Is Miss Moly Ready for $20 Shoes?

Morning Miners!

It is 5:57 AM. Grab a cup and let's get to work. While we're waiting for U.S. markets to open, let's see what we might expect for the week. On Friday European leaders used soothing words to reassure the world that there wouldn't be a Greek financial tragedy and world markets bounced (A Little Greenback with Your Greek Salad?). The S&P closed at 1194.37, a new high topping my prediction of 1193 by Memorial Day. That deserves a Colonel Yee-ha!

Over the weekend they put a little walk with their talk by unveiling a massive €30 billion aid plan for Greece. Predictably, the word "possible" crept into the finance ministers' description of a low-interest (5%) three-year loan program for their ailing euro-zone partner. Nonetheless their plan is expected to lift markets again today.

To bring all this bubbly-bubbly to something we can relate to in Eureka, the ole Colonel decided to take a bird's-eye view of the steel industry - a primary driver of molybdenum prices.

Steel Business Briefing reports today that European steel producers should be able to absorb the higher cost of raw materials later this year. Mathias Carlson, a Deutsche Bank research analyst, said, "We are positive on the European steel fundamentals. I think that 2010 earnings will be driven by volumes and not by the high prices that just offset the higher raw material costs."

OK, that's cool. The big part of raw material costs has been iron ore this year but the producers have been passing those costs on to customers through higher steel prices. Here are the price increases for steel billet in Europe and Asia since February 22, the day molybdenum futures were launched on the London Metal Exchange (LME):

LME Mediterranean steel billet (3-month seller's contract) up 38.0%
LME Far East steel billet (3-month seller's contract) up 32.6%

Again, I believe most of this increase is due to a rise in iron ore. How have some of the specialty metals used in steel alloys fared?

LME molybdenum (3-month seller's contract) up 6.5%
LME nickel (3-month seller's contract) up 19.6%
LME cobalt (3-month seller's contract) up 18.8%

And how much have moly spot prices moved over the same period?

Western moly oxide up 1.4%
European moly oxide up 5.9%

What's your point Colonel? It appears that global steel production is indeed on the mend as predicted by the experts last year. Although input prices have risen there seems to be no significant resistance (yet) to higher steel prices in Europe or Asia. Miss Moly, however, is lagging her metallic cousins in both the spot and futures markets. Although supply and demand set the price for individual metals, I question whether any price can withstand the "reflation" spirit of markets lifting on improved European financial news. I believe there could be a catch-up in moly spot prices in the next several months if global conditions continue to improve. That puts Miss Moly in $20 shoes in my crystal ball, pardner.

Let's have a Colonel beer bet on her new heels (Colonel's Beer Derby, lower right column of this blog):

Western Moly Oxide will break $20/lb before Summer Solstice

OK, the markets are now open and guess what? The S&P 500 is flirting 1200 and the "fear index" is in the 15s, levels not seen since July 2007! (what's a "fear index"?). Fearless markets buckaroos, come on Miss Moly - kick your heels.

Here is a complete summary of last week's moly price action:

Western Moly Oxide (FeMo65) $17.50/lb (the price reported by Infomine and tracked by Base Metals on the General Moly Website)

Moly Oxide, Europe (Mo Drummed Molydbic Oxide EU) $18.00/lb (the price reported in the Metals Bulletin)

LME Futures Contracts

3-Month (Buyer) $39,000/metric ton $17.69/lb
3-Month (Seller)$41,000/metric ton $18.60/lb

15-Month (Buyer) $39,000/metric ton $17.69/lb
15-Month (Seller)$41,000/metric ton $18.60/lb

Here is the price action of the LME 3-month contract (seller) from the February launch:



Enough moly-talk, let's walk the walk:

4-WD is OFF - smoother markets return; the VIX or "fear index" is in the 15s for the first time in many moons, far below 25 which is terrific; metals & miners are happy with benchmark FCX comfortably above $74, 10-year Treasurys are below 4% preserving a low-interest environment (what's this?)

The YELLOW light is switched back on our fuel gauge with oil above $80

An ORANGE light is ON for possible adverse regulation/legislation: Miner's claim fee, Miner taxation, Cortez Hills & mercury emissions

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

NYMEX/COMEX: Oil is up $0.12 in early trading to $85.04 (May contract, most active); Gold is down $0.7 to $1161.2 (June contract, most active); Silver is up $0.074 to $18.425 (May contract); Copper is up $0.0265 to $3.6165 (May contract); Western Molybdenum Oxide sits at $17.50, LME moly 3-month & 15-month seller's contracts move up to $18.60

The DOW is up 14.89 points to 11012.24; the S&P 500 is up 2.35 to 1196.72. The miners are whistling their way to work:

Barrick (ABX) $41.67 up 0.92%
Newmont (NEM) $54.31 up 0.18%
US Gold UXG) $3.23 up 2.86%
General Moly (Eureka Moly, LLC) (GMO) $3.53 unchanged
Thompson Creek (TC) $14.30 up 2.22%
Freeport-McMoRan (FCX) $85.83 down 0.19% (a bellwether mining stock spanning copper, gols & molybdenum)

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

ArcelorMittal (MT) $46.11 up 0.72% - global steel producer
POSCO (PKX) $121.11 down 0.81% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.83% to $1,445,557.98 (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

A Little Greenback with Your Greek Salad?

χωριάτικη σαλάτα
Morning Miners!

It is 6:01 AM and high-time for a little Raine's Red Label TGIF coffee! I think I've got it figured out. If you want the price of gold or copper to go up and the dollar to go down, just wait for a European leader to tell the world that the solvency of Greece is not a problem. It just takes words. The folks in the EU castle were a little light on words this week so markets shuddered as yields exploded on Greek bonds, the U.S. dollar enjoyed a 4-day rally and gold started to look like a good bomb shelter to escape the next financial crisis. Things got so out of hand that someone across the pond decided it might take two leaders and an EU President to generate enough words to spare us Armageddon.

Yesterday at a special bilateral summit French President Nicholas Sarkozy and Italian Prime Minister Silvio Berlusconi spoke at a joint news conference. As reported this morning in the Wall Street Journal the leaders said they, "...are ready to aid Greece...a failure to support the country would be bad for the euro and euro-zone economy." and to make us feel extra good Mr. Sarkozy added that, "[our] position on Greece has not changed", without providing details.


And to make the world feel even mo' better, EU President Herman Van Rompuy said in a French newspaper interview published this morning, "The EU is prepared to intervene to help Greece out of its financial crisis."

Boy that's tellin' em! In early trading the U.S. dollar fell against the euro like a rock in a mineshaft, gold hit a 3-month high and copper got back up in the giddy-up go saddle. Haven't we been to this rodeo before?

Let's break these rocks down to something we can haul. In early morning trading, Barrick Gold (ABX) market capitalization increased $414,000,000 on the "euro-words." By my count there were 41 reassuring words between two leaders and one president which works out to be $10 million per word for one mining company alone. Those are some pretty fancy words, pardner. Sure is easier money than busting rocks for gold.

I think it is time for the weekend. Make sure you pack some "euro-words" in case you run into trouble on the road to Ely.

Enough euro-talk, let's walk the walk:

4-WD is OFF - smoother markets return; the VIX or "fear index" is in the 16s, far below 25 which is good; metals & miners hang are happy with benchmark FCX comfortably above $74 (what's this?)

The YELLOW light is switched back on our fuel gauge with oil above $80

An ORANGE light is ON for possible adverse regulation/legislation: Miner's claim fee, Miner taxation, Cortez Hills & mercury emissions

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

NYMEX/COMEX: Oil is up $0.38 in early trading to $85.77 (May contract, most active); Gold is up $3.4 to $1156.3 (June contract, most active); Silver is up $0.188 to $18.315 (May contract); Copper is up $0.0155 to $3.6020 (May contract); Western Molybdenum Oxide sits at $17.45, LME moly 3-month & 15-month seller's contracts remain at $18.14

The DOW is up 41.79 points to 10968.86; the S&P 500 is up 3.80 to 1190.24. The miners are mixed:

Barrick (ABX) $41.37 up 1.03%
Newmont (NEM) $53.98 up 0.15%
US Gold UXG) $3.15 up 0.96%
General Moly (Eureka Moly, LLC) (GMO) $3.52 down 0.28%
Thompson Creek (TC) $14.12 down 0.07%
Freeport-McMoRan (FCX) $86.04 down 0.01% (a bellwether mining stock spanning copper, gols & molybdenum)

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

ArcelorMittal (MT) $45.67 down 0.26% - global steel producer
POSCO (PKX) $121.96 down 2.28% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.09% to $1,434,987.02 (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

Gold & the Dollar - Twin Sisters on a See-Saw or...?

Morning Miners!

It is 6:16 AM. Have a brimming cup of Thor's java and let's see if we can figure out some "confusement" on gold and the dollar. This is the second morning the ole Colonel has awoke to rising gold on the London spot market and a rising U.S. dollar. As I write, COMEX gold is falling back a bit but still very close to my March nominal price ($1148.8/oz versus $1150/oz) and the "Dixie" (U.S. Dollar index, .DXY) continues her 4-day rally. These two usually move in price like twin sisters on a see-saw but lately have been happily sitting in the same swing.

Let's return once more to our thoughts on March 2, "Gold really needs to sort out what its role will be in the coming months - a fellow traveler with the metals and oil or safe haven play for investors fleeing the commodity space" (The Colonel's Outlook for March). Nobody is fleeing the commodity space buckaroos but there are some signs that the recent run-up is feeling a little tired. Oil has thankfully pulled back from a dash to $90 and copper looks like she needs some R&R. Lawrence Williams reports a London-based metals consultancy, GFMS, opinion on copper today in Mineweb:

Copper price hiatus predicted then $8,000/tonne by year end - GFMS (Mineweb, 4/8/2010)

$8,000/tonne is $3.63/lb over her in the Colonies which is about where COMEX copper opened yesterday. If GFMS is correct, copper could move sideways or down with increased volatility before regaining her mojo.

I think we're still at an inflection point and the answer to our question about gold remains unclear. One thing for sure is the impact sovereign debt has had on both the U.S. dollar and gold. Checkout this chart of both for the last 6-months:


The debt crisis began with Dubai's problems in late November (Dubai World, A World Away?, 11/29/2009). By the first week of December gold was north of $1200 at its peak (blue line) and the dollar was at its bottom (red line); two sisters on the big risk/reward see-saw. With similar sovereign debt problems surfacing in Europe, the dollar strengthened and gold faltered. More recently the sisters jumped in the same swing as Greece's woes continue to dominate the headlines. In fact, gold and the dollar have both moved up roughly the same amount from where they were six-months ago (gold up 8.5%, Dixie up 6.0%). On average, this may suggest that the "safe haven" aspect of gold is trumping its black leather jacket role as a "risk trade" with commodities. It is tempting to breakdown the gold uptrend as a 2.5% commodity reflation and a 6% safe haven play. In truth, the answer is not clear.

Let's checkout 10-year Treasurys for another piece to this puzzle:


There has been great media hullabaloo that our national borrowing frenzy would cause the benchmark 10-year to collapse in price and jump in yield. Yesterday's 10-year auction was a big success; foreigners scooped up more of our notes like high grade in the mine pit. Our 10-year yields are dropping safely below 4% as Greek 2-year notes blow past a scary 8% yield this morning. Strong dollar, strong Treasurys; maybe we're not so bad off as everyone thinks! Will gold continue to move with the dollar or rest a bit on the bench with copper? Stay tuned.

Ending on a positive note, Western moly oxide ticked up to $17.45 and there is a buzz that demand for ferro-molydenum in Europe may further support prices. Here is a one-month chart of Miss Moly and Uncle Nickel:


Enough talk, let's walk the walk:

4-WD is ON - unsettled markets may persist; the VIX or "fear index" is in the 17s but below 25 which is good; metals & miners hang in there with benchmark FCX comfortably above $74 (what's this?)

The YELLOW light is switched back on our fuel gauge with oil above $80

An ORANGE light is ON for possible adverse regulation/legislation: Miner's claim fee, Miner taxation, Cortez Hills & mercury emissions

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

NYMEX/COMEX: Oil is down $0.94 in early trading to $84.94 (May contract, most active); Gold is down $0.6 to $1148.8 (June contract, most active); Silver is down $0.209 to $17.990 (May contract); Copper is down $0.0380 to $3.5595 (May contract); Western Molybdenum Oxide ticks up to $17.45, LME moly 3-month & 15-month seller's contracts remain at $18.14

The DOW is down 20.41 points to 10877.11; the S&P 500 is down 2.27 to 1180.18. The miners are mixed:

Barrick (ABX) $40.89 up 0.47%
Newmont (NEM) $53.98 down 0.20%
US Gold UXG) $3.10 down 0.64%
General Moly (Eureka Moly, LLC) (GMO) $3.58 down 0.56%
Thompson Creek (TC) $14.04 down 0.32%
Freeport-McMoRan (FCX) $84.99 down 1.09% (a bellwether mining stock spanning copper, gols & molybdenum)

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

ArcelorMittal (MT) $45.24 down 1.61% - global steel producer
POSCO (PKX) $123.38 up 0.64% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.21% to $1,428,328.88 (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

Gold & Silver Pop, US Gold Breaks $3

*** BREAKING NEWS *** Today's 10-year Treasury auction went much better than expected earning an "A" grade on CNBC Business News. The fears that investors, especially foreigners, would shy from this auction proved unfounded. The yield settled at 3.9%, well below the 4% level seen last week. The participation was very good with a bid-to-cover ratio of 3.72 compared to an average of 2.87. Indirect bids (a measure of foreign participation) was a healthy 43%. This is a positive outcome with regard to the current Federal Reserve "low-interest rate" policy.

Morning Miners!

It is 5:56 AM. Let the ole Colonel pour you a cup. Pardner, any morning that starts with a pop in London spot gold and a rising dollar is a good day. Strong gold and dollar, strong America. Although gold and the greenback usually drive in opposing lanes, it looks like both are traveling in the north bound today. Hey, look at silver...be back in a minute.



OK, the domestic markets are open now and here's another pleasant surprise. US Gold (UXG), one of our favorite miners, just broke $3.00 at the open on news about positive core drilling results at their El Gallo Project in Sinaloa State, Mexico. Now that's fine and dandy but I'm still waiting for them to reopen the old Atlas mine...someday. With domestic gold production down 10% last year, the ole Colonel is betting someone is going to kick up some new dirt in an old find along the Eureka-Carlin trend...someday. US Gold is sitting on those claims even though I understand they don't have the old mill. Apparently there are others that think the little guys are well situated for a good year. Checkout this Mineweb article:

Exploration spending set to jump in 2010, led by juniors - MEG (Mineweb, 4/6/2010)

The gist of this article is that the juniors, beaten down by the recession, are now in good position for a rebound in 2010 with new inflows of equity financing. My money is on US Gold, Yee-ha!

Now what about those moves in gold and silver? On Monday, I set $1150/oz as a nominal price for the yeller stuff for this month ($19 Silver? The Colonel's Metal & Oil Roundup) which puts us back on the 1-year trend line. The Report has been saying for some time that silver is overdue for a pop to catch up with her lustrous cousin. COMEX silver is trading at $18.100/oz this morning still undervalued with respect to gold. This was my Monday call for a $1150/oz nominal:

The fair value of silver for April is $18.295 in a range of $17.146 to $19.444

Another way to look at the relation of gold and silver is the ratio of their prices. Here's an article on Mineweb to bring you up to speed on this important metric:

The Gold:Silver Ratio: Is gold too high, or perhaps silver too low? (Mineweb, 4/06/2010)

The so-called AU:AG ratio sits around 63 this morning after a high during the recession of 84.4. The author, Thomas Kavanagh, makes the point that historically this ratio tends to decline after recessions. According to Kavanagh, there is still some way to go in the downside before the rate hits the 50 level of 2007. This means either gold is headed south or silver is headed north. With the sovereign interest in gold as hedge against fiat currencies, my bet is that gold moves sideways or up and silver takes a nice bounce. Stay tuned. Here are some gold:silver ratio charts for 3-years and 6-months:



By the by, I enjoy sharing my thoughts with you on where I see the junior miners, gold and silver heading. Please don't take this as investment advice; the ole Colonel may be dead wrong. Do your own research and place your own bets buckaroos, precious metals & juniors miners make a mighty tricky casino. Good luck.

Enough gambling talk, let's walk the walk:

4-WD is ON - The benchmark 10-year T-Note is too close to 4% for my comfort and there remains an air of caution in the winds, rougher markets possible [revised 12:37 PM PDT, see above BREAKING NEWS - unsettled markets may persist, however, on mixed economic news]; the VIX or "fear index" is below 25 which is good; metals & miners remain solid with benchmark FCX comfortably above $74 (what's this?)

The YELLOW light is switched back on our fuel gauge with oil above $80

An ORANGE light is ON for possible adverse regulation/legislation: Miner's claim fee, Miner taxation, Cortez Hills & mercury emissions

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

NYMEX/COMEX: Oil is down $0.20 in early trading to $86.64 (May contract, most active); Gold is up $7.1 to $1143.4 (June contract, most active); Silver is up $0.169 to $18.100 (May contract); Copper is up $0.0035 to $3.6205 (May contract); Western Molybdenum Oxide sits at $17.12, LME moly 3-month & 15-month seller's contracts remain at $18.14

The DOW is down 48.82 points to 10921.17; the S&P 500 is down 4.51 to 1184.87. The miners are mixed:

Barrick (ABX) $40.11 up 1.75%
Newmont (NEM) $53.66 up 0.73%
US Gold UXG) $3.00 up 1.35%
General Moly (Eureka Moly, LLC) (GMO) $3.60 down 2.96%
Thompson Creek (TC) $14.24 down 1.25%
Freeport-McMoRan (FCX) $86.58 down 0.86% (a bellwether mining stock spanning copper, gols & molybdenum)

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

ArcelorMittal (MT) $46.49 down 0.98% - global steel producer
POSCO (PKX) $123.50 down 0.72% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.01% to $1,427,776.56 (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

The Colonel's Miners Roundup for April

Morning Miners!

It is 5:59 AM. Have a cup and let's see how our favorite miners are doing for April. Before we start, some words of caution. Yesterday the broader markets hit 18-month highs but the 10-year Treasury broke 4%. On 3/26 the Report said, "Some believe a 4% 10-year Treasury is the trip point for when bond markets blunt the rally in stock markets" (Debt Concerns Move From Europe to U.S.).

The Colonel has put us in 4-WD as a precaution for rougher roads ahead but the rise in interest rates could also be a good sign. Rising markets, rising Treasury yields and a strengthening dollar can all live happily together if folks really believe we're starting to roll in the U.S., especially when our recovery appears stronger than others in the developed world.

The flip-side is a rise in yields due to investors shying away from upcoming Treasury auctions. This is a "supply-side" problem when the massive issuance of new debt doesn't attract new buyers, especially foreign buyers, as it has in the past. When supply then exceeds demand, prices fall and yields rise in the bond world. At 4% we are at an inflection point; too early to tell which way we're headed but there is a key 10-year auction tomorrow.

Here are 3-month charts of the U.S. dollar index (.DXY or "Dixie") and 10-year Treasury yields:



Nobody has told the miners that things aren't turning up. As we mentioned yesterday, gold has got some giddy-up, copper has been on fire and molybdenum prices are holding their recent gains. The miners have responded with a bounce in their stride. Dennis Gartman, the "Commodity King", wryly reminds us how to pick winners, "Look for charts that go from the lower left to the upper right." Here is a one-year chart of General Moly's stock performance:


The solid line is a 200-day average which is trending from lower left to upper right. The expectation of full funding for the Mt. Hope Project caused a March 5th jump in share price, a leap above the 200-day line that deserves a Gartman Yee-ha! Let's look at our two benchmark miners; Freeport-McMoRan (FCX) as an overall bellwether and Thompson Creek (TC) as a major moly producer:




Looks like up-up and away to me. Here is how all three fared from the more gloomy early days of February (intraday low on 2/5/10 compared to yesterday's close, 4/5/10):

General Moly (GMO) 2/5 $2.11, 4/5 $3.49 up 65.4%
Freeport-McMoRan (FCX) 2/5 $66.03, 4/5 $87.33 up 32.2%
Thompson Creek (TC) 2/5 $11.06, 4/5 $14.17 up 28.1%

This is a remarkable surge in their collective performance from troubling signs earlier this year (Freeport "Broken", Miners in Correction). Things may be looking up pardner.

How about our gold miners? Here are charts of benchmark Barrick together with Newmont and U.S. Gold:




Looks like the gold miners are whistling while they work too. Performance compared to their 200-day average is not as dramatic as the first group (with the possible exception of Newmont) but all are still very respectable. Here is a comparison from the February lows to the present for the golds:

Barrick (ABX) 2/5 $33.65, 4/5 $39.65 up 17.8%
Newmont (NEM) 2/5 $43.11, 4/5 $53.81 up 24.8%
U.S. Gold (UXG) 2/5 $2.02, 4/5 $2.90 up 43.6%

If we can keep this whole herd moving from the "lower left to the upper right" 2010 could be a great year for both metals and miners. Stay tuned.

Enough talk, let's walk the walk:

4-WD is ON - The benchmark 10-year T-Note broke 4% yesterday and there is an air of caution in the winds, rougher markets possible; the VIX or "fear index" is below 25 which is good; metals & miners remain solid with benchmark FCX comfortably above $74 (what's this?)

The YELLOW light is switched back on our fuel gauge with oil above $80

An ORANGE light is ON for possible adverse regulation/legislation: Miner's claim fee, Miner taxation, Cortez Hills & mercury emissions

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

NYMEX/COMEX: Oil is up $0.26 in early trading to $86.88 (May contract, most active); Gold is up $2.1 to $1135.9 (June contract, most active); Silver is down $0.038 to $18.080(May contract); Copper is down $0.0030 to $3.6285 (May contract); Western Molybdenum Oxide remains at $17.12

The DOW is down 6.73 points to 10966.82; the S&P 500 is up 0.58 to 1188.02. The miners are mixed:

Barrick (ABX) $39.63 down 0.05%
Newmont (NEM) $53.96 up 0.58%
US Gold UXG) $2.89 down 0.34%
General Moly (Eureka Moly, LLC) (GMO) $3.47 down 0.57%
Thompson Creek (TC) $14.40 down 0.41%
Freeport-McMoRan (FCX) $87.83 up 0.57% (a bellwether mining stock spanning copper, gols & molybdenum)

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

ArcelorMittal (MT) $46.79 up 1.17% - global steel producer
POSCO (PKX) $124.84 up 0.01% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.11% to $1,417,837.44 (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

$19 Silver for April? The Colonel's Metal & Oil Roundup

Morning Miners!

It is 6:03 AM. Grab a cup of joe and let's see what the Easter bunny left in our basket for April. I have a feeling that gold could get back its giddy-up go after several lack luster months. There is a flood of new articles on the yeller stuff and that's a bullish sign, pardner. Here's a Mineweb sample from South Africa, China and U.K. for the past several days:

The current consolidation in gold offers a buying opportunity (Mineweb, Johannesburg, 4/5/2010)

China's central bank raises spectre of world wide asset bubbles and inflation (Mineweb, Beijing - REUTERS, 4/2/2010)

Gold to the masses - China's top bank partners with World Gold Council (Mineweb, London, Lawrence Williams , 4/1/2010)

There are several common themes in these headlines: down-the-road inflation remains a concern given the monetary and fiscal policies of developed nations, big players like China and India have set a "sovereign" floor to gold prices, the U.S. dollar rally has its limits given our deficit/debt predicament.

I chose a nominal of $1120/oz for February and March and the markets closed pretty near that price for both months. The ole Colonel believes gold should return to (or exceed) its 1-yr tend line for April which sits right around $1150/oz.

Here are my updated commodity models for the month of April for silver, copper and oil assuming a nominal price for gold of $1150/oz:

The fair value of silver is $18.295 in a range of $17.146 to $19.444

The fair value of copper is $3.5287 in a range of $3.2980 to $3.7594

The fair value of oil is $83.239 in a range of $78.674 to $87.884

COMEX gold this morning is trading at $1129.5

COMEX silver is $17.995, a level undervalued with respect to a $1150/oz gold nominal. Interestingly silver has regained her "beta" in a big way lately so an uptrend in gold should result in a larger bounce for silver.

Here's a simple way to think of a metal's "beta" with respect to a reference metal such as gold. If beta = 1.0, a 1% move in gold should produce (on average) a 1% move in silver. For beta = 2.0, a 1% move in gold gives a 2% change in silver. Got it, pardner? If beta is greater than 1.0, we say silver is "high beta" and ready trot; if less than 1.0, silver is "low-beta" and headed back to the barn.

On February 17th silver's beta with respect to gold (see note 1) was a dismal 0.46. Silver beta peaked at 1.72 on 3/19 but is still a healthy 1.53. Last November we asked the question, Why is Silver So Cheap?. At that time silver was around $17.50/oz with a beta of 1.55, not greatly different from today's numbers. Silver then bounced to break $19 in early December but then the Dubai debt crisis cratered precious metals. This time we could get to $19 fairly easily without breaking my upper range of $19.44/oz. This, of course, assumes gold is headed higher absent any new bugaboos on sovereign debt or...?

Copper broke the key $3.50 level recently and could be headed for my $3.76 upper range trading at $3.6140 this morning. A continued reduction in the London Metal Exchange (LME) inventories together with improving opinions on global growth is a positive sign for copper price. The present beta for copper is a healthy 2.02.

Oil continues to have less resistance to going up than down lately. At $85.72 this morning, oil already sits comfortably above "fair value" for $1150/oz gold. The present oil beta is also looking good at 1.52 (well, good for oil speculators - not so hot for miners and working folks). $90 oil may or may not be in the cards for April but don't be surprised to see a return to this scary level in the coming months.

Molybdenum prices have stabilized in a tight range which is a positive sign for both the metal and the new London Metal Exchange futures market. Here is a wrap up of the latest moly price action:

Western Moly Oxide (FeMo65) $17.11/lb (the price reported by Infomine and tracked by Base Metals on the General Moly Website)

Moly Oxide, Europe (Mo Drummed Molydbic Oxide EU) $17.50/lb (the price reported in the Metals Bulletin)

LME Futures Contracts

3-Month (Buyer) $38,000/metric ton $17.24/lb
3-Month (Seller)$40,000/metric ton $18.14/lb
1
15-Month (Buyer) $38,000/metric ton $17.24/lb
15-Month (Seller)$40,000/metric ton $18.14/lb

Here is the price action of the LME 3-month contract (seller) from the February launch:



Enough talk, let's walk the walk:

4-WD is OFF - the VIX or "fear index" is below 25, smoother broader markets are still in the cards; metals & miners are good with FCX comfortably above $74; the benchmark 10-year T-Note remains below 4% (what's this?)

The YELLOW light is switched back on our fuel gauge with oil above $80

An ORANGE light is ON for possible adverse regulation/legislation: Miner's claim fee, Miner taxation, Cortez Hills & mercury emissions

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

NYMEX/COMEX: Oil is up $0.85 in early trading to $85.72 (May contract, most active); Gold is up $3.4 to $1129.5 (June contract, most active); Silver is up $0.105 to $17.995 (May contract); Copper is up $0.0300 to $3.6140 (May contract); Western Molybdenum Oxide remains at $17.11

The DOW is up 48.97 points to 10976.04; the S&P 500 is up 8.61 to 1186.71. The miners are happy campers:

Barrick (ABX) $39.63 up 0.45%
Newmont (NEM) $53.75 up 1.59%
US Gold UXG) $2.92 up 3.18%
General Moly (Eureka Moly, LLC) (GMO) $3.44 up 1.78%
Thompson Creek (TC) $14.62 up 3.18%
Freeport-McMoRan (FCX) $87.56 up 1.49% (a bellwether mining stock spanning copper, gols & molybdenum)

The Steels are happy too, (a "tell" for General Moly & Thompson Creek):

ArcelorMittal (MT) $46.25 up 1.74% - global steel producer
POSCO (PKX) $124.73 up 4.14% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 1.88% to $1,415,462.83 (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

Note 1: The Colonel's "metal-versus-gold" beta is calculated from the most recent 3-month slice of COMEX futures data (most active contract) and normalized to the 200-day moving price average for both the metal and gold.

Headline photograph by Mariana Titus

DOW 12,901 by the End of the World?

Morning Miners!

It is 6:12 AM. Grab a cup of Thor's java and let's talk about markets and the End of the World...

April Fools, buckaroos!


No, the Colonel isn't packing his gear and heading for high ground. I haven't had a senior moment or a recent head injury but there are some people that believe the world will indeed come to an end December 21, 2012. Why? These folks point to the Maya calendar which they believe runs out of steam on the Winter Solstice occurring some 33 months from now.

I have much respect for the ancient Maya civilization and their wonderful system of calendars. You can check them out on Wikipedia:

Maya Calendar

Their so-called "long calendar" looked way, way down the road and its system of counting was used to date special monuments:

"The Maya name for a day was k'in. Twenty of these k'ins are known as a winal or uinal. Eighteen winals make one tun. Twenty tuns are known as a k'atun. Twenty k'atuns make a b'ak'tun." (Wiki)

It turns out that the fateful December 21, 2012 is simply the first day of the 14th b'ak'tun. That's not too scary is it? Take care, pardner, there will no doubt be a media storm on this one that will make Y2K look like a skinny dip in the hot springs.

Since this is a market report, I thought it might be fun to see where the popular DOW Jones Industrial Average might be by the End of the World based on a little history. The average annual return for the DOW over the last century or so is often quoted by financial advisers to be somewhere between 7-8%. From the period of 1901 to 1999, the average is 7.4%. If we project the DOW with this return from its closing price last Winter Solstice to Doomsday 2012, it works out to be 12,901. Ouch. The last time we closed above that level was 5/19/2008 and by then we'd already fallen from the DOW's all time closing high of 14,164.53 set on 10/9/2007.

What's your point with all this doomsdayin' Colonel? I think it is well to remember the devastating impact the "Great Recession" had on markets. I also believe in the market's incredible resilience. How about an optimistic prediction to lighten things up, pardner?

The DOW will break 12,901 before the End of the World on 12/21/2012


That's a good'un for the Colonel's Beer Derby (what's this? lower right column of this blog). I bet I don't need to wait 33 months to collect on this bet - Yee-ha!

Have a great k'in and an even better winal. See you bright and early Monday, have a relaxing Easter break!


Looks like a good'un for metals, miners & steels today - let's walk the walk:

4-WD is OFF - the VIX or "fear index" is below 25, smoother broader markets are still in the cards; metals & miners are good with FCX comfortably above $74; the benchmark 10-year T-Note remains below 4% (what's this?)

The YELLOW light is switched back on our fuel gauge with oil above $80

An ORANGE light is ON for possible adverse regulation/legislation: Miner's claim fee, Miner taxation, Cortez Hills & mercury emissions

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

NYMEX/COMEX: Oil is up $0.91 in early trading to $84.67 (May contract, most active); Gold is up $8.9 to $1123.4 (June contract, most active); Silver is up $0.414 to $17.940 (May contract); Copper is up $0.0425 to $3.5960 (May contract); Western Molybdenum Oxide remains at $17.11

The DOW is up 61.82 points to 10918.45; the S&P 500 is up 7.99 to 1177.42. The miners aren't worried about Doomsday:

Barrick (ABX) $39.13 up 2.06%
Newmont (NEM) $52.49 up 3.06%
US Gold UXG) $2.78 up 2.96%
General Moly (Eureka Moly, LLC) (GMO) $3.36 up 1.20%
Thompson Creek (TC) $14.02 up 3.62%
Freeport-McMoRan (FCX) $85.46 up 2.30% (a bellwether mining stock spanning copper, gols & molybdenum)

The Steels are happy too, (a "tell" for General Moly & Thompson Creek):

ArcelorMittal (MT) $45.44 up 3.48% - global steel producer
POSCO (PKX) $119.15 up 1.83% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 2.29% to $1,381,230.98 (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

Mayan Space Image