U.S. Dollar Strength; Global Markets Retreat

*** BREAKING NEWS *** The DOW is down more than 320 points on accelerating  concerns in Europe and rumors of eminent Greek default; DOW 10,966.93, S&P 500 1,152.05

*** BREAKING NEWS *** The 10-year treasury note hit a 60-year low today, presently 1.923%, as investors flee to safe havens

*** BREAKING NEWS *** COMEX copper has dropped below $4/lb, down 3.6% presently at $3.9950/lb (12:49 PM PDT)

My latest Kitco Commentary: The Copper-Gold Conundrum (9/6/2011)

This morning's...
COMEX Gold price = $1,850.3/oz (December contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 99.72
Value Adjusted Gold Price© (VAGP) = $1,550.3/oz
COMEX - VAGP = $300.0/oz; gold is trading at a premium; key gold-referenced commodity ratios remain at recession levels (e.g., copper & oil)


Morning Miners!

It is 5:44 AM. have a very well deserved cup of Raine's finest Red Label. You have earned your stripes in the market this week. Ten-years after 9-11 and with all our ups and downs, this country keeps on ticking like the Timex watch of yore...


U.S. Dollar Strength; Global Markets Retreat

With new terrorist warnings, mixed reactions to the President's speech and deteriorating conditions in Europe sure make a tough marketplace. Gold and the base metals fell on a U.S. dollar that continues to strengthen against the euro. In the minimalist headline words of the London Metal Exchange, "Dollar Index - Goes from strength to strength." The U.S. Dollar Index (.DXY) is right at its 200-day average on the upside, a condition we have not seen since September 2010. The euro has fallen to the $1.37-level marking a six-month low. 17 of 19 stock markets that this report tracks are in the red today.

COMEX copper is falling closer to the key $4/lb border presently at $4.0370/lb and COMEX gold is trying to stabilize in mid-$1,850 territory at $1,850.3/oz. COMEX silver continues to track gold with a gold:silver ratio of 44+ now at $41.750/oz.

This Report's three primary indices are all near critical levels, a pretty good snapshot of the situation:

Eureka Miner’s Gold Value Index© (GVI) = 99.72, a value of 100 indicates a high-vale of gold with respect to key commodities

Eureka Miner's Index© (EMI) = 104.75, a value below 100 is solid bear country for the metals & miners

Debt Crisis Index = 195.0, a value of 200 or greater marks a time for serious concern.

You can read more about these indices in the Daily Market Roundup below.

The Colonel's input to the Weekly Kitco Gold Survey

Below is my weekly input to the Kitco gold survey. I continue to believe COMEX gold will break $2,000/oz before Thanksgiving:

U.S. dollar dynamics will cloud the movements of gold next week as it strengthens against the euro (6-month high this morning). Falling global markets on growth concerns and Western economy uncertainty may also cause liquidations in the precious metals. Nonetheless, this is a headline driven market and gold will continue to benefit on the margin until there is improvement in near term expectations for Europe and to a lesser extent, the United States. Key gold-referenced commodity ratios (e.g., oil, copper) remain at recession levels.


Daily Market Roundup

Enough talk, let's walk the walk:

Eureka Miner's Index(EMI)

This morning the Eureka Miner's Index© (EMI) is above-par at 104.75, down from yesterday's 126.50 and above the 1-month moving average of 103.78. The EMI set a new low for 2011 of 74.53 on August 9. It is troubling that the 1-month average is almost at the 100-level.

The EMI gives us the market temperature for the factors that have the greatest impact on mining in Eureka County. The record high for the EMI is 816.78 set 01/04/2011; the low was set 6/7/2010 at 50.7. An EMI of 100 is the boundary between hot and cold markets for the metals & miners.

200-day averages are used to update mining equity norms in the EMI on a monthly basis.

Gold Value Index (GVI)

The Eureka Miner’s Gold Value Index© (GVI) is below-par at 99.72, up from yesterday's 97.94 and above its 1-month average of 98.43. The new record high for 2011, was set Tuesday, September 6th at 103.43. The Value Adjusted Gold Price© (VAGP) is $1,550.3/oz or $300.0/oz below the current COMEX gold price.

Although gold prices were on the rise, the GVI initially trended down from 6/7/2010 when it had a value of 100; gold regained value reversing the trend, moved sideways for a time and and headed back up with vigor. A sustained presence around the 100-level may prove to be a recession warning for a second dip down in the economy.

The GVI gauges the value of gold in relation to oil, copper and silver independent of currency. These three commodities were chosen for relative value comparison because 1) oil derivatives are a common cost element for all miners, 2) copper has proven to be a reliable proxy for global growth and 3) silver is a precious and industrial metal that now competes with gold for investment and as a hedge against fiat currencies.

Daily Debt Crisis Watch

July 26th we introduced the Debt Crisis Index (DCI). The DCI is computed in the mornings and at the market close Friday in much the same way we do the EMI and GVI indices. Today, the DCI has a value of 195.0 up from yesterday's 182.0. Our benchmark is 100, the value of the DCI on July 22nd; a bigger number suggests a worsening impact on markets (note 2). This Report has identified an elevated level surpassing 200 is time for serious concern. We are now just below that level.

Daily Oil Watch

Latest Nevada Fuel Prices

On February 1st we identified North Sea Brent crude oil as a good barometer for the developing crisis in the Middle East and North Africa (MENA). It is now above $110/bbl with a large spread from the North American benchmark, Western Texas Intermediate or "Texas light sweet crude", traded on the NYMEX (see note 1). The Report normally follows the latter but will track both until things settle out in the region.

Here are the key front-month contracts as of this morning:

NYMEX light sweet crude $86.65
ICE North Sea Brent crude $112.21
Spread (ICE- NYMEX) = $25.56 (Yesterday, $26.54)

Here are the December contracts* with a narrower spread:

NYMEX light sweet crude $87.10
ICE North Sea Brent crude $110.09
Spread (ICE- NYMEX) = $22.99 (Yesterday, $23.99)

* NYMEX futures contracts have rolled forward, we now show October and December for a 2-month look-ahead

Prices are off their crisis highs and we have $110+ Brent and $85+ NYMEX in December favoring high oil prices throughout the fall and into early winter. My last December prediction that we would see NYMEX $100/bbl oil before the Fourth of July came true on February 23rd.

Eureka Outlook Dashboard

4-WD is ON - The miners are on very rough roads; The VIX or "fear index" is above 25; in early morning trading, bellwether Freeport-McMoRan (FCX) is below its 200-day moving average of $52.33 (our new key level, 09/08 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment.

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

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

The YELLOW light is turned on for Inflation Watch The Federal Reserve phased out buying Treasurys June 30th (aka QE2) but will maintain low interest rates until mid-2013

The ORANGE light is turned back on for Investor Confidence with investors adverse to commodity-sensitive equities

The YELLOW light is turned on our Fuel Gauge with oil above $80

A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, Miner's claim fee, Miner taxation, Cortez Hills, mercury emissions , General Moly Mt. Hope Water Rights, U.S. House committee debates miner workplace safety bill, R&R Partners parts ways with Nevada Mining Association, Obama budget includes mining royalty , Mineral commission fights consolidation, Democrats seek to repeal mining tax from the constitution, Rhoads, Ellison oppose repeal of net proceeds tax, Proposal could change net proceeds tax, 'You get to deduct WHAT???' Nevada lawmakers ask gold miners

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

Commodity Market Morning Update

NYMEX/COMEX: Oil is down $2.40 in early trading at $86.65 (October contract, most active); Gold is down $7.2 to $1850.3 (December contract, most active); Silver is down $0.780 to $41.750 (December contract, most active); Copper is down $0.1070 at $4.0370 (December contract, most active)

Western Molybdenum Oxide (Infomine) is $14.97; European Molybdenum Oxide (Bloomberg) is $14.62; LME cash seller is $14.74, LME moly 3-month seller's contract is $14.74

Stock Market Morning Update

The DOW is down 173.54 points to 11,122.27; the S&P 500 is down 16.09 points at 1169.81

Miners are mixed:

Barrick (ABX) $54.78 down 0.72%
Newmont (NEM) $65.89 up 0.35%
US Gold (UXG) $6.31 down 1.41%
General Moly (Eureka Moly, LLC) (GMO) $3.71 down 1.59%
Thompson Creek (TC) $8.06 down 2.30%
Freeport-McMoRan (FCX) $43.06 down 2.73% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $12.09 down 1.71%
Timberline Resources (TLR) $0.81 up 1.25%

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

ArcelorMittal (MT) $18.09 down 6.37% - global steel producer
POSCO (PKX) $95.41 down 3.07% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is down 1.47% at $1,629,174.19 (what's this?).

Cheers,

Colonel Possum

Note 1 - West Texas Intermediate (WTI), also known as Texas light sweet, is a type of crude oil used as a benchmark in oil pricing and is the underlying commodity of New York Mercantile Exchange's (NYMEX) oil futures contracts. The price of WTI is often referenced in North American news reports on oil prices, alongside the price of North Sea Brent crude (source: Wikipedia)

Note 2 - The impact of the U.S. debt ceiling debate affected investment decisions for weeks before its resolution August 2nd and was followed by an S&P credit downgrade. Global sovereign debt issues have been an overhang on markets for many, many months starting with the Dubai crisis in late November, 2009 and spreading to the euro-zone in 2010-2011.

Headline photograph by Mariana Titus

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

Europe Bounces Gold; Base Metals "Tread Water"

Next Stop Palisade

My latest Kitco Commentary: The Copper-Gold Conundrum (9/6/2011)

This morning's...
COMEX Gold price = $1,861.0/oz (December contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 97.94
Value Adjusted Gold Price© (VAGP) = $1,587.7/oz
COMEX - VAGP = $273.3/oz; gold remains overvalued; key gold-referenced commodity ratios remain at recession levels (e.g., copper & oil)


Þūnresdæg
Morning Miners!

It is 6:20 AM. Have a cup of  Thor's Viking Vengeance. Our favorite Norseman wants to attack England this weekend. What that means is a trip to Illipah resevoir where the Colonel sits on the shore and watches Thor tread water and play with his toy viking ship. He'll have some company...

Europe Bounces Gold; Base Metals "Tread Water"

These markets can drive even the ole Colonel a little batty. Headlines drive prices and that's about it. Yesterday about this time, COMEX gold was down $59.6/oz as safe money sought riskier assets buoyed by the German Court's decision not to upset the EU bailout apple cart. This morning gold is back up $43.4/oz to $1,861.0/oz on news that Europe's growth estimates had been revised downward (no surprise there) and interest rates would remain unchanged. The European Central Bank (ECB) President Jean-Claude Trichet pointed to growing economic risks and presented "significant" cuts to euro-zone growth forecasts. The ECB now estimates growth for 2011 to be between 1.4% and 1.8%, down from a previous forecast of 1.5% to 2.3%. Growth expectations for 2012 were lowered too.

Remember when a gold price change greater than $20/oz was a time to sit up and take notice? We're not talking ancient history - how about just a few months ago? Now daily swings of $40+/oz are just part of the erratic heartbeat of an unsettled marketplace. Forget supply & demand fundamentals, this morning's London Metal Exchange (LME) headline says it all to me "Base metals quiet, treading water until Obama speech."

COMEX copper is obediently treading water presently down $0.0310/lb to $4.1010/lb. I didn't know the red metal watched so much 24-hour cable news.

Nothing more to report, pardner. Enjoy a beautiful September day.


Daily Market Roundup

Enough talk, let's walk the walk:

Eureka Miner's Index(EMI)

This morning the Eureka Miner's Index© (EMI) is above-par at 126.50, up from yesterday's 114.47 and above the 1-month moving average of 102.41. The EMI set a new low for 2011 of 74.53 on August 9. It is troubling that the 1-month average is almost at the 100-level but today is a move up from yesterday.

The EMI gives us the market temperature for the factors that have the greatest impact on mining in Eureka County. The record high for the EMI is 816.78 set 01/04/2011; the low was set 6/7/2010 at 50.7. An EMI of 100 is the boundary between hot and cold markets for the metals & miners.

200-day averages are used to update mining equity norms in the EMI on a monthly basis.

Gold Value Index (GVI)

The Eureka Miner’s Gold Value Index© (GVI) is below-par at 97.94, up from yesterday's 96.81 and below its 1-month average of 98.39. The new record high for 2011, was set Tuesday, September 6th at 103.43. The Value Adjusted Gold Price© (VAGP) is $1,587.7/oz or $273.3/oz below the current COMEX gold price.

Although gold prices were on the rise, the GVI initially trended down from 6/7/2010 when it had a value of 100; gold regained value reversing the trend, moved sideways for a time and and headed back up recently with vigor. A sustained presence around the 100-level may be a recession warning for a second dip down in the economy.

The GVI gauges the value of gold in relation to oil, copper and silver independent of currency. These three commodities were chosen for relative value comparison because 1) oil derivatives are a common cost element for all miners, 2) copper has proven to be a reliable proxy for global growth and 3) silver is a precious and industrial metal that now competes with gold for investment and as a hedge against fiat currencies.

Daily Debt Crisis Watch

July 26th we introduced the Debt Crisis Index (DCI). The DCI is computed in the mornings and at the market close Friday in much the same way we do the EMI and GVI indices. Today, the DCI has a value of 174.3 down from yesterday's 183.1. Our benchmark is 100, the value of the DCI on July 22nd; a bigger number suggests a worsening impact on markets (note 2). This Report has identified an elevated level surpassing 200 is time for serious concern. We are now below that level.

Daily Oil Watch

Latest Nevada Fuel Prices

On February 1st we identified North Sea Brent crude oil as a good barometer for the developing crisis in the Middle East and North Africa (MENA). It is now above $110/bbl with a large spread from the North American benchmark, Western Texas Intermediate or "Texas light sweet crude", traded on the NYMEX (see note 1). The Report normally follows the latter but will track both until things settle out in the region.

Here are the key front-month contracts as of this morning:

NYMEX light sweet crude $89.42
ICE North Sea Brent crude $115.96
Spread (ICE- NYMEX) = $26.54 (Yesterday, $26.02)

Here are the December contracts* with a narrower spread:

NYMEX light sweet crude $89.85
ICE North Sea Brent crude $113.84
Spread (ICE- NYMEX) = $23.99 (Yesterday, $23.93)

* NYMEX futures contracts have rolled forward, we now show October and December for a 2-month look-ahead

Prices are off their crisis highs and we have $110+ Brent and $85+ NYMEX in December favoring high oil prices throughout the fall and into early winter. My last December prediction that we would see NYMEX $100/bbl oil before the Fourth of July came true on February 23rd.

Eureka Outlook Dashboard

4-WD is ON - The miners are on very rough roads; The VIX or "fear index" is above 25; in early morning trading, bellwether Freeport-McMoRan (FCX) is below its 200-day moving average of $52.45 (our new key level, 08/31 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment.

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

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

The YELLOW light is turned on for Inflation Watch The Federal Reserve phased out buying Treasurys June 30th (aka QE2) but will maintain low interest rates until mid-2013

The ORANGE light is turned back on for Investor Confidence with investors adverse to commodity-sensitive equities

The YELLOW light is turned on our Fuel Gauge with oil above $80

A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, Miner's claim fee, Miner taxation, Cortez Hills, mercury emissions , General Moly Mt. Hope Water Rights, U.S. House committee debates miner workplace safety bill, R&R Partners parts ways with Nevada Mining Association, Obama budget includes mining royalty , Mineral commission fights consolidation, Democrats seek to repeal mining tax from the constitution, Rhoads, Ellison oppose repeal of net proceeds tax, Proposal could change net proceeds tax, 'You get to deduct WHAT???' Nevada lawmakers ask gold miners

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

Commodity Market Morning Update

NYMEX/COMEX: Oil is up $0.08 in early trading at $89.42 (October contract, most active); Gold is up $43.4 to $1861.0 (December contract, most active); Silver is up $0.824 to $42.455 (December contract, most active); Copper is down $0.0310 at $4.1010 (December contract, most active)

Western Molybdenum Oxide (Infomine) is $14.97; European Molybdenum Oxide (Bloomberg) is $14.70; LME cash seller is $14.74, LME moly 3-month seller's contract is $14.74

Stock Market Morning Update

The DOW is down 21.30 points to 11,393.56; the S&P 500 is down 3.92 points at 1194.70

Miners are mixed:

Barrick (ABX) $55.70 up 2.24%
Newmont (NEM) $65.73 up 3.01%
US Gold (UXG) $6.36 up 2.25%
General Moly (Eureka Moly, LLC) (GMO) $3.88 down 0.51%
Thompson Creek (TC) $8.46 down 1.74%
Freeport-McMoRan (FCX) $44.99 down 0.40% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $12.80 down 1.02%
Timberline Resources (TLR) $0.83 uop 2.47%

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

ArcelorMittal (MT) $19.43 down 1.72% - global steel producer
POSCO (PKX) $98.65 down 0.21% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is down 0.68% at $1,667,626.77 (what's this?).

Cheers,

Colonel Possum

Note 1 - West Texas Intermediate (WTI), also known as Texas light sweet, is a type of crude oil used as a benchmark in oil pricing and is the underlying commodity of New York Mercantile Exchange's (NYMEX) oil futures contracts. The price of WTI is often referenced in North American news reports on oil prices, alongside the price of North Sea Brent crude (source: Wikipedia)

Note 2 - The impact of the U.S. debt ceiling debate affected investment decisions for weeks before its resolution August 2nd and was followed by an S&P credit downgrade. Global sovereign debt issues have been an overhang on markets for many, many months starting with the Dubai crisis in late November, 2009 and spreading to the euro-zone in 2010-2011.

Headline photograph by Mariana Titus

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

Gold Trips; Copper & Oil Bounce

Old Miner Woden calls this home

My latest Kitco Commentary: The Copper-Gold Conundrum (9/6/2011)

This morning's...
COMEX Gold price = $1,813.7/oz (December contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 96.81
Value Adjusted Gold Price© (VAGP) = $1,565.4/oz
COMEX - VAGP = $248.3/oz; gold remains overvalued; key gold-referenced commodity ratios are at recession levels (e.g., copper & oil)


Morning Miners!

It is 5:41 AM. Have a brimming cup of Hump-Day-Got-Here-Soon. Old Miner Woden is grumpy this morning and is ready to go back in his cave...

Gold Trips; Copper & Oil Bounce

Old Miner Woden may be upset to see gold fall but the ole Colonel is plenty happy to see the red metal & oil rally a bit. Both are fairly reliable proxies for global growth and neither has had much giddy-up lately amid all the recession talk (lately, NYMEX WTI crude is more a gauge of U.S. domestic growth; ICE Brent crude, a benchmark for global growth - see Daily Oil Watch below).

COMEX gold is presently trading down $59.6/oz from yesterday's close sitting at $1,813.7/oz. This is a whopping $110.5/oz retreat from Tuesday's new record of $1,923.7/oz. COMEX silver is down more than a buck at $40.825/oz with the closely watched gold:silver ratio not significantly changed from yesterday, currently at 44.4.

In contrast, COMEX copper is up more than a percent adding more daylight above the key $4/lb-level; up $0.0565/lb at $4.1125/lb. NYMEX WTI is up nearly $2/bbl at $87.73/bbl and ICE Brent Crude pushed closer to $115/bbl at $113.75/bbl. Our markets are now open and it is a rare day to see all nineteen global markets on this report's radar screen in the green.

So, what has caused all this happiness? Markets anxiously awaited a ruling by Germany's Federal Constitutional Court on the legality of the the euro-zone's 2010 bailout for Greece and subsequent aid granted through the currency bloc's rescue fund. They gave it a thumbs up today. A negative court decision could have thrown a monkey wrench into an already shaky situation in Europe. There is also some anticipation that President Obama will announce a $300 billion jobs package tomorrow night.

Whatever happens across the pond or tomorrow on television, there will still be a European sovereign debt crisis and high unemployment in this country for some time to come. What the heck, I'll enjoy a positive market day while its here.

Here is some encouraging news from my perspective. The one-month gold:copper and oil:copper correlations have both turned positive this morning. The 3-month correlations are still negative so we're a long way from a metals & miners picnic but the ole Colonel is willing to say this development moves us from a "very bearish" outlook to just "bearish."

Here are the three sets of correlations that I believe are key. Metals & miners do best when all six numbers are positive; today we have four-out-of-six:

Gold:copper correlation +0.0313 (1-month) -0.4388 (3-month)
Gold:Oil correlation +0.0831 (1-month) -0.7743 (3-month)
Oil:copper correlation +0.6509 (1-month) +0.7526(3-month)

Stay tuned, pardner.


Daily Market Roundup

Enough talk, let's walk the walk:

Eureka Miner's Index(EMI)

This morning the Eureka Miner's Index© (EMI) is above-par at 114.47, up from yesterday's 99.29 and above the 1-month moving average of 100.88. The EMI set a new low for 2011 of 74.53 on August 9. It is troubling that the 1-month average is almost at the 100-level but today is a move up from yesterday.

The EMI gives us the market temperature for the factors that have the greatest impact on mining in Eureka County. The record high for the EMI is 816.78 set 01/04/2011; the low was set 6/7/2010 at 50.7. An EMI of 100 is the boundary between hot and cold markets for the metals & miners.

200-day averages are used to update mining equity norms in the EMI on a monthly basis.

Gold Value Index (GVI)

The Eureka Miner’s Gold Value Index© (GVI) is below-par at 96.81, down from yesterday's 103.43 and below its 1-month average of 98.19. the new record high for 2011, was set Tuesday, September 6th at 103.43. The Value Adjusted Gold Price© (VAGP) is $1,565.4/oz or $248.3/oz below the current COMEX gold price.

Although gold prices were on the rise, the GVI initially trended down from 6/7/2010 when it had a value of 100; gold regained value reversing the trend, moved sideways for a time and and headed back up recently with vigor. A sustained presence around the 100-level may be a recession warning for a second dip down in the economy.

The GVI gauges the value of gold in relation to oil, copper and silver independent of currency. These three commodities were chosen for relative value comparison because 1) oil derivatives are a common cost element for all miners, 2) copper has proven to be a reliable proxy for global growth and 3) silver is a precious and industrial metal that now competes with gold for investment and as a hedge against fiat currencies.

Daily Debt Crisis Watch

July 26th we introduced the Debt Crisis Index (DCI). The DCI is computed in the mornings and at the market close Friday in much the same way we do the EMI and GVI indices. Today, the DCI has a value of 183.1 down from yesterday's 212.6. Our benchmark is 100, the value of the DCI on July 22nd; a bigger number suggests a worsening impact on markets (note 2). This Report has identified an elevated level surpassing 200 is time for serious concern. We are now below that level.

Daily Oil Watch

Latest Nevada Fuel Prices

On February 1st we identified North Sea Brent crude oil as a good barometer for the developing crisis in the Middle East and North Africa (MENA). It is now above $110/bbl with a large spread from the North American benchmark, Western Texas Intermediate or "Texas light sweet crude", traded on the NYMEX (see note 1). The Report normally follows the latter but will track both until things settle out in the region.

Here are the key front-month contracts as of this morning:

NYMEX light sweet crude $87.73
ICE North Sea Brent crude $113.75
Spread (ICE- NYMEX) = $26.02 (Yesterday, $26.80)

Here are the December contracts* with a narrower spread:

NYMEX light sweet crude $88.31
ICE North Sea Brent crude $112.24
Spread (ICE- NYMEX) = $23.93 (Yesterday, $24.55)

* NYMEX futures contracts have rolled forward, we now show October and December for a 2-month look-ahead

Prices are off their crisis highs and we have $110+ Brent and $85+ NYMEX in December favoring high oil prices throughout the fall and into early winter. My last December prediction that we would see NYMEX $100/bbl oil before the Fourth of July came true on February 23rd.

Eureka Outlook Dashboard

4-WD is ON - The miners are on very rough roads; The VIX or "fear index" is above 25; in early morning trading, bellwether Freeport-McMoRan (FCX) is below its 200-day moving average of $52.45 (our new key level, 08/31 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment.

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

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

The YELLOW light is turned on for Inflation Watch The Federal Reserve phased out buying Treasurys June 30th (aka QE2) but will maintain low interest rates until mid-2013

The ORANGE light is turned back on for Investor Confidence with investors adverse to commodity-sensitive equities

The YELLOW light is turned on our Fuel Gauge with oil above $80

A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, Miner's claim fee, Miner taxation, Cortez Hills, mercury emissions , General Moly Mt. Hope Water Rights, U.S. House committee debates miner workplace safety bill, R&R Partners parts ways with Nevada Mining Association, Obama budget includes mining royalty , Mineral commission fights consolidation, Democrats seek to repeal mining tax from the constitution, Rhoads, Ellison oppose repeal of net proceeds tax, Proposal could change net proceeds tax, 'You get to deduct WHAT???' Nevada lawmakers ask gold miners

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

Commodity Market Morning Update

NYMEX/COMEX: Oil is up $1.71 in early trading at $87.73 (October contract, most active); Gold is down $59.6 to $1813.7 (December contract, most active); Silver is down $1.043 to $40.825 (December contract, most active); Copper is up $0.0595 at $4.1155 (December contract, most active)

Western Molybdenum Oxide (Infomine) is $14.52; European Molybdenum Oxide (Bloomberg) is $14.70; LME cash seller is $14.97, LME moly 3-month seller's contract is $14.97

Stock Market Morning Update

The DOW is up 166.20 points to 11,305.50; the S&P 500 is up 19.66 points at 1184.90

Miners are mixed:

Barrick (ABX) $52.34 down 2.33%
Newmont (NEM) $62.90 down 2.50%
US Gold (UXG) $5.99 down 2.60%
General Moly (Eureka Moly, LLC) (GMO) $3.74 up 0.27%
Thompson Creek (TC) $8.11 up 2.66%
Freeport-McMoRan (FCX) $45.23 up 1.96% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $12.76 up 2.94%
Timberline Resources (TLR) $0.83 unchanged

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

ArcelorMittal (MT) $19.19 up 2.90% - global steel producer
POSCO (PKX) $97.20 up 3.96% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is down 0.68% at $1,616.588.82 (what's this?).

Cheers,

Colonel Possum

Note 1 - West Texas Intermediate (WTI), also known as Texas light sweet, is a type of crude oil used as a benchmark in oil pricing and is the underlying commodity of New York Mercantile Exchange's (NYMEX) oil futures contracts. The price of WTI is often referenced in North American news reports on oil prices, alongside the price of North Sea Brent crude (source: Wikipedia)

Note 2 - The impact of the U.S. debt ceiling debate affected investment decisions for weeks before its resolution August 2nd and was followed by an S&P credit downgrade. Global sovereign debt issues have been an overhang on markets for many, many months starting with the Dubai crisis in late November, 2009 and spreading to the euro-zone in 2010-2011.

Headline photograph by Mariana Titus

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

$1,923.70/oz Gold; All Eyes on Europe

My latest Kitco Commentary: The Copper-Gold Conundrum (9/6/2011)

This morning's...
COMEX Gold price = $1,894.0/oz (December contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 103.43
Value Adjusted Gold Price© (VAGP) = $1,530.0/oz
COMEX - VAGP = $364.0/oz; gold remains overvalued; key gold-referenced commodity ratios are at recession levels (e.g., copper & oil)


Morning Miners!

It is 5:42 AM. Have a hot cup of Short Week Willies. Our market bull Ruby T isn't talking to anyone in the break room this morning. I'm sure glad Old Miner Woden is back at Lone Mountain, he probably doesn't know that gold took a shot at $2,000/oz this morning. Glitter is about the only thing up in these stormy markets...

$1,923.70/oz Gold & a Eureka Miner’s Gold Value Index© (GVI) new high

Equity markets in Europe were taken to the woodshed yesterday while we were enjoying a fine Labor Day. The sovereign debt crisis across the pond is center stage in today's world of worry. Kitco's Allen Sykora carried a Dennis Gartman summation of the situation in his morning Market Nugget, “The situation in Europe is becoming more and more severe with each passing day, and we are approaching that time when each nation is now looking out properly for its own best interests, and the people of Europe are considering what it is that shall serve them best.” Dennis Gartman is the author/publisher of the respected Gartman Letter, when he speaks the Colonel listens.

Gartman concludes, “Simply put, Germany and Germans are growing more and more certain that they’ve spent as much money as they deem necessary and reasonable to keep the monetary union intact.” There is a key vote in Germany tomorrow on EU bailouts which could prove to be a real market mover. If Gartman is correct about negative German sentiment, gold could soar. He maintains a long position in gold in non U.S. dollar terms.

In the wee hours, COMEX gold set a new nominal price record of $1,923.70/oz (December contract most active). The Swiss announced that they would defend their currency by pegging it to the falling euro; the Swiss franc has become a popular safe haven refuge for worried investors.  COMEX gold dove $61.90/oz on the news but then recovered. It is presently trading at a respectable $1,894.0/oz up $17.1 from Friday's close. COMEX silver is at $42.245/oz for a gold:silver ratio of 44.83 losing some ground to gold from Friday's 43.56 (a smaller number implies stronger gold).

All of this market commotion sent the Eureka Miner’s Gold Value Index© (GVI) to a new high of 103.4 up from Friday's 101.1. Here is an updated chart of the Gold Value Index© (GVI) through Friday's close (a larger more readable version is given near the bottom of this blog page):

A GVI above the 100-level indicates we are at a high-value relative to current oil, copper and silver prices. Gold trading at a premium is a measure of the fear that exists in the marketplace driven primarily by the uncertainty caused by the European sovereign debt crisis.

Even more worrisome are the recession-levels of both the copper:gold and oil:gold ratios. The Colonel's rule-of-thumb is that former needs to be below 400 lb/oz and the latter, below $20/bbl to have any hope for a slow-but-steady growth scenario. This morning the gold:copper ratio is a 467.7 lbs/oz and gold:oil is $22.54 bbl/oz - sobering levels indeed. Checkout my latest Kitco Commentary: The Copper-Gold Conundrum for more thoughts on what this may imply about the future.

Eureka Miner's Index© (EMI)

The Eureka Miner's Index© (EMI) shows just what a tough time mining companies continue to have. Here is a chart over the same time period as the GVI (a larger more readable version is given near the bottom of this blog page):

From an EMI of 816.8 a at the beginning of the year, we have trended mostly down dropping below the critical 100-level into solid bear country. The EMI (magenta line) rose above 100 last week but finds itself just below the key marker this morning at 99.29. A disturbing sign is that the one-month moving average (blue line) is very close to breaking 100 to the downside sitting at 100.6 presently. Ouch.

More discussion of the GVI and EMI are in the Roundup that follows...


Daily Market Roundup

Enough talk, let's walk the walk:

Eureka Miner's Index(EMI)

This morning the Eureka Miner's Index© (EMI) is below-par at 99.29, down from Friday's 117.23 and above the 1-month moving average of 100.57. The EMI set a new low for 2011 of 74.53 on August 9. It is troubling that the 1-month average is almost at the 100-level.

The EMI gives us the market temperature for the factors that have the greatest impact on mining in Eureka County. The record high for the EMI is 816.78 set 01/04/2011; the low was set 6/7/2010 at 50.7. An EMI of 100 is the boundary between hot and cold markets for the metals & miners.

200-day averages are used to update mining equity norms in the EMI on a monthly basis.

Gold Value Index (GVI)

The Eureka Miner’s Gold Value Index© (GVI) is above-par at 103.43, up from Friday's 100.10 and above its 1-month average of 97.86. This is a new record high for 2011, the old high was 102.71 set Friday, August 19th. The Value Adjusted Gold Price© (VAGP) is $1,530.0/oz or $364.00/oz below the current COMEX gold price.

Although gold prices were on the rise, the GVI initially trended down from 6/7/2010 when it had a value of 100; gold regained value reversing the trend, moved sideways for a time and and headed back up recently with vigor. Its sustained presence around the 100-level may be a recession warning for a second dip down in the economy.

The GVI gauges the value of gold in relation to oil, copper and silver independent of currency. These three commodities were chosen for relative value comparison because 1) oil derivatives are a common cost element for all miners, 2) copper has proven to be a reliable proxy for global growth and 3) silver is a precious and industrial metal that now competes with gold for investment and as a hedge against fiat currencies.

Daily Debt Crisis Watch

July 26th we introduced the Debt Crisis Index (DCI). The DCI is computed in the mornings and at the market close Friday in much the same way we do the EMI & GVI indices. Today, the DCI has a value of 212.6 up from Friday's 186.4. Our benchmark is 100, the value of the DCI on July 22nd; a bigger number suggests a worsening impact on markets (note 2). This Report has identified an elevated level surpassing 200 is time for serious concern. We are now above that level.

Daily Oil Watch

Latest Nevada Fuel Prices

On February 1st we identified North Sea Brent crude oil as a good barometer for the developing crisis in the Middle East and North Africa (MENA). It is now above $100/bbl with a large spread from the North American benchmark, Western Texas Intermediate or "Texas light sweet crude", traded on the NYMEX (see note 1). The Report normally follows the latter but will track both until things settle out in the region.

Here are the key front-month contracts as of this morning:

NYMEX light sweet crude $84.03
ICE North Sea Brent crude $110.83
Spread (ICE- NYMEX) = $26.80 (Yesterday, $26.22)

Here are the December contracts* with a narrower spread:

NYMEX light sweet crude $84.67
ICE North Sea Brent crude $109.22
Spread (ICE- NYMEX) = $24.55 (Yesterday, $24.00)

* NYMEX futures contracts have rolled forward, we now show October and December for a 2-month look-ahead

Prices are off their crisis highs and we have $110+ Brent and $80+ NYMEX in December favoring high oil prices throughout the fall and into early winter although price weakness in NYMEX has reappeared. My last December prediction that we would see NYMEX $100/bbl oil before the Fourth of July came true on February 23rd.

Eureka Outlook Dashboard

4-WD is ON - The miners are on very rough roads; The VIX or "fear index" is above 25; in early morning trading, bellwether Freeport-McMoRan (FCX) is below its 200-day moving average of $52.45 (our new key level, 08/31 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment.

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

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

The YELLOW light is turned on for Inflation Watch The Federal Reserve phased out buying Treasurys June 30th (aka QE2) but will maintain low interest rates until mid-2013

The ORANGE light is turned back on for Investor Confidence with investors adverse to commodity-sensitive equities

The YELLOW light is turned on our Fuel Gauge with oil above $80

A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, Miner's claim fee, Miner taxation, Cortez Hills, mercury emissions , General Moly Mt. Hope Water Rights, U.S. House committee debates miner workplace safety bill, R&R Partners parts ways with Nevada Mining Association, Obama budget includes mining royalty , Mineral commission fights consolidation, Democrats seek to repeal mining tax from the constitution, Rhoads, Ellison oppose repeal of net proceeds tax, Proposal could change net proceeds tax, 'You get to deduct WHAT???' Nevada lawmakers ask gold miners

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

Commodity Market Morning Update

NYMEX/COMEX: Oil is down $2.42 in early trading at $84.03 (October contract, most active); Gold is up $17.1 to $1894.0 (December contract, most active); Silver is down $0.824 to $42.245 (December contract, most active); Copper is down $0.0745 at $4.0500 (December contract, most active)

Western Molybdenum Oxide (Infomine) is $14.52; European Molybdenum Oxide (Bloomberg) is $14.70; LME cash seller is $14.51, LME moly 3-month seller's contract is $14.51

Stock Market Morning Update

The DOW is down 211.23 points to 11,029.03; the S&P 500 is down 21.74 points at 1152.23

Miners are mixed:

Barrick (ABX) $54.43 up 2.95%
Newmont (NEM) $65.53 up 2.12%
US Gold (UXG) $6.26 up 2.45%
General Moly (Eureka Moly, LLC) (GMO) $3.73 down 1.58%
Thompson Creek (TC) $7.69 down 2.66%
Freeport-McMoRan (FCX) $43.95 down 2.20% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $12.24 down 2.10%
Timberline Resources (TLR) $0.82 up 3.53%

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

ArcelorMittal (MT) $18.28 down 8.32% - global steel producer
POSCO (PKX) $92.37 down 1.03% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is down 0.54% at $1,630,586.98 (what's this?).

Cheers,

Colonel Possum

Note 1 - West Texas Intermediate (WTI), also known as Texas light sweet, is a type of crude oil used as a benchmark in oil pricing and is the underlying commodity of New York Mercantile Exchange's (NYMEX) oil futures contracts. The price of WTI is often referenced in North American news reports on oil prices, alongside the price of North Sea Brent crude (source: Wikipedia)

Note 2 - The impact of the U.S. debt ceiling debate affected investment decisions for weeks before its resolution August 2nd and was followed by an S&P credit downgrade. Global sovereign debt issues have been an overhang on markets for many, many months starting with the Dubai crisis in late November, 2009 and spreading to the euro-zone in 2010-2011.

Headline photograph by Mariana Titus

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

Goose Egg Jobs Report; $2,000/oz Gold before T-Day; GMO Followup on Moly Prices

My latest Kitco Commentary: Buy or Sell Gold Now? Check the VAGP First
(8/22/2011)

This morning's...
COMEX Gold price = $1,877.3/oz (December contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 100.70
Value Adjusted Gold Price© (VAGP) = $1,557.7/oz
COMEX - VAGP = $319.6.3/oz; gold remains overvalued relative to key commodities


Morning Miners!

It is 5:25 AM. Have a welcome cup of Raine's famous Red Label and hold on tight. The goose may have laid a COMEX golden egg this morning but for the domestic jobs front a "goose egg" means big fat zero. I think the ole Colonel can retire that metaphor after all that rhetorical abuse. Have a fun and safe Labor Day weekend.


A Goose Egg Jobs Report

I just watched the jobs report on CNBC News - what a bruiser. Zero nonfarm jobs added from last month; the last time we had a zero was apparently February, 1945. Chicago's CNBC bond market reporter and market skeptic Rick Santelli's estimate was "zero-thousands," he nailed it. The government sector continued to shed employees and the private sector added only 17,000 jobs. The headline unemployment number is 9.1%; the broader "U6" unemployment is a sobering 16.2%. Nuts.

COMEX gold is presently trading up $48.2/oz at $1,877.3/oz; COMEX silver is up $1.268/oz at $42.800/oz.

A troubling harbinger of worse times to come for the domestic economy is to see 1) NYMEX natural gas futures down on a day when a major tropical system is in the Gulf of Mexico and, 2) a widening spread (> $25/bbl) between domestic benchmark NYMEX crude oil and global benchmark ICE Brent crude oil futures (see Daily Oil Watch below).

$2,000/oz Gold by T-Day- The Colonel's input to the Weekly Kitco Gold Survey

Below is my weekly input to the Kitco gold survey. Given the latest news, I believe COMEX gold will break $2,000/oz before Thanksgiving:

Deepening domestic economy woes and an impending European banking crisis will provide continued headline support. From a commodity view, gold remains overvalued given key gold-referenced commodity ratios at recession levels (notably copper and oil). This is inconsistent with the slow-but-steady growth scenario - given today's employment number maybe we now understand why.

General Moly (GMO) Followup on Moly Prices

General Moly's Director of Investor Relations Seth Foreman provided a followup to yesterday's discussion on molybdenum prices for this Autumn:

"Definitely disappointing to see the LME price tick lower again this week, but just as a reference, both Metals Week and Ryan’s Notes, the two bi-weekly publications on Moly price (and the publications most Companies use to base transactions off) have been down in the $14.65 range for a week or two, so not all that surprising to see LME prices come off the $14.97 level."

This report said the spot $14.65/lb followed the LME down-tick but it seems the timing was vice-verse. I believe Infomine (this Report's source) uses a composite roll-up of spot prices and appreciate the more accurate and 'user-relevant' input from Seth. He added, "...we are still expecting the Autumn rally as demand picks back up following summer maintenance and holiday periods."

Seth provided this article he just received from Metals Week in support of his view looking forward:

S Korean FeMo plants start restocking for Q4

South Korean ferromolybdenum plants have started to seek spot moly oxide cargoes on expectations of demand from steelmakers picking up in the fourth quarter, market sources said Thursday. Earlier this week, spot trades into South Korea were scarce. But buying interest increased Thursday following the rebound in the London Metal Exchange metal prices, sources said. Korean buyers were mostly ferromoly plants, anticipating a price rise next week. Chinese traders, the major spot suppliers to South Korea, have offered $14.50/lb CIF Busan while buyers bid $14.30-14.40/lb. A 40 mt deal was heard done at $14.40/lb CIF Thursday, but Platts has not been able to confirm directly with the buyer. Most ferromoly plants in South Korea are operating at below 80% rates currently, plant sources said. They are hoping to lift their run rates as ferromoly orders from Europe may increase in the coming weeks for October-December consumption. Orders were thin, although contacts have become more frequent. “There were inquiries, but the Europeans were checking our numbers,” said one plant source. “The Europeans wanted to check our stock level. But no business done,” said a second source. Europeans had indicated buying ferromoly at $35.20/kg or below, in-warehouse Rotterdam basis, which they could not accept, the plant sources said. South Korean ferromoly imports into Europe have been duty-free since July 1. Meanwhile, three South Korean traders doing ferromoly tolling business have chosen to stay on the sidelines. “It is a bit shaky. There are positive signs today, but things may turn negative tomorrow,” said one trader.


Seth concluded,

"Still early in the game, but we are still expecting a positive price movement in September. Europe is a wild card here, but there is absolutely zero chance that China will let its economy enter a recession. They have too much firepower (in the form of USDs) and too many people demanding jobs, growth, homes, etc. to allow that to happen. Some pretty mixed economic data from the Western world, but I think more indicative of sluggish GDP growth, not GDP contraction."

This report thanks Seth Foreman for his data clarification and valuable insights into the fundamentals behind molybdenum pricing.


Daily Market Roundup

Enough talk, let's walk the walk:

Eureka Miner's Index(EMI)

This morning the Eureka Miner's Index© (EMI) is above-par at 118.1, down from yesterday's 133.02 and above the 1-month moving average of 104.56. The EMI set a new low for 2011 of 74.53 on August 9. It is troubling that the 1-month average is almost at the 100-level.

The EMI gives us the market temperature for the factors that have the greatest impact on mining in Eureka County. The record high for the EMI is 816.78 set 01/04/2011; the low was set 6/7/2010 at 50.7. An EMI of 100 is the boundary between hot and cold markets for the metals & miners.

200-day averages are used to update mining equity norms in the EMI on a monthly basis.

Gold Value Index (GVI)

The Eureka Miner’s Gold Value Index© (GVI) is above-par at 100.70, up from yesterday's 96.33 and above its 1-month average of 97.10. The record high for 2011 was 102.71 set Friday, August 19th. Today's Value Adjusted Gold Price© (VAGP) is $1,557.7/oz or $319.6/oz below the current COMEX gold price.

Although gold prices were on the rise, the GVI initially trended down from 6/7/2010 when it had a value of 100; gold regained value reversing the trend, moved sideways for a time and and headed back up recently with vigor. It is showing signs of being a little "toppy" now that it is above the 100-level again.

The GVI gauges the value of gold in relation to oil, copper and silver independent of currency. These three commodities were chosen for relative value comparison because 1) oil derivatives are a common cost element for all miners, 2) copper has proven to be a reliable proxy for global growth and 3) silver is a precious and industrial metal that now competes with gold for investment and as a hedge against fiat currencies.

Value Adjusted Gold Price© (VAGP) is a level that supports current oil, copper & oil prices based on historical commodity norms. If the daily COMEX gold price is below the VAGP, then gold is undervalued; if above, overvalued.

Daily Debt Crisis Watch

July 26th we introduced the Debt Crisis Index (DCI). The DCI is computed in the mornings and at the market close Friday in much the same way we do the EMI & GVI indices. Today, the DCI has a value of 189.8 up from yesterday's 177.9. Our benchmark is 100, the value of the DCI on July 22nd; a bigger number suggests a worsening impact on markets (note 2). This Report has identified an elevated level surpassing 200 is time for serious concern. We are now below that level but caution is in the air.

Daily Oil Watch

Latest Nevada Fuel Prices

On February 1st we identified North Sea Brent crude oil as a good barometer for the developing crisis in the Middle East and North Africa (MENA). It is now above $100/bbl with a large spread from the North American benchmark, Western Texas Intermediate or "Texas light sweet crude", traded on the NYMEX (see note 1). The Report normally follows the latter but will track both until things settle out in the region.

Here are the key front-month contracts as of this morning:

NYMEX light sweet crude $86.07
ICE North Sea Brent crude $112.29
Spread (ICE- NYMEX) = $26.22 (Yesterday, $25.74)

Here are the December contracts* with a narrower spread:

NYMEX light sweet crude $86.85
ICE North Sea Brent crude $110.85
Spread (ICE- NYMEX) = $24.00 (Yesterday, $23.69)

* NYMEX futures contracts have rolled forward, we now show October and December for a 2-month look-ahead

Prices are off their crisis highs and we have $110+ Brent and $85+ NYMEX in December favoring high oil prices throughout the fall and into early winter. My last December prediction that we would see NYMEX $100/bbl oil before the Fourth of July came true on February 23rd.

Eureka Outlook Dashboard

4-WD is ON - The miners are on very rough roads; The VIX or "fear index" is above 25; in early morning trading, bellwether Freeport-McMoRan (FCX) is below its 200-day moving average of $52.45 (our new key level, 08/31 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment.

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

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

The YELLOW light is turned on for Inflation Watch The Federal Reserve phased out buying Treasurys June 30th (aka QE2) but will maintain low interest rates until mid-2013

The ORANGE light is turned back on for Investor Confidence with investors adverse to commodity-sensitive equities

The YELLOW light is turned on our Fuel Gauge with oil above $80

A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, Miner's claim fee, Miner taxation, Cortez Hills, mercury emissions , General Moly Mt. Hope Water Rights, U.S. House committee debates miner workplace safety bill, R&R Partners parts ways with Nevada Mining Association, Obama budget includes mining royalty , Mineral commission fights consolidation, Democrats seek to repeal mining tax from the constitution, Rhoads, Ellison oppose repeal of net proceeds tax, Proposal could change net proceeds tax, 'You get to deduct WHAT???' Nevada lawmakers ask gold miners

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

Commodity Market Morning Update

NYMEX/COMEX: Oil is down $2.86 in early trading at $86.07 (October contract, most active); Gold is up $48.2 to $1877.3 (December contract, most active); Silver is up $1.268 to $42.800 (December contract, most active); Copper is down $0.0675 at $4.0930 (December contract, most active)

Western Molybdenum Oxide (Infomine) is $14.74; European Molybdenum Oxide (Bloomberg) is $14.70; LME cash seller is $14.74, LME moly 3-month seller's contract is $14.74

Stock Market Morning Update

The DOW is up 30.20 points to 11,643.73; the S&P 500 is up 2.09 points at 1220.98

Miners are mixed:

Barrick (ABX) $52.92 up 2.42%
Newmont (NEM) $63.63 up 1.86%
US Gold (UXG) $6.22 up 1.97%
General Moly (Eureka Moly, LLC) (GMO) $3.83 down 0.52%
Thompson Creek (TC) $7.94 down 1.49%
Freeport-McMoRan (FCX) $45.40 down 2.26% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $12.74 down 1.03%
Timberline Resources (TLR) $0.80 up 1.27%

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

ArcelorMittal (MT) $20.32 down 4.51% - global steel producer
POSCO (PKX) $93.40 down 2.26% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is up 0.40% at $1,642,037.35 (what's this?).

Cheers,

Colonel Possum

Note 1 - West Texas Intermediate (WTI), also known as Texas light sweet, is a type of crude oil used as a benchmark in oil pricing and is the underlying commodity of New York Mercantile Exchange's (NYMEX) oil futures contracts. The price of WTI is often referenced in North American news reports on oil prices, alongside the price of North Sea Brent crude (source: Wikipedia)

Note 2 - The impact of the U.S. debt ceiling debate affected investment decisions for weeks before its resolution August 2nd and was followed by an S&P credit downgrade. Global sovereign debt issues have been an overhang on markets for many, many months starting with the Dubai crisis in late November, 2009 and spreading to the euro-zone in 2010-2011.

Headline photograph by Mariana Titus

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

Eureka Moly Goes Live! Will There be an Autumn Moly Rally?

My latest Kitco Commentary: Buy or Sell Gold Now? Check the VAGP First
(8/22/2011)

This morning's...
COMEX Gold price = $1,826.9/oz (December contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 96.33
Value Adjusted Gold Price© (VAGP) = $1,584.6/oz
COMEX - VAGP = $242.3/oz; gold remains overvalued relative to key commodities


Þūnresdæg
Morning Miners!

It is 5:35 AM. Have a hot cup of Thor's Thunderblast, you might want to let it cool down for an hour or two. Our favorite Norseman is up to his old tricks - whatever that stuff is in the pot, it's not coffee. I think the break room's semi-retired thunder god is warming up for a stormy September...

Eureka Moly Goes Live!

General Moly's Zach Spencer just informed me that the Eureka Moly LLC website is making its debut today. Congratulations!

Check it out, it's a dandy:

http://www.eurekamoly.com/

Will There Be an Autumn Moly Rally?

On August 3rd the ole Colonel said this about spot moly oxide:

Spot moly prices looked like they were forming a bottom for the summer and set to trend back up in the August-September period. I had made a prediction we'd see $16/lb molybdenum before Halloween. The latest global growth jitters may put some overburden on that prediction. (The Eureka Miner's Market Report, 8/03/2011)

Hmm...maybe a lot of overburden. We still have two months to bump up from $14/lb territory but the London Metal Exchange (LME) 3-month molybdenum contact started its market week going in the wrong direction for a rally. Western spot prices (per Infomine) and the LME 3-month contract have been stuck just below $15/lb for a good part of August at $14.97/lb ($33,000/metric ton). Monday was a holiday for Londoners but on Tuesday, LME moly dropped to $32,300/metric tonne ($14.65/lb). Tuesday recovered some of the loss and moved the 3-month up to $32,500/metric ton ($14.74/lb).

Admittedly, these are small changes but were followed by a fall-off in Western spot to $14.65/lb. European moly oxide (per Bloomberg) should update today but it has been the laggard at $14.50/lb for some time. If futures and spot prices start migrating to the mid- or low-$14/lb range, an Autumn rally to $16/lb looks a lot less likely. Still early in the game, I need to ask General Moly's Seth Foreman what he thinks is down the road. Stay tuned.

In the meantime, here is a 3-month charts for the LME 3-month contract:

Remember, London dates are backwards (31/8/2011 vs 8/31/2011). Here is the companion chart for Western moly oxide spot prices as reported by Infomine:

Daily Market Roundup

Enough talk, let's walk the walk:

Eureka Miner's Index(EMI)

This morning the Eureka Miner's Index© (EMI) is above-par at 133.02, down from yesterday's 138.12 and above the 1-month moving average of 108.83. The EMI set a new low for 2011 of 74.53 on August 9.

The EMI gives us the market temperature for the factors that have the greatest impact on mining in Eureka County. The record high for the EMI is 816.78 set 01/04/2011; the low was set 6/7/2010 at 50.7. An EMI of 100 is the boundary between hot and cold markets for the metals & miners.

200-day averages are used in the EMI

Gold Value Index (GVI)

The Eureka Miner’s Gold Value Index© (GVI) is below-par at 96.33, down from yesterday's 96.47 and just below its 1-month average of 96.37. The record high for 2011 was 102.71 set Friday, August 19th. Today's Value Adjusted Gold Price© (VAGP) is $1,584.6/oz or $242.3/oz below the current COMEX gold price.

Although gold prices were on the rise, the GVI initially trended down from 6/7/2010 when it had a value of 100; gold regained value recently reversing the trend, moved sideways for a time and and headed back up with vigor. It is showing signs of being a little "toppy" now that it is around the 100-level again.

The GVI gauges the value of gold in relation to oil, copper and silver independent of currency. These three commodities were chosen for relative value comparison because 1) oil derivatives are a common cost element for all miners, 2) copper has proven to be a reliable proxy for global growth and 3) silver is a precious and industrial metal that now competes with gold for investment and as a hedge against fiat currencies.

Value Adjusted Gold Price© (VAGP) is a level that supports current oil, copper & oil prices based on historical commodity norms. If the daily COMEX gold price is below the VAGP, then gold is undervalued; if above, overvalued.

Daily Debt Crisis Watch

July 26th we introduced the Debt Crisis Index (DCI). The DCI is computed in the mornings and at the market close Friday in much the same way we do the EMI & GVI indices. Today, the DCI has a value of 177.9 up from yesterday's 168.6. Our benchmark is 100, the value of the DCI on July 22nd; a bigger number suggests a worsening impact on markets (note 2). This Report has identified an elevated level surpassing 200 is time for serious concern. We are now below that level and trending down.

Daily Oil Watch

Latest Nevada Fuel Prices

On February 1st we identified North Sea Brent crude oil as a good barometer for the developing crisis in the Middle East and North Africa (MENA). It is now above $100/bbl with a large spread from the North American benchmark, Western Texas Intermediate or "Texas light sweet crude", traded on the NYMEX (see note 1). The Report normally follows the latter but will track both until things settle out in the region.

Here are the key front-month contracts as of this morning:

NYMEX light sweet crude $88.86
ICE North Sea Brent crude $114.60
Spread (ICE- NYMEX) = $25.74 (Yesterday, $25.71)

Here are the December contracts* with a narrower spread:

NYMEX light sweet crude $89.50
ICE North Sea Brent crude $113.31
Spread (ICE- NYMEX) = $23.81 (Yesterday, $23.69)

* NYMEX futures contracts have rolled forward, we now show October and December for a 2-month look-ahead

Prices are off their crisis highs and we have $110+ Brent and $85+ NYMEX in December favoring high oil prices throughout the fall and into early winter. My last December prediction that we would see NYMEX $100/bbl oil before the Fourth of July came true on February 23rd.

Eureka Outlook Dashboard

4-WD is ON - The miners are on very rough roads; The VIX or "fear index" is above 25; in early morning trading, bellwether Freeport-McMoRan (FCX) is below its 200-day moving average of $52.45 (our new key level, 08/31 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment.

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

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

The YELLOW light is turned on for Inflation Watch The Federal Reserve phased out buying Treasurys June 30th (aka QE2) but will maintain low interest rates until mid-2013

The ORANGE light is turned back on for Investor Confidence with investors adverse to commodity-sensitive equities

The YELLOW light is turned on our Fuel Gauge with oil above $80

A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, Miner's claim fee, Miner taxation, Cortez Hills, mercury emissions , General Moly Mt. Hope Water Rights, U.S. House committee debates miner workplace safety bill, R&R Partners parts ways with Nevada Mining Association, Obama budget includes mining royalty , Mineral commission fights consolidation, Democrats seek to repeal mining tax from the constitution, Rhoads, Ellison oppose repeal of net proceeds tax, Proposal could change net proceeds tax, 'You get to deduct WHAT???' Nevada lawmakers ask gold miners

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 $88.86 (October contract, most active); Gold is down $4.8 to $1826.9 (December contract, most active); Silver is down 0.183 to $41.585 (December contract, most active); Copper is down $0.0535 at $4.1510 (December contract, most active)

Western Molybdenum Oxide (Infomine) is $14.65; European Molybdenum Oxide (Bloomberg) is $14.50; LME cash seller is $14.74, LME moly 3-month seller's contract is $14.74

Stock Market Morning Update

The DOW is up 30.20 points to 11,643.73; the S&P 500 is up 2.09 points at 1220.98

Miners are up mostly:

Barrick (ABX) $51.10 up 0.69%
Newmont (NEM) $62.77 up 0.24%
US Gold (UXG) $6.19 unchanged
General Moly (Eureka Moly, LLC) (GMO) $4.04 up 1.76%
Thompson Creek (TC) $8.28 up 0.12%
Freeport-McMoRan (FCX) $47.58 up 1.00% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $13.44 up 1.00%
Timberline Resources (TLR) $0.79 unchanged

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

ArcelorMittal (MT) $21.75 down 1.00% - global steel producer
POSCO (PKX) $95.57 up 0.45% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is up 0.48% at $1,661,339.12 (what's this?).

Cheers,

Colonel Possum

Note 1 - West Texas Intermediate (WTI), also known as Texas light sweet, is a type of crude oil used as a benchmark in oil pricing and is the underlying commodity of New York Mercantile Exchange's (NYMEX) oil futures contracts. The price of WTI is often referenced in North American news reports on oil prices, alongside the price of North Sea Brent crude (source: Wikipedia)

Note 2 - The impact of the U.S. debt ceiling debate affected investment decisions for weeks before its resolution August 2nd and was followed by an S&P credit downgrade. Global sovereign debt issues have been an overhang on markets for many, many months starting with the Dubai crisis in late November, 2009 and spreading to the euro-zone in 2010-2011.

Headline photograph by Mariana Titus

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