How Well is Eureka County Doing? Ask the Grubstake!

*** BREAKING NEWS *** COMEX gold hit a new high of $1292.4/oz (December contract, most active) at 15:45:00 EDT

Morning Miners!

It is 5:43 AM. Have a cup of Tuesday java with Ruby and me. She is some proud this morning, pardner. A custom shop in Carson is going to turn her Pete 379 into the beautiful ride she deserves. Checkout this computer graphic they created of what the the new Ruby Tuesday will become (inset photo)...ohh-weee! She'll need to drive to California to get an ocean sunset like that. It should be roaring down the Highway 50 by the end of this month, give her a toot. Oh, by the way the Great Recession is over...

The Great Recession is Over

The National Bureau of Economic Research (NBER) has determined that the recession that began in December, 2007, ended last year in the month of June, 2009. The so-called Great Recession marked the longest slump since the Great Depression, destroyed 7.3 million jobs, cut 4.1% from economic output and cost Americans 21% of their net worth. For many folks this official determination offers little solace, especially if you're still out of work.

The Eureka Miner's Grubstake Portfolio


Mining helped buffer Eureka County from some of the harshest effects of this recession. Coincidentally, this Report created the Eureka Miner's Million Dollar Grubstake Portfolio the month before the official end of the recession. At that time we gave the readers one million dollars to invest in twelve stocks that directly or indirectly impact our local economy. I thought it would be interesting to compare its performance with the broader market to gauge how well we're doing in recovery. Here's the present composition (see note 1):

Stocks Related Directly to Eureka County Mining:

Barrick (ABX) - Senior benchmark gold miner
Newmont (NEM) - Senior gold miner
US Gold (UXG) - Junior gold miner
General Moly (Eureka Moly, LLC) (GMO) - Junior molybdenum miner
ArcelorMittal (MT) - International steel producer, investor in General Moly
POSCO (PKX) - South Korean integrated steel producer, investor in the Mt. Hope Project (Eureka Moly, LLC)

Stocks Related to Domestic & Global Recovery:

Gold exchange traded fund (ETF) (GLD) - Gold investment fund
Silver ETF (SLV) - Silver investment fund
Caterpillar (CAT) - Global supplier of mining equipment
Freeport-McMoRan (FCX) - Bellwether miner spanning copper, gold & molybdenum
Thompson Creek (TC) - Benchmark molybdenum miner & producer
EOG Resources (EOG) - Domestic oil & gas producer

The first market day for the Grubstake was May 11, 2009. On that day the S&P 500 closed at 909.24 and gold was trading at $913/oz. The broader markets have just opened, let's see how we're doing by comparison:

S&P 500 today, 10:15 a.m. EDT 1141.30 up 25.5%

COMEX gold (December contract) today, $1278.9/oz up 40.1%

Eureka Miner's Grubstake Portfolio today, $1,474,914.84 up 47.5%

I'd say we're doing pretty good buckaroos!

How do the individual stocks stack up? In order of highest return:

1 -US Gold (UXG) up 98.1%
2 - Caterpillar (CAT) up 89.2%
3 - General Moly (Eureka Moly, LLC) (GMO) up 73.9%
4 - Freeport-McMoRan (FCX) up 59.0%
5 - Silver ETF (SLV) up 46.4%
6 - Newmont (NEM) up 43.2%
7 - Gold ETF (GLD) up 38.5%
8 - Barrick (ABX) up 33.9%
9 - POSCO (PKX) up 23.8%
10 - ArcelorMittal (MT) up 16.5%
11 - EOG Resources (EOG) up 14.4%
12 - Thompson Creek (TC) down 9.8%

In fairness Thompson Creek and US Gold were swapped in early this year (see note 1). If we compare their performance back to 5/11/2009, the overall returns would be:

US Gold (UXG) up 152.1%
Thompson Creek (TC) up 42.5%

This keeps US Gold at the top of the stack and Thompson Creek would just edge out the gold ETF for the number seven spot.

All in all, not too bad if the Grubstake performance is any indication of how well the mining business is doing in our county. If you must have a recession, it's good to live in Eureka, Nevada!

Daily Market Roundup

Enough talk, let's walk the walk:

Eureka Outlook Dashboard

The Eureka Miner's Index(EMI) is above-par at 243.85, up from yesterday's 242.25 and a long way from the 6/7/10 low of 50.7. The EMI high for the year was 259.35 on 4/12/2010 - the same day that COMEX copper peaked. Today's number is just below a lower trend level of 244.02 but comfortably above support at 186.51. Remember an EMI greater than 100 is good times (or at least better times) for the metals & miners relevant to Eureka County.

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 low-$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 $0.11 in early trading at $76.08 (November contract, most active); Gold is down $1.9 to $1278.9 (December contract, most active); Silver is down $0.083 to $20.720 (December contract, most active); Copper is up $0.0025 to $3.5070 (December contract, most active)

Western Molybdenum Oxide is $15.50; European Molybdenum Oxide is $15.65; LME moly 3-month seller's contract is $16.33, LME cash seller is $16.01

Stock Market Morning Update

The DOW is down 6.17 points to 10747.45; the S&P 500 is down 1.41 to 1141.30. Miners are down except for Thompson Creek:

Barrick (ABX) $45.59 down 1.85%
Newmont (NEM) $62.67 down 0.95%
US Gold (UXG) $5.27 down 2.23%
General Moly (Eureka Moly, LLC) (GMO) $3.20 down 3.03%
Thompson Creek (TC) $11.03 up 0.73%
Freeport-McMoRan (FCX) $82.37 down 1.18% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $33.43 up 1.18% - global steel producer
POSCO (PKX) $110.19 down 0.74% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.87% to $1,474,914.84 (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 - There were two changes to the Eureka Miner Grubstake for 2010:
Thompson Creek Metals (TC) replaced Nucor (NUE) 01-05-2010 and
US Gold (UXG) replaces ConocoPhilips (COP) 01-12-2010.

Headline photograph by Mariana Titus

Gold & Copper New Highs - Metals & Miners Weekly Roundup

*** BREAKING NEWS *** COMEX gold bested its new high early this morning with $1285.2/oz at 11:00 a.m. ET (December contract, most active)

Morning Miners!

It is 5:46 AM. Have a cup of Wedding-Bell-Monday coffee and let's pause to celebrate - Miss Copper & Gold finally got hitched. Both of this Report's favorite metals hit new highs in the wee hours of electronic trading on the COMEX:

COMEX Gold new high $1284.9/oz 02:45:00 ET (12/10 contract, most active)

COMEX Copper 5-Month high $3.5560/oz 02:45:00 ET (12/10 contract, most active)

If you missed some episodes of this soap opera, last Monday's roundup is a good place to start, Copper and Gold Head for Vegas. Copper and gold have had an on-again-off-again relation for many months, now they seem very happy together. The ole Colonel believes a sustained period of good times for the metal & mining sector can occur only when copper and gold prices move together in the up-up-and-away direction.

Copper price is a reliable indicator of global recovery due to its broad industrial uses including new construction. When the recovery is in doubt (e.g., recent fears of a global double-dip recession), gold prices rise as investors rush to a safe haven investment and copper prices fall as they leave riskier assets such as commodities. In good times, copper and gold correlate positively. There is a technical discussion in the roundup below on how the copper/gold correlation has improved dramatically in the last few weeks - a very bullish sign.

Both copper and gold are benefiting from a fall in the U.S. dollar and chatter of further quantitative easing in the United States. Copper is also in tight supply with London Metal Exchange (LME) inventories continuing their decline. The Federal Reserve announces its latest policy decision tomorrow which may signal the need to inject more stimulus into the domestic economy. Here is a good summary form London Reuters this morning:

Copper climbs to fresh five month highs (Michael Taylor, London Reuters, 9/20/2010)

Worldwide oil demand is also an important gauge for how we're doing in the Big Picture. As much as we do not like higher prices at the gas pump, rising crude oil prices are another indication that the global recovery is on tract. The jury is still out on oil's current relation to gold; like copper it has been a odds with the precious metal since the stock markets fell from highs set in April of this year. The short-term correlations with gold (1-month) are positive and promising. The near-term (3-month) are still in the red - a mixed signal from the slippery stuff.

The best environment for the metals & mining sector is positive correlations of copper & gold and oil & gold with oil prices not rising too high (this Report's threshold is $80/bbl). This morning NYMEX oil fell to $74.82/bbl as copper & gold set new highs. Some upward movement of the former would be welcome.

All in all we've had a pretty decent September so far with the Eureka Miner's Index (EMI) coming very close to its April 12th high which coincided with the peak in copper prices for the year. The S&P 500 is also nearing its level for that day (1,129.7 this morning versus 1,199.2 on 4/12) although it has some way to go to hit the high for the year of 1,219.8 on April 26th.

Let's look at how Miss Moly is doing and then we'll talk more about our metals & miners...

Weekly Molybdenum Roundup



Although historically molybdenum has experienced very high price volatility, it has been steady as a rock lately (to excuse the pun) when compared to other metals. The last time period we witnessed such low variability in prices was mid-April to late May. Moly prices remain in a stable range for the year with Western moly oxide at $15.50/lb sitting a bit below European moly at $15.65/lb. The LME 3-month seller contracts is still $16.33/lb ($36,000/metric ton). The Report's mid-range price target for 2010 moly prices is $15.71/lb.

Western Moly Oxide (FeMo65) $15.50/lb (the price tracked by Base Metals on the General Moly Website)

Moly Oxide, Europe (Mo Drummed Molydbic Oxide EU) $16.33/lb (the price reported in the Metals Bulletin)

LME Futures Contracts

LME cash seller is at $35,300/metric ton $16.01/lb

3-Month (Buyer) $34,000/metric ton $15.42/lb
3-Month (Seller) $36,000/metric ton $16.33/lb

15-Month (Buyer) $34,000/metric ton $15.42/lb
15-Month (Seller)$36,000/metric ton $16.33/lb

Here is a chart of the LME 3-month contract (seller) from the February launch to the present:



Eureka Miner's Index (EMI)

The Eureka Miner's Index (EMI) gives us the market temperature for the sectors that have the greatest impact on mining in Eureka County. Below is a chart of the EMI at Friday's close. The magenta line is the EMI with a low interest cap of 3% on 10-year Treasurys (LIRC) and adjustments for gold and silver prices (i.e., Au:Ag ratio); the gray line is the EMI without these corrections. A larger more readable chart appears at the bottom of this blog page.


The Eureka Miner's Index(EMI) is above-par at 242.25, up from Friday's close at 240.42 and a long way from the 6/7/10 low of 50.7. The EMI high for the year was 259.35 on 4/12/2010 - the same day that COMEX copper peaked. Today's number is above a lower trend level of 235.81 and comfortably above support at 186.51. Remember an EMI greater than 100 is good times (or at least better times) for the metals & miners relevant to Eureka County.

Oil & Copper Correlations with Gold

Oil & copper correlations with gold give us insight into what may happen next for the metals & miners. One way to visualize these correlations with gold over time is to plot the "near-term" 3-month versus the "short-term" 1-month correlations (aka "rho") as shown below in these two graphs (ref: China to the Rescue?):



In the case of copper versus gold, we start out on 4/27/10 with both positively correlated (i.e. in the "+,+" or "green" quadrant). This is the day after the 2010 S&P 500 high and shortly after COMEX copper high of $3.5840/lb (4/12/10). Unfortunately we soon descended into negative territory (i.e. in the "-,-" or "red" quadrant) as the financial crisis in Europe worsened (blue line). Presently we are back in the "+/+" or "green" quadrant - the magenta line and arrow show the most recent data and direction. To sustain optimism for copper prices we need to stay in the "+,+" green pasture.

Oil versus gold has a similar trajectory starting 5/4/2010 moving from the "+/+" to "-/-" quadrant. Oil needs a breakout to the positive to end the bearish cycle of the past few months but has shown good improvement from last week's short-term (1-month) correlation. The graphs above are up to Friday's close.

Here are the latest correlations given this morning's NYMEX/COMEX trading:

Oil/Au correlation +0.4197 (1-month) -0.4341 (3-month)
Cu/Au correlation +0.7650 (1-month) +0.4437 (3-month)
Cu/Oil correlation +0.6439 (1-month) +0.1002 (3-month)

Last week's numbers:

Oil/Au correlation -0.1125 (1-month) -0.3865 (3-month)
Cu/Au correlation +0.7737 (1-month) +0.1341 (3-month)
Cu/Oil correlation +0.3271 (1-month) +0.0963 (3-month)

Daily Market Roundup

Enough talk, let's walk the walk:

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 low-$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 $0.10 in early trading at $74.82 (November contract, most active); Gold is up $3.6 to $1281.1 (December contract, most active); Silver is up $0.004 to $20.820 (December contract, most active); Copper is up $0.0075 to $3.5145 (December contract, most active)

Western Molybdenum Oxide is $15.50; European Molybdenum Oxide is $15.65; LME moly 3-month seller's contract is $16.33, LME cash seller is $16.01

Stock Market Morning Update

The DOW is up 7.27 points to 10602.10; the S&P 500 is up 1.83 to 1126.49. Miners are mixed:

Barrick (ABX) $46.26 up 0.59%
Newmont (NEM) $62.79 down 0.35%
US Gold (UXG) $5.22 down 0.57%
General Moly (Eureka Moly, LLC) (GMO) $3.09 down 0.96%
Thompson Creek (TC) $10.57 down 0.09%
Freeport-McMoRan (FCX) $82.18 up 0.56% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $32.38 down 1.37% - global steel producer
POSCO (PKX) $109.32 down 0.62% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.31% to $1,459,487.17 (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

Silver Breaks $21 - A Little (More) Advice from Mark Twain

"There are two times in a man's life when he should not speculate: when he can't afford it, and when he can." Mark Twain


Morning Miners!

It is 5:36 AM, clean cups are on the hook and the coffee is hot. The ole Colonel is going to chat a bit with the old timers this morning but the young folks are welcome to stay in the break room, there might be something here for everyone. I was sitting on my favorite bench in front of Raine's Market the other day with my faithful sidekick, Loquita. By the by, if you're having a difficult day go sit there a spell, I swear that bench has magical qualities for soothing the soul. I must ask Scott about its history, maybe it has been there since the old Kitchen Market days.

Actually, it is 5:41 AM. I wrote the above paragraph over 15 months ago (A Little Advice from Mark Twain, 6/4/2009) and thought it might be fitting to do a little followup. If Mark Twain were alive today he might enjoy the Raine's bench as much as I do. Scott Raine's mother wasn't too sure of its history when I asked her, so Samuel Langhorne Clemens may have sat there once on a Eureka visit from his beloved Virginia City. See there, that's how to start a rumor! (Of course, to make this tall tale work, the Raine's bench would have been in front of a prospector's tent in those days and our American author/journalist wouldn't have known he was in Eureka because it wasn't a town yet).

Silver was big news in Nevada then and it is a big story again. In overnight electronic trading COMEX silver pegged $21.02/oz (3:15 a.m. ET, December contract, most active). Less than a month ago this Report threw up a flag on silver (Good Time to Buy Silver...?, 8/23/2010) when it was trading in $17/oz territory.

What's going on with Silver?

Federal civilian pensions began in 1920. That was a decade after Mr. Clemens passed but he would know what pensions were since they have been around in one form or another since the Revolutionary War. Given today's headline quote from the old sage, I'm sure he would be shocked to learn some private pension funds are now looking at mining companies. With fewer places to find returns and the uncertainty of global economics, investors have been piling into gold for sometime. Now silver, copper, other metals and the mining companies that produce them are experiencing a surge of investor interest (... Pensions Head for the Mineshaft, 9/16/2010)

Silver futures this morning hit their highest level since 1980, the year the Hunt brothers tried to corner the market driving silver prices to $48.70/oz. Individual investors are snapping up new Silver Eagle and antique coins and hedge funds have been plowing money into the metal since midyear. Hedge funds binged on silver before the Lehman Brothers bankruptcy and it was the first treasure thrown overboard when things went south. I can remember silver in the $9/oz basement after several big liquidations. Be careful investing in this white metal buckaroos.


Dennis Gartman, the "Commodity King", made a funny comment on CNBC Business News yesterday about the latest rally, "I'm getting too old to invest in silver!" The ole Colonel found this particularly amusing since I'm older than Gartman. I'm holding on to my silver for now but I've got the Model '73 cocked and one eye looking out the window. If Mr. Clemens were here I'm sure he'd give the ole Colonel covering fire (see note 1).


The Return of Your Money

In the June, 2009 blog, I talked about another Mark Twain quote:

"I am reluctant to give anyone advice on what they should do with their money but am not shy about telling you what I'm doing. I'll leave the advice part to Mark Twain who once remarked, 'I am more concerned with the return of my money than the return on my money.' This is such a sage quote that it was repeated by Will Rogers during the Great Depression and is sometimes attributed (incorrectly) to the famous British economist, John Maynard Keynes. Keynes is important to my story because he had the radical idea that governments should spend money they don't have in hard times to save the ship."

Gee, my story hasn't changed much at all - our government is still spending the money they don't have to kick start this economy! At that time, I suggested to old timers like myself that they shouldn't fret too much about a lousy 2% return on a 1-year bank CD. Inflation was near zero then and a 2% "real return" (i.e. interest less inflation rate) was just fine - at least you'd get back all your money back plus a little. The government just released the new core inflation number for August and it is a meager 0.9%. Unfortunately, you now have to buy a 5-year CD to capture a 2% annual return (2.34% national average in a 52-week Lo/Hi range of 2.32% to 2.71% for a 5-year CD). A quick check of CD rates this morning shows a 1-year CD today can be found anywhere from roughly 0.75% to 1.5%. Looking back 15 months, that 2% 1-year CD was a really good deal!

"So what's your durn point, Colonel?"

If you're near retirement or already fishing, I'd be a little cautious about jumping into precious metals at these levels - especially silver. Keep both of Mark Twain's quotes in mind before you throw too many more Silver Eagles in your buckboard. Stay tuned, buckaroos.

Daily Market Roundup

Enough porch sitting, let's walk the walk:

The Eureka Miner's Index(EMI) is above-par at 234.14, up from yesterday's 221.47 and a long way from the 6/7/10 low of 50.7. The EMI high for the year was 259.35 on 4/12/2010 - the same day that COMEX copper peaked. Today's number is below a lower trend level of 240.50 but comfortably above support at 178.59. 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 low-$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 up $0.05 in early trading at $75.79 (November contract, most active); Gold is up $5.6 to $1279.4 (December contract, most active); Silver is up $0.029 to $20.800 (December contract, most active); Copper is up $0.0190 to $3.5125 (December contract, most active)

Western Molybdenum Oxide is $15.50; European Molybdenum Oxide is $15.65; LME moly 3-month seller's contract is $16.33, LME cash seller is $16.01

Stock Market Morning Update

The DOW is up 7.27 points to 10602.10; the S&P 500 is up 1.83 to 1126.49. Miners are mixed:

Barrick (ABX) $46.30 up 0.87%
Newmont (NEM) $63.31 up 0.21%
US Gold (UXG) $5.38 down 0.19%
General Moly (Eureka Moly, LLC) (GMO) $3.18 unchanged
Thompson Creek (TC) $10.50 up 1.35%
Freeport-McMoRan (FCX) $81.82 up 0.11% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $32.71 up 0.58% - global steel producer
POSCO (PKX) $109.83 down 0.88% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.15% to $1,467,867.39 (what's this?).

Cheers,

Colonel Possum

Note 1: As a point of disclosure the ole Colonel fired his first round at 11:23 a.m. (PT) when COMEX silver was at $20.850. He had three silver bullets, now he only has 2. The Colonel holds iShares Silver Trust (SLV) Exchange Traded Fund. The price at sale was $20.38/share.

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 Scares $1280 - Pensions Head for the Mineshaft

*** REMINDER *** Don't forget to attend the Eureka Moly Community Appreciation Picnic, Saturday, 10/2/2010 behind the old elementary school and across from the swimming pool. For more information contact Carri Wright at (775)237-7700 or Elaine Barkdull-Spencer at (775)340-2045


Þūnresdæg
Morning Miners!

It is 5:46 AM. Have a cup of Thor's thunderous java - looks like a good day, pardner. Oh, ignore our favorite Norseman sitting over in the corner of the break room. He's been in a huff ever since Jerry chased him out of Windfall Range yesterday. Thor was pitching thunderbolts when he started a small brush fire at the 200-yard target. He says he was just getting his arm in shape for the winter season. I guess the ole Colonel can expect a call from Mike today to keep a closer eye on this rascal, we don't want a September wildfire! Hey, there's a lot of good stuff going on today for the metals & miners...

A New Role for Gold, Silver & Copper?

I heard noted economist David Malpass propose a new thought on precious metals the other day on CNBC Business News. He said the recent run-up in gold price and U.S. Treasurys is less about investors seeking "safe haven" and more about "equity aversion." After the so-called "flash crash" and the 2008-2009 downturn, many folks have just given up on the stock markets as a wise place to put their money.


The Malpass observation explains why copper and gold are now in a rally together. Typically when investors rush to safe havens, gold goes up and copper falls down the mineshaft. Some investors now view commodities and the companies that produce them as a safer bets than the broader stock market. This 6-month chart of the Philadelphia Gold/Silver Index (.XAU) versus the S&P 500 tells part of the story:



The Philadelphia Gold and Silver Index is an index of eleven precious metal mining companies that is traded on the Philadelphia Stock Exchange and includes most of our favorite miners (e.g., Barrick, Newmont, Kinross, Goldcorp and Freeport-McMoran). In the last six months (which includes the highs of last April) the S&P 500 is down 4% and the XAU is up 12%.

Copper is a good example for the other piece of the puzzle. Since late August, the red metal has been on a tear nearly reaching its April highs. COMEX copper is up 10% since August 25th while the S&P 500 has only risen 6%. Not all stocks are being shunned - the miners have been hot with copper giant Freeport-McMoRan (FCX) rising 23% over the same period.

This morning COMEX gold, silver and copper all had a very good bounce. Here are the highs so far today:

COMEX gold $1279.5/oz (4:30 a.m. PDT, December contract, most active)
COMEX silver $20.795/oz (4:30 a.m. PDT, December contract, most active)
COMEX copper $3.5115/oz (6:20 a.m. PDT, December contract, most active)

The broader markets are now open and our metals are up but have pulled back a tad. The S&P 500 is starting out in the red.

Pensions Head for the Mineshaft

Some of the most conservative investors are pension fund managers and it seems they are now heading for the mineshaft too. Here is a morning article from Reno reporter Dorothy Kosich.

Pension funds to invest more as global mining sector M&A heats up (Dorothy Kosich, Mineweb, Reno 09/16/2010)

She reports on a recent PricewaterhouseCoopers (PwC) study which says more large pension funds will invest in mining, "one of the few bright spots in the global economy." One of the drivers has been recent mergers,"...As the potential for commodity scarcity escalates, M&A activity in the global mining sector will likely intensify, mimicking a ‘global arms race.'"

One example of such mergers is the acquisition of Red Back Mining Inc. by Kinross Gold Corp. as reported by Adella Harding of the Elko Daily Free Press:

Voters OK Red Back acquisition (Adella Harding, Elko Daily Free Press, 9/15/2010)


This Report has stated previously (based on no more information than the seat of the Colonel's britches) that a junior miner like U.S. Gold (UXG), that owns properties on the Eureka-Carlin trend, could be in the cross-hairs of the gold giants given this environment. Stay tuned, buckaroos!

Daily Market Roundup

Enough idle speculation, let's walk the walk:

The Eureka Miner's Index(EMI) is above-par at 221.47, up from yesterday's 215.24 and a long way from the 6/7/10 low of 50.7. The EMI high for the year was 259.35 on 4/12/2010 - the same day that COMEX copper peaked. Today's number is below a lower trend level of 231.48 but comfortably above support at 178.59. 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 low-$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 $0.77 in early trading at $75.25 (October contract, most active); Gold is up $7.2 to $1275.9 (December contract, most active); Silver is up $0.129 to $20.700 (December contract, most active); Copper is up $0.0435 to $3.5100 (December contract, most active)

Western Molybdenum Oxide is $15.50; European Molybdenum Oxide is $15.65; LME moly 3-month seller's contract is $16.33, LME cash seller is $16.01

Stock Market Morning Update

The DOW is down 20.47 points to 10552.26; the S&P 500 is down 3.60 to 1121.47. Miners are up:

Barrick (ABX) $45.41 up 0.93%
Newmont (NEM) $63.33 up 0.68%
US Gold (UXG) $5.23 up 1.18%
General Moly (Eureka Moly, LLC) (GMO) $3.23 up 0.31%
Thompson Creek (TC) $10.23 up 0.29%
Freeport-McMoRan (FCX) $81.95 up 0.68% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $32.46 down 0.70% - global steel producer
POSCO (PKX) $110.45 down 2.46% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.22% to $1,464,616.69 (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

Japan Intervenes on Yen - U.S Dollar Up

Wōdnesdæg
Morning Miners!

It is 5:44 AM. Have a hot cup of Hump Day Special with Old Miner Woden and the Colonel. He and I have been working this morning on a link to the Report's recent seven-part series on the historic Homestake Mine in the Black Hills of South Dakota. I'm being a little generous here, the Old Miner has about as much use for computers as a 3-piece suit.

"That gizmo don't even make a good wheel chock, Colonel!"

OK, OK. If you look to your right below the metal price charts there is a photo you can click on to link you to the series. In later years, Homestake Mining operated our Ruby Hill Mine in the late 1990s until it was acquired by Barrick Gold in 2001. Our thanks again to this Report's friend and contributor who provided the photographs and background for this series (see note 1).

Japan Intervenes on the Yen

The market mover for metals & miners today is the Japanese foreign-exchange intervention to weaken their soaring yen. The bank of Tokyo sold an estimated total of 1 trillion yen ($12 billion U.S. dollars) throughout the Asian trading day. Predictably the U.S. dollar strengthened against the yen. When the intervention began the yen was at a 15-year low of 83 yen (JPY) for one U.S. dollar (USD); this morning it had moved up to 85.63 or a 2.8% rise, the U.S. dollar index (.DXY) rose nearly 1%. The .DXY has since fallen back to a 0.7% rise as the broader markets open on these shores.

.DXY low (9/14) 81.00 (12:46 p.m. EDT)
.DXY high (9/15) 81.76 (4:51 a.m. EDT) up 0.94%
.DXY market open 81.57 (9:31 a.m. EDT) up 0.70%

Ho-hum, at least for now. COMEX gold is at $1270.0/oz and COMEX copper is about where it was yesterday at this time at $3.4435/lb (versus $3.4495/lb). Theory says a stronger dollar should generate headwinds for dollarized commodities and this may indeed be the case going forward, COMEX oil has dropped a $1.75 to $75.05/bbl. So far no big shakes.

Japan made this bold move to prop up their flagging export market and possibly arrest their decades long deflationary cycle. Markets are driven by two basic laws; supply & demand and fear & greed. External disturbances such as government intervention or something coming out of left field ("exogenous events" such as the 9/11 attack) can upset the marketplace in unexpected ways. Currency interventions are always a little scary.

Tokyo is determined to intervene further if deemed necessary, we'll just have to sit tight and see how all this plays. So far, the miners are down for the day except the big gold diggers and the Eureka Miner's Index(EMI) is only slightly behind yesterday's number (below).

The Report use two gauges of marketplace fear, the the S&P Volatility Index (VIX) and the gold-to-silver ratio (Au:Ag or GSR). The former is below our fear threshold of 25 at 22.36 edging up only slightly from yesterday's 21.61. The GSR is at its lowest level (i.e. decreasing fear) since we started computing the EMI in early June:

GSR 6/4/2010 high 69.942
GSR today, 9/15/2010 62.042

In happier days before the Great Recession, the GSR was in a range of 50-56 so we're moving in the right direction.

Shucks! Low fear + strong gold & copper - I remain bullish on metals & mining. Stay tuned, buckaroos.

Daily Market Roundup

Enough talk, let's walk the walk:

The Eureka Miner's Index(EMI) is above-par at 215.24, down a tad from yesterday's 217.20 and a long way from the 6/7/10 low of 50.7. The EMI high for the year was 259.35 on 4/12/2010 - the same day that COMEX copper peaked. Today's number is below a lower trend level of 222.46 but comfortably above support at 178.59. 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 low-$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 $1.75 in early trading at $75.05 (October contract, most active); Gold is down $1.7 to $1270.0 (December contract, most active); Silver is up $0.038 to $20.470 (December contract, most active); Copper is down $0.0250 to $3.4435 (December contract, most active)

Western Molybdenum Oxide is $15.50; European Molybdenum Oxide is $15.65; LME moly 3-month seller's contract is $16.33, LME cash seller is $16.01

Stock Market Morning Update

The DOW is up 2.99 points to 10529.48; the S&P 500 is down 1.71 to 1119.39. Miners are down except for the big gold diggers:

Barrick (ABX) $45.44 up 0.49%
Newmont (NEM) $62.97 up 0.19%
US Gold (UXG) $5.25 down 0.19%
General Moly (Eureka Moly, LLC) (GMO) $3.15 down 0.33%
Thompson Creek (TC) $10.22 down 1.45%
Freeport-McMoRan (FCX) $80.66 down 0.96% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $32.37 down 0.83% - global steel producer
POSCO (PKX) $112.45 up 0.64% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.30% to $1,456,873.09 (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 photo: Homestake Mill Sites in Lead, South Dakota.

Note 1: The headline and Homestake Series photos can be seen at the Homestake Visitor Center on 160 West Main Street, Lead, South Dakota. Please pay them a visit on your next pass through.

Gold Breaks $1261 & Silver $20.4 - Copper Calls Ruby

*** EVENING UPDATE *** Gold price spurts to record high (Adella Harding, Elko Daily Free Press, 4:26 p.m.(PDT), 9/14/2010)
*** BREAKING NEWS *** COMEX gold hit $1276.5/oz at 8:50 a.m. (PDT); COMEX silver $20.55/oz at 7:30 a.m. (PDT)

Morning Miners!

It is 5:42 AM. Have a cup of joe and excuse the mess. Ruby Tuesday came into the break room this morning like a late season hurricane. Her face was redder than the cab of her Peterbilt 379 - Pardner, I mean to tell you that ole gal was some mad! Miss Copper called her at midnight from the Vegas Greyhound and wanted bus fare home. She was crying that Gold had got too big for his britches again and was high-rolling in the casinos with Silver. Lord knows, I don't think I'll ever get Gold and Copper to the altar. If you've missed all this melodrama you may want to start with yesterday's blog, Copper & Gold Head for Vegas.

Just the Facts Ma'am


If Joe Friday were in the break room this morning he'd sit Ruby down and start from the top, "Just the facts, ma'am." Our first fact is that this Report watches the fortunes of Miss Copper and her beau Gold with great interest. As copper goes, so go the metals & miners, so go the broader markets in my world. That's the way it's been working ever since China and other emerging economies acquired a voracious appetite for the red metal and all manner of other natural resources.

Our second fact is that the metals & miners do best when oil, copper and gold all march in step. That hasn't been the case for many months until very recently. Copper re-established a positive correlation with gold and it now looks like oil is not far behind. If this trend continues we should see bluer skies for all the metals and miners as we close out 2010. So what caused all the stir in Las Vegas last night?

Softer than expected economic data came out of Europe and investors raced to the safe haven of precious metals. COMEX gold hit $1261.9/oz and COMEX silver peaked at $20.44/oz in early trading. They've fallen back but not much with gold at $1260.4/oz and silver at $20.265 as the ole Colonel takes notes for Sergeant Friday. As you might expect Miss Copper fell down the hotel stairs:



Here's what the bellboy had to say:

METALS-Copper falls after European economic data (Reuters, 9/14/2010, 12:24pm GMT)

Now sweet Ruby T has a good head on her shoulders when she's not hollering and screaming. In the wee hours she reminded Miss Copper that her prices were up 9% in only 12-days in India and her China imports have risen big time for August.

Chinese copper imports rise to 379,527 tonnes in August (Reuters, 9/14/2010)

The ole Colonel found it encouraging that this one month Chinese demand is nearly equivalent to all the remaining copper stored in the London Metal Exchange (LME) warehouse - 391,400 tonnes. That inventory has been in decline for months after peaking earlier this year at some 550,000 tonnes. Here is a recent inventory chart for Miss Copper at her London flat:



Lastly, even with all the commotion today's Eureka Miner's Index(EMI) remains above 200 and steps higher than yesterday's number (see below). Ruby convinced Miss Copper to return to the hotel, kiss and makeup - it will take more than a little sour news from Europe to breakup this reunion.

Daily Market Roundup

Enough boo-hooing, let's walk the walk:

The Eureka Miner's Index(EMI) is above-par at 217.20, up from yesterday's 207.93 and a long way from the 6/7/10 low of 50.7. The EMI high for the year was 259.35 on 4/12/2010 - the same day that COMEX copper peaked. Today's number is above a lower trend level of 204.41 and comfortably above support at 178.59. 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 low-$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 unchanged in early trading at $77.19 (October contract, most active); Gold is up $13.3 to $1260.4 (December contract, most active); Silver is up $0.114 to $20.265 (December contract, most active); Copper is down $0.0295 to $3.4495 (December contract, most active)

Western Molybdenum Oxide is $15.50; European Molybdenum Oxide is $15.80; LME moly 3-month seller's contract is $16.33, LME cash seller is $16.10

Stock Market Morning Update

The DOW is down 30.43 points to 10513.70; the S&P 500 is down 4.36 to 1117.54. Miners are down except for the gold diggers:

Barrick (ABX) $45.42 up 2.74%
Newmont (NEM) $62.65 up 3.69%
US Gold (UXG) $5.20 up 2.36%
General Moly (Eureka Moly, LLC) (GMO) $3.14 down 1.88%
Thompson Creek (TC) $10.22 down 0.58%
Freeport-McMoRan (FCX) $81.00 down 0.95% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $32.07 down 2.55% - global steel producer
POSCO (PKX) $110.76 down 0.83% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.46% to $1,452,494.53 (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

Copper & Gold Head for Vegas - Metals & Miners Weekly Roundup

Morning Miners!

It is 5:30 AM. Have a cup of Monday-got-here-too-damn-quick java and let's get to work. The Colonel is smiling this morning - copper and gold are back in the saddle and galloping off to a Las Vegas sunset. I hope they get hitched there, I did. Many moons ago my Luziana sweetheart and I were married at the famous Candlelight Wedding Chapel by the old Riviera casino. We passed it a few years ago and the poor Candlelight had lost her flame and steeple and was waiting to be carried off to a new location (headline photograph). I guess even marriage sanctuaries can't stand in the way of "bigger-is-better" casinos (see note 1).

I'm sure copper and gold will find their own wedding chapel if they don't take to squabbling again. If you're just catching up on their domestic quarrel, you may want to checkout my blog of July 28th, Will Gold & Copper Ever Make Up? This Report looks at the relation of copper and oil with respect to gold to better understand the health of the global economy. Gold is a good reference for these commodities because it isolates the analysis from the arcane world of currency fluctuations (i.e. gold and oil are traded in U.S. dollars).

The best environment for the metals & mining sector is when oil, copper and gold move in the same direction as long as oil prices don't go too high. Positive correlations of oil & copper with gold were a "sweet spot" for metals & miners during the second-half of 2009 until the debt crisis in Dubai in late November.

Things improved briefly in 2010 then fell apart this spring and summer with concern about the European sovereign debt crisis followed by slower-than-expected growth expectations for the recovery. Fears of a double-dip recession drove gold up and oil & copper down. It looks like that relation is now changing as the double-dip scenario appears less likely (note 2). These two 1-year charts of oil & copper (red line) versus gold (green line) tell the story. Note the almost mirror image movements of oil & copper with gold since May 2010, followed by a more in-step behavior recently:



Here are two morning articles from London (Bloomberg) and Australia (AAP) that characterize the new sentiment:

Copper Gains as Chinese Industrial Production Exceeds Analysts' Estimates(Anna Stablum, London Bloomberg News, 9/13/2010)

Shares led by miners, banks (Business AAP, 09/13/2010)

The release of new Chinese economic data that was anticipated to give headwinds for the metals & miners now points to a "soft economic landing" for the hungry dragon with a renewed appetite for natural resources. That's good, pardner.

A technical analysis of the oil/gold & copper/gold relation is given below in our weekly correlation watch. Let's see what's new with Miss Moly first...

Weekly Molybdenum Roundup



Molybdenum prices remain in a stable range with Western moly oxide still at $15.50/lb sitting a bit below European moly at $15.80/lb. The LME 3-month seller contracts is still $16.33/lb ($36,000/metric ton). The Report's mid-range price target for 2010 moly prices is $15.71/lb.

Western Moly Oxide (FeMo65) $15.50/lb (the price tracked by Base Metals on the General Moly Website)

Moly Oxide, Europe (Mo Drummed Molydbic Oxide EU) $15.80/lb (the price reported in the Metals Bulletin)

LME Futures Contracts

LME cash seller is at $35,500/metric ton $16.10/lb

3-Month (Buyer) $34,000/metric ton $15.42/lb
3-Month (Seller) $36,000/metric ton $16.33/lb

15-Month (Buyer) $34,000/metric ton $15.42/lb
15-Month (Seller)$36,000/metric ton $16.33/lb

Here is a chart of the LME 3-month contract (seller) from the February launch to the present:



Eureka Miner's Index (EMI)

The Eureka Miner's Index (EMI) gives us the market temperature for the sectors that have the greatest impact on mining in Eureka County. Below is a chart of the EMI at Friday's close (9/10/2010). The magenta line is the EMI with a low interest cap of 3% on 10-year Treasurys (LIRC) and adjustments for gold and silver prices (i.e., Au:Ag ratio); the gray line is the EMI without these corrections. A larger more readable chart appears at the bottom of this blog page.


The Eureka Miner's Index(EMI) is above-par at 207.93; a nice jump from Friday's close of 186.51 and a long way from the 6/7/10 low of 50.7. The EMI high for the year was 259.35 on 4/12/2010 - the same day that COMEX copper peaked. Today's number is just above a lower trend level of 204.41 and comfortably above support at 178.59. Remember an EMI greater than 100 is good times (or at least better times) for the metals & miners relevant to Eureka County.

Oil & Copper Correlations with Gold

Oil & copper correlations with gold give us insight into what may happen next for the metals & miners. One way to visualize these correlations with gold over time is to plot the "near-term" 3-month versus the "short-term" 1-month correlations (aka "rho") as shown below in these two graphs (ref: China to the Rescue?):



In the case of copper versus gold, we start out on 4/27/10 with both positively correlated (i.e. in the "+,+" or "green" quadrant). This is the day after the 2010 S&P 500 high and shortly after COMEX copper high of $3.5840/lb (4/12/10). Unfortunately we soon descended into negative territory (i.e. in the "-,-" or "red" quadrant) as the financial crisis in Europe worsened (blue line). Presently we are back in the "+/+" or "green" quadrant - the magenta line and arrow show the most recent data and direction. To sustain optimism for copper prices we need to stay in the "+,+" green pasture.

Oil versus gold has a similar trajectory starting 5/4/2010 moving from the "+/+" to "-/-" quadrant. Oil needs a breakout to the positive to end the bearish cycle of the past few months but has shown some improvement from last week. The graphs above are up to Friday's close (9/10/2010).

Here are the latest correlations given this morning's NYMEX/COMEX trading:

Oil/Au correlation -0.1125 (1-month) -0.3865 (3-month)
Cu/Au correlation +0.7737 (1-month) +0.1341 (3-month)
Cu/Oil correlation +0.3271 (1-month) +0.0963 (3-month)

Last week's numbers:

Oil/Au correlation -0.7300 (1-month) -0.3902 (3-month)
Cu/Au correlation +0.5691 (1-month) -0.0204 (3-month)
Cu/Oil correlation +0.0132 (1-month) +0.1514 (3-month)

Daily Market Roundup

Enough talk, let's walk the walk:

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 low-$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 up $0.89 in early trading to $77.34 (October contract, most active); Gold is down $2.2 to $1244.3 (December contract, most active); Silver is up $0.110 to $19.955 (December contract, most active); Copper is up $0.0845 to $3.4890 (December contract, most active)

Western Molybdenum Oxide is $15.50; European Molybdenum Oxide is $15.80; LME moly 3-month seller's contract is $16.33, LME cash seller is $16.10

Stock Market Morning Update

The DOW is up 68.64 points to 10531.41; the S&P 500 is up 9.88 to 1119.43. Miners are up except for the gold diggers:

Barrick (ABX) $44.36 down 0.81%
Newmont (NEM) $60.41 down 0.44%
US Gold (UXG) $5.08 down 0.18%
General Moly (Eureka Moly, LLC) (GMO) $3.14 up 2.61%
Thompson Creek (TC) $9.76 up 4.05%
Freeport-McMoRan (FCX) $81.69 up 3.00% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $32.91 up 2.46% - global steel producer
POSCO (PKX) $111.66 up 3.84% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 1.26% to $1,439,822.69 (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 new Candlelight Wedding Chapel location is 2855 Las Vegas Boulevard South, Las Vegas, NV 89109

Note 2: Not all economists agree with the story commodities are telling: "Three in five economists surveyed by The Wall Street Journal expect the U.S. Federal Reserve to resume large-scale purchases of securities in the face of a deteriorating economic outlook—but, by a 3-to-2 margin, most of them also think that would be a mistake." (WSJ, 9/13/2010) This Report believes in the commodities, especially base metals.

Headline photograph by Mariana Titus