.61%
US Gold (UXG) $6.54 down 5.08%
General Moly (Eureka Moly, LLC) (GMO) $5.56 down 4.30%
Thompson Creek (TC) $14.12 down 3.35%
Freeport-McMoRan (FCX) $110.49 down 4.06% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $35.38 up 0.23% - global steel producer
POSCO (PKX) $104.67% down 0.31% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 2.99% at $1,784,923.59 (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