Diamonds are a (Canadian) Miner's Best Friend

Morning Miners!

It is 5:45 AM, grab a cup and let's kick start this week. Some stories are just too much fun to pass up. Before we get to story telling, a faithful reader asked me the other day to explain Barrick's new direction and "de-hedging". I have included my reply below the sign off today for those of you that may also be wondering what's going on. Keep those questions coming!


The Colonel is a fan of the History Channel's summer show "Ice Road Truckers". It is a great series about the men and women that brave driving trucks in the great white north to deliver supplies to mines and oil & gas exploration sites near the Arctic Circle. One of their destinations has been Canada'a Diavik Diamond Mine which is only accessible 10-weeks out the year by ice road. You thought you have problems making a good list before driving to Elko's Walmart!


Diavik Mine is back in the news because they have canceled their scheduled winter shutdown and 2010 delivery is expected to ramp up to 7.5 million carats of diamonds or more. Diamonds are another canary in the global recovery mineshaft and this announcement is a positive sign for better times ahead. As you can imagine, demand for high-end diamond jewelry was one of the first fatalities in the economic downturn. Harry Winston Diamond Corp.(NYSE:HWD), a major Diavik owner, saw their share price drop from above $45 in the Fall of 2007 to below $5 this year. Signs of returning demand have created new interest in the fortunes of this hole-in-the-ground in Canada's Far North. In the words of chairman and chief executive Robert Gannicott:

"Since the market has improved substantially and consistently since the beginning of the first quarter, there is now a new mine plan under consideration..." (conference call, 9/11/09)

With a new salon in Singapore and eight others in Asia, Gannicott said Harry Winston is well positioned to profit from "a sector of the world economy that is expected to drive new growth."

Here are some related Web sites for the full story. There are some great mining photos on the Diavik site:

Harry Winston says new plan for Diavik would see 7.5M carats delivered in 2010 (Canadian Press, 9/11/09)

Diavik Minesite

Harry Winston Diamond Corporation

Ice Road Truckers


The ole Colonel is considering putting a little money on Harry. I would caution that this is a highly speculative play and depends greatly on the sustainability of global recovery, ice roads and and a lot of other stuff. Ah, what the heck! HWD is presently trading around $7.50 and is one of the few mining stocks trading up on an otherwise downer day. More on that when we walk the walk.

On the other side of the coin, I continue to be concerned about the softness in metals. Even gold and silver are in retreat today. Unfortunately molybdenum and nickel, key ingredients in the manufacture of steel, continued to slide Friday. Moly is now at $14.75, considerably below our $16.50 magic number (what's this?). Here's a one-month chart of molybdenum and nickel:


The Colonel will keep this chart running for you until something moves up. Let's cross our fingers.

Enough talk, let's walk the walk:

4-WD is OFF (the VIX or "fear index" is low)

Yellow light is ON for declining molybdenum price (less than magic number: $16.50)

Yellow light is ON for possible adverse regulation/legislation (mercury emissions)

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

Oil is down $1.05 in early trading to $68.24 (October contract); Gold is down $7.60 to $998.8 (December contract, most active); Silver is down $0.180 to $16.520 (December contract); Copper is down $0.0590 to $278.75 (December contract); Molybdenum drops to $14.75.

The DOW is down 9.06 points to 9596.35; the S&P 500, down 0.15 points to 1042.58. The miners are not happy:

Barrick (ABX) $37.79 down 1.02%
Newmont (NEM) $46.04 down 1.05%
General Moly (Eureka Moly, LLC) (GMO) $3.15 down 1.25%
Freeport McMoran (FCX) $69.63 down 1.05% (a bellwether mining stock spanning gold, copper & molybdenum)

Steel stocks are flat, (a "tell" for General Moly):

Nucor (NUE) $46.31 down 0.13% - domestic steel manufacturing
ArcelorMittal (MT) $39.65 down 0.05% - global steel producer
POSCO (PKX) $98.58 down 0.33% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is down 0.58% to $1,190,490.31(what is this?).

Cheers,

Colonel Possum

Headline Photograph by Mariana Titus, "Waterhole Reflections", Ackerman Ranch

All other photos courtesy of The Diavik Diamond Mine

Response to a Reader's Question about Barrick and de-hedging:

In markets, hedging is a technique used by both buyers and sellers to reduce risk. Of course with less risk there is less reward. The old adage comes to mind, "hedge your bets", where one puts a little money on other horses in addition to your favorite to win. De-hedging goes in the the opposite direction, increasing risk and the possibility for greatest reward. In our analogy, placing all your money on one horse to win is an unhedged bet.

A recent Forbes article has a good explanation Barrick's de-hedging announcement:

"Gold hedges are futures contracts that commit a company to selling the metal at set prices. While hedges guarantee certain cash flows, they often commit a metals producer to ship the gold at prices lower than the current spot price. Barrick's decision to pay off its hedges amounts to a bet that gold prices - which rose above $1,000 per ounce Tuesday - will keep rising." (Forbes, 9/12/09)

Hedging became popular with gold miners like Barrick when gold prices experienced a lot of price swings in the 1990s:

"The industry went on an orgy of hedging in the 1990s, when a combination of weakening spot gold prices and a steep forward curve made it very profitable. This decade, as gold's prospects have brightened, hedging has fallen out of favor. Barrick, one of the last holdouts, has seen its stock lag behind the broader sector significantly this year." (WSJ, 9/10/09)

Here's a simple example. If I guaranteed to buy gold from a miner every month for $950/oz; the miner does well if the spot price for gold drops below $950 and loses money if it heads higher. With a hedge, at least the miner can rely on a reliable flow of cash. The buyer (me) typically holds on to the miner's gold waiting for the price to move higher to sell. To "de-hedge", I believe Barrick is now buying back gold to relieve themselves from the obligations of futures contracts. If gold keeps heading north to say $1200/oz in 2010, they made a wise decision.

An interesting side to this is the size of Barrick. They are so big that their buy-backs (increased demand) can actually increase the price of gold which then becomes a self-fulfilling prophecy.

Viva Las VIXas! Don't Worry Be Happy

Morning Miners!

It is 5:46 AM, grab a hot cup of Raine's TGIF coffee. Don't worry be happy! There is good cause to be happy this week; gold crossed $1000 retreated a bit but is back over that mercurial mark this morning on the London Exchange, General Moly not only broke $3 yesterday but closed at $3.35, Barrick is looking stronger than ever after its de-hedging announcement Wednesday and the broader markets are at their highs for 2009. You'll notice the Colonel has put us back into 2-Wheel Drive on the Eureka Outlook Dashboard to your right (what's this?). All lights are green except for some recent weakness in molybdenum setting a yellow light for Gold & Moly Prices and a pesky threat of adverse regulation on mercury emissions. We'll close on thoughts about molybdenum.

What's up? September and October are historically the worst months for stock markets. We're just into that period by eleven days but things are looking up. The answer is simple, fear has left the marketplace. How do we know this? There is actually a "fear index" traded right along with soy beans, stocks, bonds and anything else brought to markets. It is called the "Chicago Board Options Exchange Volatility Index" or simply VIX. The VIX is often referred to as the "fear index" because it is a measure of market volatility. When there are wild swings in the markets, we say the volatility is high; when day-to-day price fluctuations are small, we say the volatility is low and markets are stable.

The VIX represents one measure of the market's expectation of volatility over the next 30 day period. It is derived from S&P 500 index options which investors buy and sell to defray risk. A high value corresponds to a more volatile market and therefore more costly options. Options are like insurance, when the rates go up you can bet someone is expecting a hurricane in the investment world.

To give this some perspective, the ole Colonel dug into a little recent history. Here are some key events during the current recession and the corresponding values of the "fear index":

03/17/2008 VIX=35.6 Collapse of Bear Stearns
09/15/2008 VIX=31.9 Collapse of Lehman Brothers
10/23/2008 VIX=96.4 Highest VIX, fear of a run on the banks
03/09/2009 VIX=51.3 S&P 500 March closing low 676.53 ("the bottom")

Recent History:

09/02/2009 VIX=29.6 S&P 500 recent low (994.75 close)
09/09/2009 VIX=24.3 S&P 500 new high (1,033.37 close)
09/10/2009 VIX=23.6 S&P 500 new high (1,044.14 close)

I'd say any VIX number below 25 is a pretty fearless environment. Of course, what replaces fear in markets? You got it buckaroos...GREED! I think you should still be happy but a cautious happy is always best. The one thing that has worried the Colonel lately has been a softness in the metals (except for precious metals). Copper is still below $3 and molybdenum has been a wilting violet lately. I thought It might be a good idea to compare moly with nickel since both are used in the manufacture of steel. Here is a one month chart:


Interestingly, molybdenum and nickel have roughly followed each other down. There was a blip up on nickel yesterday and maybe we're seeing a bottom in both metals (one data point is a stretch to make such a conclusion!). I'd say nickel and moly trending up coupled with copper north of $3 would indicate smooth roads for markets and global recovery (at least for the time being). Certainly stock prices for General Moly and the steelmakers are feeling no pain right now. Even POSCO has its mojo back which is a great sign for GMO.

Enough bubbly-bubbly, let's walk the walk:

4-WD is OFF (the VIX or "fear index" is low)

Yellow light is ON for declining molybdenum price (less than magic number: $16.50)

Yellow light is ON for possible adverse regulation/legislation (mercury emissions)

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

Oil is up $0.48 in early trading to $72.42 (October contract); Gold is up $12.0 to $1008.8(December contract, most active); Silver is up $0.180 to $16.850 (December contract); Copper is up $0.0060 to $2.8825 (December contract); Molybdenum sits at $15.15.

The DOW is up 10.36 points to 9673.84; the S&P 500, up 2.85 points to 1046.99. The miners are singing with Elvis:

Barrick (ABX) $38.70 up 1.84%
Newmont (NEM) $47.20 up 2.34%
General Moly (Eureka Moly, LLC) (GMO) $3.20 down 4.48%
Freeport McMoran (FCX) $70.70 up 2.08% (a bellwether mining stock spanning gold, copper & molybdenum)

Steel stocks are dancing too, (a "tell" for General Moly):

Nucor (NUE) $47.35 up 0.68% - domestic steel manufacturing
ArcelorMittal (MT) $40.09 up 4.18% - global steel producer
POSCO (PKX) $99.95 up 1.40% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is up 0.77% to $1,208,762.88(what is this?).

Cheers,

Colonel Possum

Headline Photograph by the ole Colonel

CAT Adds Another Hat, GMO Breaks $3.00

Morning Miners!

It is 5:48 AM and the ole Colonel is making a new pot. The first passed quickly when the break room was filled with gold experts earlier this morning. It's amazing how $1000 gold brings'em out of the wood work. Alan Greenspan was even here in a new pair of Raine's Wranglers and an oversize Resistol. I think they're all headed out to Barrick for a mine tour. We'll close on that in a moment, check this out first buckaroos.



For those of you that wear the CAT hat or carry a fondness for the old timer International Harvester trucks, there is some breaking news for you this morning. Although the deal has been in the works for some time, Caterpillar and Navistar just announced that they closed a joint venture transaction resulting in a new company, NC2 Global LLC (see note 1 below). It will serve the global commercial truck market and establish its headquarters in the Chicago area. Here is the press release:

NC2 Global LLC Press Release (09/10/09)

I can't think of a better example of two companies that "get it" when it comes to America's rightful and proud tire tracks in the global economy. Let's give them a Colonel Yee-ha!

Back to the world of gold which is certainly the buzz this week. Both gold and silver stumbled on the London spot market this morning but have recovered since. The yeller stuff dipped below $985 and then returned to $990; well below the $1000 mark but some profit taking is to be expected given the recent rally. The Colonel is sticking with his prediction of $1050 before Christmas. Silver followed gold to test $16.10 before bouncing back to $16.40. It will take a few days to see where we go next on precious metals. Not surprisingly the greenback reached new 52-week lows yesterday and I used that opportunity to buy more dollars through the Exchange Traded Fund UUP (someone needs to swim upstream, water wings advised).

After halting trading on two exchanges yesterday, Barrick is back on its feet nicely since its de-hedging announcement (Barrick Makes Bold Move, Moly Drops).

General Moly is screaming this morning jumping more than 9% to break $3.00. The intraday high is $3.15 so far. That deserves another Colonel Yee-ha!

Unfortunately molybdenum took another leg down to $15.10 and copper continues to struggle below $3. Metals don't lie buckaroos, I'd feel a whole lot better if these canaries would start flying north again. Here's a one month chart of our two little birdies in the global recovery mineshaft:


OK. Let's clear the decks and see what Alan Geenspan has to say about gold and currencies. Yeah, he probably did help crater the global economy but he was our monetary grandpa for all those years. If you want to ditch the link and show that old pa-pa how to wear a hat, I'm not tellin':

Gold Rally Signals Move Away From Currencies, Greenspan Says (Bloomberg, 9/9/09)

Let's skip the mine tour and walk the walk:

CAUTION: 4-WD ON, Off-Road Market Conditions Ahead

Yellow light on for declining molybdenum price (less than magic number: $16.50)

Yellow light on for possible adverse legislation (mercury emissions)

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

Oil is up $0.61 in early trading to $71.92 (October contract); Gold is down $4.7 to $992.4(December contract, most active); Silver is down $0.055 to $16.415 (December contract); Copper is up $0.0650 to $2.8590 (December contract); Molybdenum drops to $15.10.

The DOW is up 20.33 points to 9567.55; the S&P 500, up 2.18 points to 1035.55. The miners are rocking:

Barrick (ABX) $37.45 up 1.35%
Newmont (NEM) $46.11 up 2.74%
General Moly (Eureka Moly, LLC) (GMO) $3.14 up 9.03%
Freeport McMoran (FCX) $67.96 up 0.41% (a bellwether mining stock spanning gold, copper & molybdenum)

Steel stocks are dancing too, (a "tell" for General Moly):

Nucor (NUE) $46.03 up 0.88% - domestic steel manufacturing
ArcelorMittal (MT) $37.94 up 0.15% - global steel producer
POSCO (PKX) $97.44 up 2.22% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is up 1.85% to $1,177,020.05(what is this?).

Cheers,

Colonel Possum

Headline Photograph by Mariana Titus

Note 1 - In 1986 Harvester changed the corporate name to Navistar International Corporation (Harvester had sold the International Harvester name and the IH symbol to Tenneco Inc. as part of the sale of its Ag division). Navistar International Corporation continues to manufacture medium- and heavy-duty trucks, school buses, and engines under the International brand name. (Wikipedia)

Barrick Makes Bold Move, Moly Drops

Morning Miners!

It is 5:49 AM, have a cup and note that today is "nine-nine-nine", I don't know what this portends but it happens only once!

A faithful reader alerted the ole Colonel to a bold move made by Barrick yesterday. I appreciate this, many eyes make a better report. Barrick announced a plan to eliminate all of their gold hedge contracts within a year. Here are the key links:

Barrick Announces Plan to Eliminate Gold Hedges; Launches $3 Billion Public Equity Offering (Barrick Website, 9/08/09)

Barrick Gold to Sell $3 Billion in Stock, Buy Back Hedges (CNBC, 9/08/09)

They are offering $3 billion in stock to buy back both fixed priced contracts and a portion of their spot price gold contracts. Why is this important? In their words:

"Barrick has made this strategic decision to gain full leverage to the gold price on all future production due to:

• an increasingly positive outlook on the gold price. The Company expects global monetary and fiscal reflation will be necessary for years to come, resulting in an increased risk of higher inflation and a future negative impact on the value of global currencies; and
• continuing robust gold supply/demand fundamentals.

In addition, Barrick believes that the Gold Hedges and the Floating Contracts were adversely impacting the Company's appeal to the broader investment community and hence, its share price performance."

This will no doubt cause some volatility in Barrick's share price (ABX) and I've just noticed that trading has been halted on the Toronto and New York exchanges. Now that's what I call a whooper-dooper press release!

This offer is called a "dilution" because the present value of the company will be spread over more shares. The hope for investors is that future value without hedges will increase with rising gold prices so that the net affect will be positive for everyone.

Moves like this cause considerable discussion by the talking heads. There are least two camps so far. The first sees this news as yet another example of gold's expected rise beyond $1000 to higher prices and a positive for gold miners; the opposing view is that Barrick was pushed into this decision by shareholders, that they were one of the last big gold miners to do so (see note 1 below) and it marks a near term top for both gold and miners. The latter view is based on the old "sell the news, buy the rumor" logic in markets. Confused? We won't know the answer for awhile, ABX is frozen at yesterday's close of $39.30. Newmont is up this morning and gold is hovering just slightly below $1000 on the London exchange.

While we wait for that kettle to boil, I'm a little concerned about the recent fall in molybdenum prices. Please notice that I've turned one of the Eureka Outlook Dashboard lights to yellow this morning since moly closed below $16.50 yesterday to settle at $15.83.


I don't the reason for this and it hasn't affected General Moly (GMO) share price which steadily chugs closer to $3. The Report will sort out whether this is weakening demand or new supply in the next few weeks. There is one more troubling sign, however, that may be related to the price decline. In the past 3-months South Korean steel producer, POSCO, has lead both ArcelorMittal and Nucor in performance. These are the three steelmakers that the Report tracks on a daily basis. POSCO is important since they own a 20% share in our Mt. Hope Project. In the last month, POSCO has fallen behind the other two and the S&P 500:

S&P 500 up 1.8%
ArcelorMittal (MT) up 3.2%
Nucoe (NUE) down 3.5%
POSCO (PKX) down 5.1%

Since China is POSCO's biggest customer it is not unreasonable to wonder if something is weakening in the China recovery story. The Colonel would feel a whole lot better if copper broke $3 which would support the sustained Asian rebound argument. Too early to tell buckaroos but everything is connected these days. Stay tuned.

OK. Barrick resumed trading at 10:15 AM (EDT) and is presently only down a bit over 3% for the day. Salman Partners has just raised Barrick's price target (for the next 12 months) to $C48 from $C44.75. How's that for real time reporting! I'm hanging onto my Barrick stock pardner.

Enough talk, let's walk the walk:

CAUTION: 4-WD ON, Off-Road Market Conditions Ahead

Yellow light on for declining molybdenum price (less than magic number: $16.50)

Yellow light on for possible adverse legislation (mercury emissions)

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

Oil is up $0.50 in early trading to $71.60 (October contract); Gold is up $0.4 to $1000.2 (December contract, most active); Silver is up $0.060 to $16.520 (December contract); Copper is up $0.0125 to $2.9435 (December contract); Molybdenum drops to $15.83.

The DOW is up 25.24 points to 9522.58; the S&P 500, up 4.07 points to 1029.46. The miners are mixed:

Barrick (ABX) $37.87 down 3.64%
Newmont (NEM) $45.93 up 0.50%
General Moly (Eureka Moly, LLC) (GMO) $2.89 up 1.40%
Freeport McMoran (FCX) $67.66 down 0.50% (a bellwether mining stock spanning gold, copper & molybdenum)

Steel stocks are up, (a "tell" for General Moly):

Nucor (NUE) $45.61 up 0.48% - domestic steel manufacturing
ArcelorMittal (MT) $38.07 up 1.71% - global steel producer
POSCO (PKX) $95.46 up 1.68% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is up 0.28% to $1,160,280.19(what is this?).

Cheers,

Colonel Possum

Headline Photograph by Mariana Titus

Note 1 - AngloGold Ashanti now sticks out as the last big miner with a significant hedge book.

Gold Breaks $1007, Attack of the Ninja Miners (& EPA)

Morning Miners!

It is 5:39 AM, grab a cup and welcome back. I hope you had a relaxing Labor Day because there is a pile of stuff in our in-basket. To start a long haul with new tires, we've got a precious metal rally buckaroos! By mid morning London time gold broke $1007, silver danced with $16.80 and platinum leapt to $1,285. That deserves a Colonel Yee-ha! The question for the morning is whether gold can hold above the elusive $1000 mark. We'll close on that thought in a moment.


Let's do something fun to get back in shape. A faithful reader sent a link to a time lapse drive through Austin on YouTube. This will take your breath away and it's set to music to get your feet a'tappin':

Austin Nevada Timelapse Drive

By the by, if you hear this music coming out of your supervisor's office you don't need to worry about that lousy Friday report you cobbled together to get out of the office early.

For some entertaining reading on your break check out the "Ninja Miners" courtesy of Mineweb and NPR:

A 21st-century gold rush is taking place in Mongolia (Mineweb: NPR, 9/8/2009)

The Report has covered Mongolia before (Dondog's Find in Oyo Tolgoi) and it is clearly the new Wild West (Wild East?) for gold miners. There is a short video and 11 photographs of the most basic gold mining you can imagine. Former goat herders are tearing at the landscape in ways that remind me of our own gold rush days in early California. There is a picture of miners playing pool in front of their yurts that proves miners are a crazy lot no matter where you find them on our globe!

On a more serious note, the Las Vegas Sun carried an article on mercury emissions last week:

Feds consider taking lead on mercury emissions (Las Vegas Sun, 9/03/2009)

This is a story that has been around for a long time but the chilling new turn is a focus on Nevada gold mines by a re-energized Environmental Protection Agency (EPA). The EPA is moving forward with the nation’s first-ever regulation of mercury emissions from gold mines and the agency’s top administrator vows stricter monitoring of the toxin — which continues to accumulate in streams, air and fish. It is feared that the new Federal approach will be at odds with our State's own efforts to control mercury emissions. An EPA on steroids could have a serious impact on the mining future of Eureka County. The Colonel will keep his eyes open on this one.

Nuts, just when we were having fun. Let's close on a positive. We've crossed $1000 on gold before only to see it fall down the mineshaft faster than it came up in the elevator. What might be different this time? Here is a brief summary:

1) Dollar strength - The US dollar is seen by many as weak with unemployment continuing to increase and serious concerns being expressed over the economic path taken by the administration. The ole Colonel has hedged his gold position by buying the dollar (i.e., Exchange Traded Fund UUP) which takes the opposite side of this trade. I agree the dollar should continue to weaken next year but believe a dollar rally is in the cards if there is a market dipsy-doodle-down this Fall. In that event we might see the dollar and gold rise together.

3) Supply-side - global production continues to fall

4) China factor - Chinese domestic gold holdings are increasing together with a Chinese government that continues to boost its own gold holdings to hedge their massive US dollar reserves.

5) Investment safe-haven - If buying in the U.S. and Europe continues this time gold may hold its higher level and $1,000 could be the platform for further growth in price.

There are of course downsides such as reduced jewelry buying in India due to the economic impact of drought and the high price of gold. Jewelry buying tends to be seasonal (now is the beginning of peak India demand) and the expected decrease is dwarfed by the safe-haven investment demand seen so far this year.

Looks pretty honky dory for sustaining gold price buckaroos. Let's walk the walk:

CAUTION: 4-WD ON, Off-Road Market Conditions Ahead

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

Oil is up $2.11 in early trading to $70.13 (October contract); Gold is up $6.8 to $1003.5 (8:26 AM update, December contract, most active); Silver is up $0.445 to $16.730 (December contract); Copper is up $0.1030 to $2.9730 (December contract); Molybdenum dropped to the magic number $16.50 (what's this?). Further drops from this level will trigger a yellow light on the Dashboard.

The DOW is up 54,56 points to 9495.83; the S&P 500, up 8.25 points to 1024.65. The miners are rocking:

Barrick (ABX) $41.35 up 3.27%
Newmont (NEM) $47.39 up 2.51%
General Moly (Eureka Moly, LLC) (GMO) $2.86 up 1.78%
Freeport McMoran (FCX) $68.57 up 3.89% (a bellwether mining stock spanning gold, copper & molybdenum)

Steel stocks are happy-pappy too, (a "tell" for General Moly):

Nucor (NUE) $44.96 up 1.79% - domestic steel manufacturing
ArcelorMittal (MT) $37.23 up 4.02% - global steel producer
POSCO (PKX) $93.75 up 0.39% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is up a big 2.49% to $1,167,598.68(what is this?).

Cheers,

Colonel Possum

Headline Photograph by Mariana Titus: Pete Damele and Horse, Ackerman Ranch

Unemployment Jumps to 9.7% but...

Morning Miners!

It is 5:26 AM, I've got my cup topped up with some delicious Raine's TGIFLDW coffee (Thank God It's Finally Labor Day Weekend!). The Labor Department's Jobs Report is coming up in a few minutes, I'll be right back.

Hmmm...a bit mixed buckaroos. Entering our twentieth month of job losses, unemployment jumped to 9.7% (that's not good) but total jobs lost in August is less than expected (216,000 versus 230,000, that's less bad). But...the June and July numbers for job losses were 50,000 more than previously reported (euphemistically called an "up revision" by government number crunchers). Hey, if one person loses a job, that's not good!


CNBC Business News tries their best to make these monthly trips to the economic dentist as painless as possible. For those of us that get up before the chickens to watch this nonsense, the lovely Becky Quick reads the Jobs Report and this time was joined by Australian Business News anchor, Amanda Drury. Her "down under" accent is akin to the songs of morning birds. All very pleasant.

The comments by the commentators are, of course, less pleasant: "sea of lesser negatives", "worrisome numbers" and "horrific to obvious improvement". I think without Becky and Amanda hosting these early shows, folks would throw bricks at their televisions.

So what does this all mean? Losing 216,000 jobs a month is certainly better than 750,000 at the beginning of the year. The new buzzword this moning is "trajectory." Some analysts see an improved "trajectory" to zero job loss. That's encouraging but it is hard to feed your family trajectories.


Dr. Mohamed Abdulla El-Erian was Becky and Mandy's VIP guest this morning. He is the CEO and co-CIO of PIMCO, the world’s largest bond investor with $850 billion of assets under management. He is credited with the "sugar high" analogy to the present economic times which has become another news buzzword. According to the good Doc, 2009 should close with a "nice bounce" due to stimulus but then 2010 becomes the rough crash from the sugar high. El-Erian sees the recovery as having three stages: stimulus, rebuilding of inventories and demand. If strong demand does not return in 2010, watch out. Since 10 trillion dollars of our 14 trillion dollar economy rely on the consumer, a weak consumer translates to weak growth. If you're not employed, you're not consuming (as much) and El-Erian believes this is aggravated by "lacking credit in the recovery".

OK, OK, enough already! Returning to our "sugar coated bouncy" phase we see the markets are up this morning, gold is down and the gold miners are retreating a bit from a spectacular 2-day run. Duke and the film crew are back from their prospectin' adventure with no gold in their saddle bags. Given today's news, they will return to filming "The Long Dusty Trail" when we return from Labor Day (what is this?).

Have a great holiday buckaroos and don't let any economists come into your campground!

Enough talk, Becky and Mandy will help us walk the walk:

CAUTION: 4-WD ON, Off-Road Market Conditions Ahead

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

Oil is down $0.45 in early trading to $67.51 (October contract); Gold is down $7.3 to $990.4 (December contract, most active); Silver is down $0.245 to $16.045 (December contract); Copper is down $0.0115 to $2.8535 (December contract); Molybdenum holds at $17.00.

The DOW is up 27.13 points to 9371.74; the S&P 500, up 4.38 points to 1007.62. The miners are mixed:

Barrick (ABX) $39.31 down 0.56%
Newmont (NEM) $45.55 down 0.48%
General Moly (Eureka Moly, LLC) (GMO) $2.83 up 0.71%
Freeport McMoran (FCX) $64.63 up 0.23% (a bellwether mining stock spanning gold, copper & molybdenum)

Steel stocks are down, (a "tell" for General Moly):

Nucor (NUE) $44.02 down 0.11% - domestic steel manufacturing
ArcelorMittal (MT) $35.11 down 0.06% - global steel producer
POSCO (PKX) $92.46 down 0.45% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is down 0.34% to $1,123,337.52 (what is this?).

Cheers,

Colonel Possum

Headline Photograph by Mariana Titus

Gold Breaks $980, Barrick Soars

Morning Miners!

It is 5:44 AM and the coffee is ready! What a great move in gold yesterday and it appears to have a little steam left today. The yeller stuff broke $980 and spot silver passed $15.80 shortly after lunch London time. Those were my two Labor Day bets so the readers owe the Colonel two beers (The Colonel's Beer Derby, what's this?). The score so far this year for 13 bets is 8 beers for the Colonel, 2 for the readers and 3 open - Yee-ha! Silver has retreated at bit from the highs but there should be more legs to this precious metal rally. The gold miners also took off with Barrick (ABX) jumping an amazing 8% in a single day. (Mid morning UPDATE: Barrick breaks $39 at 12.22 PM EDT, a triple play gives the Colonel one more beer; 13 bets - 9 wins, 2 losses, 2 open)


How do I fell about the rest of my gold predictions for the year? I'll stand by $1050 before Christmas but a drop to $880 before Thanksgiving is probably out of the cards. I made the latter bet earlier this year when gold appeared soft and headed for a correction - hey, you can't win'em all! If we do have any pullbacks, the Colonel would be a buyer somewhere below $950.


Gold is a wonderful way to diversify and a traditional hedge against inflation but I am not a "goldbug". Dennis Gartman, the "Commodity King", suggests 2-3% is a sensible proportion for an individual's liquid assets and I agree. In his words, "...you can't eat the stuff!" I try not to chase rallies and buy on the dips. To hedge my gold position I have been buying the dollar through the UUP Exchange Traded Fund (ETF) since they historically move in opposite directions. I believe the dollar is headed for a rough ride next year but it wouldn't surprise me to see a dollar rally this Fall if the markets head south. Just some food for thought.

If you are a "goldbug" and there's nothing wrong with that, you may find this article interesting:

China pushes silver and gold investment to the masses
(Lawrenece Williams, Mineweb, 09/03/09)

Apparently, the Chinese government is now encouraging its citizens to invest in gold via television ads. Whoa, these folks are sounding more like us everyday. I take this news with a grain of salt; if everybody in the world is rushing to gold, it might be time to check where the doors are in the theater. The ole Colonel doesn't believe this to be the case.

For now, let's be happy we live in gold country and celebrate the rally! The Duke and the boys went prospectin' out by the Eldorado yesterday and haven't been heard from since. Looks like we've got another good day for the miners.

Enough talk, let's walk the walk:

CAUTION: 4-WD ON, Off-Road Market Conditions Ahead

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

Oil is up $0.15 in early trading to $68.20 (October contract); Gold is up $3.8 to $982.3 (8:26 AM update, December contract, most active); Silver is up $0.325 to $15.690 (December contract); Copper is up $0.0345 to $2.8355 (December contract); Molybdenum holds at $17.00.

The DOW is down 2.87 points to 9277.80; the S&P 500, down 0.27 points to 994.48. The miners are happy campers:

Barrick (ABX) $38.52 up 1.66%
Newmont (NEM) $43.78 up 1.51%
General Moly (Eureka Moly, LLC) (GMO) $2.70 up 1.12%
Freeport McMoran (FCX) $63.07 up 2.06% (a bellwether mining stock spanning gold, copper & molybdenum)

Steel stocks are happy too, (a "tell" for General Moly):

Nucor (NUE) $43.41 up 0.16% - domestic steel manufacturing
ArcelorMittal (MT) $34.83 up 2.38% - global steel producer
POSCO (PKX) $91.49 up 1.18% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is up 1.09% to $1,05,711.16 (what is this?).

Cheers,

Colonel Possum

Headline Photograph by Mariana Titus