Metals & Miners Busted

Þūnresdæg
Morning Miners!

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

Gold, silver, copper & oil flop together

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



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

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

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

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

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

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

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

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

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

Metals & Miners Busted

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

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

Is the ole Colonel crazy?

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

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

Daily Market Roundup

Enough talk, let's walk the walk:

Eureka Miner's Index(EMI)

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

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

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

Eureka Outlook Dashboard

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

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

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

The YELLOW light is turned on for Inflation Watch as the Federal Reserve resumes buying Treasurys (aka QE2)

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

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

A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, Miner's claim fee, Miner taxation, Cortez Hills, mercury emissions , General Moly Mt. Hope Water Rights, U.S. House committee debates miner workplace safety bill

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

Commodity Market Morning Update

NYMEX/COMEX: Oil is down $1.94 in early trading at $89.87 (March contract, most active); Gold is down $22.7 to $1347.5 (February contract, most active); Silver is down $0.981 to $27.820 (March contract, most active); Copper is down $0.0745 to $4.2955 (March contract, most active)

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

Stock Market Morning Update

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

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

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

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

The Eureka Miner's Grubstake Portfolio is is down 2.99% at $1,784,923.59 (what's this?).

Cheers,

Colonel Possum

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

Headline photograph by Mariana Titus

Buy Barrick (ABX)? Buy Newmont (NEM)?

Wōdnesdæg
Morning Miners!

It is 5:49 AM. Have a cup of hump day brew and help me console Old Miner Wooden. He's feeling a little unloved these days. He's moved back into the hi-bay this morning, 86'd from senior housing and no sweethearts to chase. The sheriff says he got back into the mead with Thor at the Keyhole - what's a Colonel to do? Speaking of the unloved, what's going on with Barrick and Newmont?

Buy Barrick (ABX)? Buy Newmont (NEM)?

With the broader markets on a tear and the U.S. dollar heading down the mineshaft (again), you'd think our big gold miners would be hotter than their molten product. Of course gold has been pretty cold in the mold lately, a subject of this report since COMEX gold pegged a Pearl Harbor Day record of $1432.5/oz last December. Trading at $1,375.6/oz this morning, there is not much to cheer for folks with short memories. If you recall being excited when gold broke $575/oz a few years ago or the breach of the impenetrable $1000/oz barrier, you may be a little less distraught about living in the $1,300 neighborhood.

There are plenty of professional "explainers" around talking about gold's demise on a better than expected domestic recovery, bursting bubbles and the phase of the moon. One popular line is that "gold doesn't generate income" like a Treasury note or even better these days, a big dividend-paying stock that has moved with the rising tide of the DOW or S&P 500. When things get like this and you need a little something to lift your spirits, read a gold bug article. Here's a good one on John Embry's thoughts from the successful Canadian hedge fund Sprott Asset Management:

Gold stocks "to blow the roof off this year" (Sprott Asset Management's John Embry, Mineweb, 01/19/2011)

Hmm...$2,000/oz gold this year, now don't you feel better? The ole Colonel has hung his hat on $1570/oz before the Fourth of July but things could get messy for the metals & miners in the short term. I always like to buy stocks when they are unloved and our big gold miners have been as down on their luck as Old Miner Wooden.

Here's a 1-year chart of Barrick Gold (ABX) and Newmont (NEM) plotted against their 200-day moving average (green line):



This chart shows a comparison of Barrick and Newmont over the same time peiod:



OK, so what? Even though they are presently in the tailings, both Barrick and Newmont have done well over a one-year period with returns of roughly 16% and 22% respectively. Both are below their 50-day moving averages (MVA) and Newmont is below its 200-day. Here are the numbers:

Barrick Gold (ABX) $48.00 (AM today) $51.23 (50-day MVA) $45.88 (200-day MVA)
Newmont (NEM) $56.69 (AM today) $59.97 (50-day MVA) $58.74 (200-day MVA)

Both are presently paying a 1% dividend with the following price-to-earnings (P/E) ratios:

Barrick Gold (ABX) $0.12/share or 1% dividend; P/E = 19.8
Newmont (NEM) $0.15 0r 1.06% dividend; P/E = 14.9

If you think Barrick looks a little pricey with a P/E of nearly 20 you may choose Newmont as the better deal. Of course their latest performance has been bearish and both could go a lot further down from here on either lower gold price or a turn in the broader markets. I threw a few a few shares of Barrick in the buckboard when it dropped below $50 the other day. If you believe gold is headed higher in 2011 and prefer something that pays an income better than a money market account (presently 0.64% on a national average), you may want to think about owning some of our big boys, 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 703.36, down a bit from yesterday's 718.81. We are now just above the 1-month moving average of 691.94 - tricky territory. The upward trend of the EMI remains under considerable pressure.

The record high for the EMI is 816.78 set 01/04/2011; the low was set 6/7/2010 at 50.7. An EMI greater than 100 signals better times for the metals & miners relevant to Eureka County, the EMI re-established an upward trend on Friday, 12/3 which is under considerable pressure.

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

Eureka Outlook Dashboard

4-WD is OFF - Markets are OK but there could be rough roads ahead; The VIX or "fear index" is below 25; bellwether Freeport-McMoRan (FCX) in the high-$110s well above its 200-day average of $83.07 (our new warning level, 01/05 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment.

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

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

The YELLOW light is turned on for Inflation Watch as the Federal Reserve resumes buying Treasurys (aka QE2)

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

The ORANGE light is turned on our Fuel Gauge with oil above $90

A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, Miner's claim fee, Miner taxation, Cortez Hills, mercury emissions , General Moly Mt. Hope Water Rights, U.S. House committee debates miner workplace safety bill

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

Commodity Market Morning Update

NYMEX/COMEX: Oil is up $0.37 in early trading at $92.68 (March contract, most active); Gold is up $7.4 to $1375.6 (February contract, most active); Silver is up $0.523 to $29.435 (March contract, most active); Copper is up $0.0095 to $4.4375 (March contract, most active)

Western Molybdenum Oxide is $16.00; European Molybdenum Oxide is $17.28; LME moly 3-month seller's contract is $17.10, LME cash seller is $16.92

Stock Market Morning Update

The DOW is up 2.92 points to 11,840.85; the S&P 500 is down 4.55 at 1290.47. Miners are mixed:

Barrick (ABX) $48.00 down 0.33%
Newmont (NEM) $56.69 up 0.23%
US Gold (UXG) $7.25 down 0.55%
General Moly (Eureka Moly, LLC) (GMO) $6.12 down 0.33%
Thompson Creek (TC) $15.01 down 0.13%
Freeport-McMoRan (FCX) $118.04 down 0.47% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $36.47 up 0.77% - global steel producer
POSCO (PKX) $105.96 up 1.16% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.51% at $1,887,377.82 (what's this?).

Cheers,

Colonel Possum

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

Headline photograph by Mariana Titus

What's Up with Gold? Metals & Miners Weekly Roundup

Morning Miners!

It is 5:36 AM. Have a hot cup of Tuesday joe. Sweet Ruby T would sure love to haul in some new records for the metal complex, I think December got her thinking January would be a busy month. Hang tight hon, the orders may be coming back....

What's Up with Gold?

Mining Editor of the Elko Daily Free Press Adella Harding carried some of my latest thinking on gold prices last Friday:

Gold prices end week down (ADELLA HARDING Mining Editor Elko Daily Free Press, Friday, January 14, 2011 5:18 pm)

Let's expand on those thoughts a little for today's Weekly Roundup. Adella started by quoting my reaction to Friday's ups and downs:

"It is natural to wonder what's up on a day when gold is down $30 and copper and oil are up, when gold is down more than 2 percent and the broader commodities index has barely budged..."

I had just watched commodity trader Bill O'Neill on CNBC Business News suggest that investors seriously look at oil, copper and food this year and continued,

"Oil and copper have been reliable proxies for global growth. Although copper has had quite a run up, almost breaking $4.50 a pound, there may be more room to go as a fairly broad consensus expects the red metal will face a supply deficit on rising world demand in 2011..."

Bloomberg's Shanghai correspondent Helen Sun gives us a nice update on the perceived copper deficit this morning:

Copper Advances on Expected Supply Shortfall; Aluminum Climbs (Helen Sun in Shanghai, Bloomberg News, Jan 18, 2011 12:25 AM PT Tuesday)

Adella went on to quote my thoughts on oil,

"Oil is above $90 a barrel gain and many (including myself) believe there is a good chance that we see a spike to $100 a barrel by mid-year..."

and finally gold,

"So what about gold? I believe that copper and oil cannot continue to rise on falling gold. The recent divergence of our lustrous friend from copper and oil and the uncharacteristic resilience of silver compared to gold's weakness may signal a near-term correction for the overall metals and mining sector.."

I ended my input to the Elko Daily Free Press by sticking with my earlier prediction that gold will break $1,570 an ounce before July 4. Let's fill in a few more details given today's market moves...

Gold, Silver, Copper Records

December was a busy month for setting new highs for our favorite metals right up to the first market day of the new year. Here's where we stand for the big three:

COMEX Gold $1432.5/oz 08:25:00 ET 12/7/2010, February contract most active
COMEX Silver $31.275/oz 08:15:00 ET 01/03/2011, March contract most active
COMEX Copper $4.4980/lb 05:45:00 ET 01/03/2011, March contract most active

In the last roundup we identified a trading range for gold with key support at $1298.0/oz and key resistance at $1413.00/oz. Within this range, I picked a nominal gold price of $1380/oz gold for January and a "low ball" price of $1320/oz to evaluate the expected price ranges of oil, copper and silver.

This morning it looks like COMEX gold is trying very hard to make it back to my nominal price trading now at $1372.6/oz after hitting a low Friday of $1355/oz. Silver and copper are bouncing back too at $28.875/oz and 4.4255/lb respectively from last week's lows of $28.050/oz and $4.2540/lb. Not bad, should be a good day for the miners. The broader markets are now open and the miners for the most part are trying to haul away a little of last week's overburden...

Eureka Miner's Index (EMI)

The Eureka Miner's Index (EMI) gives us the market temperature for the sectors that have the greatest impact on mining in Eureka County. Below is a chart of the EMI at Friday's close. The magenta line is the EMI with a low interest cap of 3% on 10-year Treasurys (LIRC) and adjustments for gold and silver prices (i.e., Au:Ag ratio). A 1-month moving average is given by the blue line. A larger and more readable chart appears near the bottom of this blog page.


This morning the Eureka Miner's Index(EMI) is above-par at 718.81, up slightly from Friday's 717.84. We are just staying above the 1-month moving average of 689.49 - although tenuous, a bullish sign. The upward trend for the EMI is still under pressure.

The 2011 record high for the EMI is now 796.00 set 01/03/2011; the 52-week low was set 6/7/2010 at 50.7. An EMI greater than 100 signals better times for the metals & miners relevant to Eureka County, the EMI re-established an upward trend on Friday, 12/3 but is now again under pressure.

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

Oil & Copper Correlations with Gold

Oil & copper correlations with gold give us insight into what may happen next for the metals & miners and shed some light on my "divergence" comment.

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

Oil/Au correlation +0.4767 (1-month) +0.7377 (3-month)
Cu/Au correlation +0.3588 (1-month) +0.5664 (3-month)
Cu/Oil correlation +0.5206 (1-month) +0.9195 (3-month)

Here are the numbers from the last Monday's roundup (01/10/2011):

Oil/Au correlation +0.5472 (1-month) +0.7730 (3-month)
Cu/Au correlation +0.4571 (1-month) +0.6291 (3-month)
Cu/Oil correlation +0.5936 (1-month) +0.9125 (3-month)

All these correlations remain positive which is a typically a bullish condition for the metals & miners but some bearish trends continue. The correlation of copper & gold continues to weaken showing an over-valued state with respect to gold (3.5-standard deviations above the new January model "fair vale" line). Though less severe, oil and gold are also showing divergence. Oil is presently overvalued with respect to gold by 2.75-standard deviations. The 3-month correlations of copper & oil remains above 0.9 suggesting copper and oil prices continue to move together although the 1-month correlation has dropped below 0.6.

One way to visualize these correlations over time is to plot the "near-term" 3-month versus the "short-term" 1-month correlations (aka "rho") as shown below in a graph of oil versus gold and copper versus gold. The blue line indicates the correlation trajectory since October 1st; the magenta line is recent data since December 1st (ref: China to the Rescue?):



In the case of oil versus gold, we start out on 10/1/10 in the "+,-" or "yellow" quadrant and move upward until both are positively correlated (i.e. in the "+,+" or "green" quadrant). Copper correlated positively faster than oil and has been in the green quadrant for this entire period. Correlation data in this region is typically considered bullish. The recent trend toward the "-,+" quadrant for both oil & copper is bearish (white arrow).

Gold/Oil & Oil/Copper Ratios

The Report has been tracking the stability of the gold/oil and oil/copper ratios. Although they ended last year rock solid (<3% variation, 1-standard deviation/mean) the ratios are starting to diverge. This is what prompted my quote to Adella, "The recent divergence of our lustrous friend [gold] from copper and oil...may signal a near-term correction for the overall metals and mining sector."

Here is a plot of the variation for both ratios as well as the copper/oil ratio (a larger and more readable chart is given at the bottom of the blog page):



Once the ratios exceed 3% error, they become less useful in predicting the price moves of one commodity with respect to another in the ratio pair.

For the past 3-months we have these statistics given this mornings' numbers:

Au/Oil ratio

mean 15.88 bbl/oz
variation > 3.0% limit at 3.06% (1-standard deviation/mean)

Oil/Copper ratio

mean 21.45 lbs/bbl
variation 2.54% (1-standard deviation/mean)

Weekly Molybdenum Roundup



Spot prices for molybdenum oxide are in $16/lb territory out West but broke $17/lb in Europe. Moly futures indicate a backwardation between European spot prices and the London Metal Exchange (LME) 3-month contract possibly signaling a pickup in near term demand overseas. Western and European spot prices continue a mild contango with the 15-month seller contracts (contango occurs when the price of a commodity for future delivery is higher than the spot price, or a far future delivery price is higher than a nearer future delivery; backwardation is the opposite of contango).

The 3-month seller at $17.10/lb is comfortably above the Colonel's mid-range moly price target for 2010 of $15.71/lb but below my target of $20.21/lb for 2011. The Report will give moly prices a "yellow-green" light on the Eureka Outlook Dashboard for now because I do believe we could see much higher prices this year.

Here is a detailed pricing summary for last week:

Western Moly Oxide $16.00/lb (the price tracked by Base Metals on the General Moly Website)

Moly Oxide, Europe (Mo Drummed Molydbic Oxide EU) $17.32/lb (the price reported in the Metals Bulletin)

LME Futures Contracts

LME cash seller is at $37300/metric ton $16.92/lb

3-Month (Buyer) $37,000/metric ton $16.78/lb
3-Month (Seller) $37,700/metric ton $17.10/lb

15-Month (Buyer) $38,050/metric ton $17.26/lb
15-Month (Seller) $39,050/metric ton $17.71/lb

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



Daily Market Roundup

Enough talk, let's walk the walk:

Eureka Outlook Dashboard

4-WD is OFF - Markets are stable but caution is in the air; The VIX or "fear index" is below 25; bellwether Freeport-McMoRan (FCX) in the high-$110s above its 200-day average of $83.07 (our new warning level, 1/05 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment.

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

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

The YELLOW light is turned on for Inflation Watch as the Federal Reserve resumes buying Treasurys (aka QE2)

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

The ORANGE light is turned on our Fuel Gauge with oil above $90

A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, Miner's claim fee, Miner taxation, Cortez Hills, mercury emissions , General Moly Mt. Hope Water Rights, U.S. House committee debates miner workplace safety bill

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

Commodity Market Morning Update

NYMEX/COMEX: Oil is down $0.78 in early trading at $90.76 (February contract, most active); Gold is up $12.1 to $1372.6 (February contract, most active); Silver is up $0.555 to $28.875 (March contract, most active); Copper is up $0.0135 to $4.4255 (March contract, most active)

Western Molybdenum Oxide is $16.00; European Molybdenum Oxide is $17.32; LME moly 3-month seller's contract is $17.10, LME cash seller is $16.92

Stock Market Morning Update

The DOW is up 26.07 points to 11,813.45; the S&P 500 is down 2.26 to 1290.98. Miners up except for General Moly:

Barrick (ABX) $48.07 up 2.10%
Newmont (NEM) $56.42 up 1.26%
US Gold (UXG) $7.41 up 2.21%
General Moly (Eureka Moly, LLC) (GMO) $6.08 down 0.24%
Thompson Creek (TC) $15.21 up 0.53%
Freeport-McMoRan (FCX) $119.25 up 0.76% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $36.39 up 0.30% - global steel producer
POSCO (PKX) $105.34 down 0.51% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.96% at $1,886,784.94 (what's this?).

Cheers,

Colonel Possum

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

Headline photograph by Mariana Titus

Gold Drops, Silver Struggles, Copper Up

Morning Miners!

It is 5:52 AM. Grab a cup of that delicious Raine's Red Label and let's see what's happening to our favorite metals before the 3-day holiday...

Gold drops, silver struggles, copper up

COMEX silver took a leg down for a morning low of $28.36/oz at 5:00 a.m. PT. COMEX gold followed silver down the shaft and dropped to a morning low of $1360.3/oz 45 minutes later. Both have recovered some but gold is still down a healthy $22.3 at $1364.7/oz; silver has struggled back to $28.695/oz. Two things to note: gold usually leads the precious metals down the mineshaft and silver typically falls a few levels further than her lustrous companion. This hasn't been the trend lately with silver showing more resilience to declines than gold. The gold/silver ratio is still a very low 47.6 up only slightly from yesterday's 47.3, another sign of the current "weak gold/stronger silver" character of the trade.

The London spot markets show the relative performance for the pair this morning:




Ironically as gold and silver drop, COMEX copper shows the best strength of the three rising a bit from yesterday's close - up $0.0015 to $4.3920/lb. China raised its reserve requirement ratio for the first time this year to combat inflation putting pressure on the metal complex and boosting the U.S. dollar. Europe credit worries have eased noticeably this week with the successful bond auctions making the euro the clear winner over either the U.S. dollar or gold.

The broader markets are now open and it looks like another bad day for the miners. Phew, we need a Monday holiday for the metals & miners! Have a good'un, 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 684.45, down from yesterday's 720.04. We are now below the 1-month moving average of 689.64 - a bearish sign. The average is now 689.64, giving us further evidence of a trend reversal in process. Let's see how we fare on the close.

The record high for the EMI is 816.78 set 01/04/2011; the low was set 6/7/2010 at 50.7. An EMI greater than 100 signals better times for the metals & miners relevant to Eureka County, the EMI re-established an upward trend on Friday, 12/3 which is under considerable pressure.

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

Eureka Outlook Dashboard

4-WD is OFF - Markets are OK but there could be rough roads ahead; The VIX or "fear index" is below 25; bellwether Freeport-McMoRan (FCX) in the high-$110s well above its 200-day average of $83.07 (our new warning level, 01/05 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment.

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

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

The YELLOW light is turned on for Inflation Watch as the Federal Reserve resumes buying Treasurys (aka QE2)

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

The ORANGE light is turned on our Fuel Gauge with oil above $90

A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, Miner's claim fee, Miner taxation, Cortez Hills, mercury emissions , General Moly Mt. Hope Water Rights, U.S. House committee debates miner workplace safety bill

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

Commodity Market Morning Update

NYMEX/COMEX: Oil is down $0.91 in early trading at $90.49 (February contract, most active); Gold is down $22.3 to $1364.7 (February contract, most active); Silver is down $0.568 to $28.695 (March contract, most active); Copper is up $0.0015 to $4.3920 (March contract, most active)

Western Molybdenum Oxide is $16.00; European Molybdenum Oxide is $17.28; LME moly 3-month seller's contract is $17.10, LME cash seller is $16.92

Stock Market Morning Update

The DOW is down 3.59 points to 11,728.31; the S&P 500 is up 0.92 at 1284.68. Miners are still unhappy:

Barrick (ABX) $46.64 down 1.69%
Newmont (NEM) $56.24 down 1.00%
US Gold (UXG) $7.16 down 0.97%
General Moly (Eureka Moly, LLC) (GMO) $6.15 down 1.60%
Thompson Creek (TC) $15.04 down 0.66%
Freeport-McMoRan (FCX) $117.48 down 0.50% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $36.36 up 0.69% - global steel producer
POSCO (PKX) $106.80 up 0.37% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.71% at $1,865,734.80 (what's this?).

Cheers,

Colonel Possum

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

Headline photograph by Mariana Titus

The Year of the Rabbit and the Red Metal

Þūnresdæg
Morning Miners!

It is 5:45 AM. Have a cup, the ole Colonel is on his second. That crazy Thor got me up extra early this morning with a roar of fireworks going off in the hi-bay. He says he's practicing for Chinese New Years - any excuse to make noise and commotion! Happy "Thor's Day"!

The Year of the Rabbit and the Red Metal


Many disruptions to the metals market are unexpected but one thing you can count on is the 15-day celebration of Chinese New Year. It kicks off next week with the full moon and whoop-de-doops until the eve of the new moon or "Lantern day" on February 2nd. Hopefully, things start to return to normal as the Chinese begin their New Year on February 3rd.

Why do we care in Eureka? Let's review the Colonel's two laws of market physics that seem to have worked pretty well for the past several years:

Law #1

As copper goes, so go the metals & miners, so go the broader markets.

Law #2

You can't sustain a copper rally without gold's participation

The red metal has proven to be a reliable proxy of global growth since it is used in almost all things new from buildings to consumer electronics. China is the world's largest consumer of copper so when their copper traders bug out for the holidays you can count on a wiggle in the copper market. By Law #1 we can expect some ripples of uncertainty to rattle the metals & mining sector. This is exacerbated this year with persistent concerns that China will engage in more monetary tightening to contain growing inflation. The bankers party too, so everyone will be wondering what will happen when they stumble back to work on the 3rd. Reuter's Silvia Antonioli wrote a good piece on both the New Years and monetary policy effect on copper together with prospects for a stronger dollar:

METALS-Copper softens on concerns about China demand (Silvia Antonioli,Reuters, 01/13/2011 1:40pm GMT)

On a positive note, supply deficit is still expected for copper in 2011 which should put a floor under any price declines. From this morning's action, some of the Chinese traders may have already left their desks and are lighting fireworks with Thor. In the early morning COMEX copper dropped 2% on a day that the dollar is falling too - not a good sign. A second day of successful bond auctions in Europe has pushed the euro up and greenback down. This should bring the "risk trade" back on but I'll bet with copper down this much we'll have a lousy day for the metals & miners...

Yup, a lousy day for the metals & miners


The broader markets are now open and all our favorite mining stocks are in the mineshaft. It's tough to fight the laws of physics.

What about the Colonel's second law? You may remember that we had miners in shaft for months in 2010 before they rallied back in the fall. From mid-May to early September, copper and gold marched in different directions in terms of their 3-month correlation (the copper/gold 3-month correlation was negative from 5/12/2010 to 9/7/2010). Only when gold began to move with copper did we have a sustained rally for the red metal (Law #2) and the metals & miners and the broader markets (Law #1).

The 3-month copper/gold correlation remains positive now but has trended toward negative country since December (e.g., a 1-month decline from a very tight positive correlation of 0.94 to today's 3-month correlation of 0.61). We're still a long way from negative territory but the decline signals a bearish trend for the near term. Copper price decline has proved to be a leading indicator for trouble ahead in the broader markets. The classic case in recent memory was when copper's bottom in December 2008 presaged the S&P 500 bottom in March 2009. Just something to keep our eyes on buckaroos, no need to panic. The Chinese on holiday won't help clear the picture for several weeks. In the meantime, party on with our favorite Norseman Thor!

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 720.04, down from yesterday's 757.42. We are now above below the 1-month moving average of 684.62 - a bullish sign. The average has, however, peaked at 688.06 January 10th - a bearish indication. Let's see what the next several days bring.

The record high for the EMI is 816.78 set 01/04/2011; the low was set 6/7/2010 at 50.7. An EMI greater than 100 signals better times for the metals & miners relevant to Eureka County, the EMI re-established an upward trend on Friday, 12/3 which is still under pressure.

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

Eureka Outlook Dashboard

4-WD is OFF - Markets are good but there could still be rough roads ahead; The VIX or "fear index" is below 25; bellwether Freeport-McMoRan (FCX) in the low-$120s well above its 200-day average of $83.07 (our new warning level, 01/05 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment.

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

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

The YELLOW light is turned on for Inflation Watch as the Federal Reserve resumes buying Treasurys (aka QE2)

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

The ORANGE light is turned on our Fuel Gauge with oil above $90

A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, Miner's claim fee, Miner taxation, Cortez Hills, mercury emissions , General Moly Mt. Hope Water Rights, U.S. House committee debates miner workplace safety bill

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

Commodity Market Morning Update

NYMEX/COMEX: Oil is down $0.06 in early trading at $91.80 (February contract, most active); Gold is down $0.9 to $1384.9 (February contract, most active); Silver is down $0.060 to $29.485 (March contract, most active); Copper is down $0.0283 to $4.3830 (March contract, most active)

Western Molybdenum Oxide is $16.00; European Molybdenum Oxide is $17.28; LME moly 3-month seller's contract is $17.10, LME cash seller is $16.92

Stock Market Morning Update

The DOW is down 16.99 points to 11,738.45; the S&P 500 is down 0.44 at 1285.52. Miners are unhappy:

Barrick (ABX) $49.17 down 1.66%
Newmont (NEM) $57.12 down 1.16%
US Gold (UXG) $7.50 down 1.19%
General Moly (Eureka Moly, LLC) (GMO) $6.44 down 1.08%
Thompson Creek (TC) $15.3601 down 0.58%
Freeport-McMoRan (FCX) $121.11 down 0.60% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $36.17 down 0.96% - global steel producer
POSCO (PKX) $108.26 down 2.56% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.93% at $1,914,417.44 (what's this?).

Cheers,

Colonel Possum

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

Headline photograph by Mariana Titus

S&P Breaks 1,280 - The Eureka Miner Bounces Back

Wōdnesdæg
Morning Miners!

It is 5:51 AM. Have a cup of hump day java and check out this neat trick. Old Miner Woden not only raised the sun for Wednesday but copper and silver prices too...

Copper and silver post a second good day, gold lags

COMEX copper and silver seem determined to return to their highs set on the first market day of 2011. Copper bounced to $4.408/lb early this morning before falling back to a respectable $4.3945/lb; COMEX silver made a run at $30 for a high of $29.740/oz and is now catching her breath at $29.440/oz. On January 3rd silver and her red metal friend posted new highs of $4.4980/oz and $31.275/lb. Where's their buddy gold?

Like someone still suffering from the holidays, COMEX gold huff and puffed to $1382.9/oz and is now sitting on the curb at $1379.1/oz - a few laps away from its Pearl Harbor Day high of $1432.5/oz set last December. The gold/silver ratio remains at a very low 46.7 down a tad form yesterday's 46.8.

A declining ratio is another way of saying, "weak gold, strong silver." In contrast, during last year's stock market "flash crash" this ratio spiked to 68.3 with silver trading at $18.2/oz and gold at $1241/oz. On arguably the worst day for the metals & miners during the Great Recession, the ratio was 79.2 on 12/5/2008 with gold at $745/oz and silver on fire sale for $9.40/oz - "strong gold, weak silver" pardner.

This report believes the gold/silver ratio is often a good gauge of marketplace fear - high ratio, high fear; low ratio, don't worry be happy. Marketplace fear has been recently stoked by credit worries in Europe. The recent participation of China and Japan in the European bond markets has served to soothe those fears as reported for a second day by Bloomberg's Moscow correspondent Maria Kolesnikova:

Copper Rises for a Second Day on Efforts to Contain European Debt Crisis (Maria Kolesnikova, Bloomberg News, 01/12/2011)

There is just not enough fear around to get gold back in shape, maybe he needs a personal trainer. In the meantime let's enjoy the copper and silver rallies.

Interestingly, gold is presently trading very near the Colonel's nominal price of $1380/oz for January. Monday, I gave these copper and silver prices consistent with that level:

The fair value of COMEX copper is $3.9869 in a range of $3.7132/oz to $4.2607/oz
The fair value of COMEX silver is $27.261 in a range of $24.513/oz to $30.009/oz

Given this morning's numbers, copper is beyond its upper bound ($4.3945/oz) and silver just below ($29.560/oz). In either case, both metals show an overvalued state with respect to gold. If gold bounces on some major calamity (Europe or elsewhere), watch out below for both copper and silver buckaroos.

S&P 500 breaks 1,280

A fearless broader market opened today with the S&P 500 breaking a key level of 1,280 at 1,280.52. To give this some perspective, we have been on nearly a straight line trend up since September 20 (if you ignore the month of November when the S&P dipped down, shot up and backed down to the trend by month's end). This is a 12% rise over that period and a 22% move from the August closing low of 1,049.33. I'd be tempted to say we're leaving bear country but I haven't had quite enough coffee yet.

The Eureka Miner's Index(EMI) bounces back

The ole Colonel has been flashing warning lights for the past several days as the Eureka Miner's Index(EMI) has lingered below its 1-month moving average. The EMI gives us the market temperature for the sectors that have the greatest impact on mining in Eureka County. Until recently it has been trending up-up and away with the broader markets since last fall. Today we break a 5-day losing streak with the EMI lifting above its average to score an impressive 757.4. Maybe things are getting a little better...hmmm...not enough coffee to say that either. Stay tuned.

Daily Market Roundup

Enough talk, let's walk the walk:

Eureka Miner's Index(EMI)

This morning the Eureka Miner's Index(EMI) is above-par at 757.42, up from yesterday's 668.30. We are now above below the 1-month moving average of 683.32 - a bullish sign. The average has, however, peaked at 688.06 January 10th - a bearish indication. Let's see what the next several days bring.

The record high for the EMI is 816.78 set 01/04/2011; the low was set 6/7/2010 at 50.7. An EMI greater than 100 signals better times for the metals & miners relevant to Eureka County, the EMI re-established an upward trend on Friday, 12/3 which is still under pressure.

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

Eureka Outlook Dashboard

4-WD is OFF - Markets are good but there could still be rough roads ahead; The VIX or "fear index" is below 25; bellwether Freeport-McMoRan (FCX) in the low-$120s well above its 200-day average of $83.07 (our new warning level, 01/05 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment.

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

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

The YELLOW light is turned on for Inflation Watch as the Federal Reserve resumes buying Treasurys (aka QE2)

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

The ORANGE light is turned on our Fuel Gauge with oil above $90

A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, Miner's claim fee, Miner taxation, Cortez Hills, mercury emissions , General Moly Mt. Hope Water Rights, U.S. House committee debates miner workplace safety bill

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

Commodity Market Morning Update

NYMEX/COMEX: Oil is up $0.44 in early trading at $91.55 (February contract, most active); Gold is up $5.2 to $1379.1 (February contract, most active); Silver is up $0.061 to $29.560 (March contract, most active); Copper is up $0.0455 to $4.3945 (March contract, most active)

Western Molybdenum Oxide is $16.00; European Molybdenum Oxide is $16.70; LME moly 3-month seller's contract is $17.10, LME cash seller is $16.92

Stock Market Morning Update

The DOW is up 56.27 points to 11,728.15; the S&P 500 is up 6.04 at 1280.52. Miners are good but General Moly and Newmont are resting:

Barrick (ABX) $50.04 up 0.14%
Newmont (NEM) $57.71 down 0.86%
US Gold (UXG) $7.74 up 0.79%
General Moly (Eureka Moly, LLC) (GMO) $6.50 down 0.31%
Thompson Creek (TC) $15.42 up 2.25%
Freeport-McMoRan (FCX) $121.92 up 0.51% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $36.05 up 2.47% - global steel producer
POSCO (PKX) $111.65 up 0.79% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.50% at $1,936,433.66 (what's this?).

Cheers,

Colonel Possum

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

Headline photograph by Mariana Titus

Horse Apples! UXG, GMO, TC & PKX Giddy-Up

Morning Miners!

It is 5:50 AM. Grab a cup and let's check out what Ruby T's sister in Texas just sent her...horse apples! Ruby is so happy that she is headed for the Commercial Casino to try her luck - it's not everyday you get three horse apples on one-eleven-eleven! Looks like the metals & miners may have a turn of luck today too...

Gold rallies, fades but copper & silver trend up

COMEX gold got a nice $10 bounce in the early hours to $1386.8/oz followed by copper touching $4.3460/lb and then silver finding a peak at $29.71/oz. All three have fallen back since but there seems to be strength in the copper and silver move up. The gold/silver ratio is still a very low 46.8 down slightly from yesterday's 47.3.

The London spot markets for gold & silver show the fade in gold but positive trend up for silver price:




Moscow metals correspondent Maria Kolesnikova reports new players coming to Europe's aid in her morning Bloomberg article:

Copper Gains for First Day in Four as Japan Plans to Buy Euro-Region Bonds (Maria Kolesnikova, Bloomberg News, 01/11/2011, 5:02 AM PT)

The re-emerging European sovereign debt crisis has been a real head wind for the metals & miners so news that Japan is joining China in buying bonds issued by Europe’s financial-aid funds is very welcome. The broader markets are now open and it looks like some of our favorite stocks in the Eureka Miner's Grubstake Portfolio are more than happy to hear this news...

UXG, GMO, TC & PKX Giddy-Up

Our junior miners, General Moly (GMO) and US Gold (UXG), stepped to the front of the class this morning with early morning advances of nearly 5%. Both stocks have been in the doldrums this month following an impressive run up late last year. Benchmark moly producer Thompson Creek (TC) and South Korean steel producer POSCO (PKX) were not far behind with a pop of 3.6% and 2.5% respectively. POSCO is an investor in General Moly and 20% owner of the Mt. Hope molybdenum project.

It remains to be seen if today's rally will be enough to return the metals & miners to busting high-grade - the Eureka Miner's Index(EMI) is up this morning but still below its 1-month moving average. Stay tuned buckaroos.

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 668.30, down from yesterday's 586.12. We are now 5-days below the 1-month moving average of 683.98, a potentially bearish sign. Metals & miners may be in a corrective phase.

The record high for the EMI is 816.78 set 01/04/2011; the low was set 6/7/2010 at 50.7. An EMI greater than 100 signals better times for the metals & miners relevant to Eureka County, the EMI re-established an upward trend on Friday, 12/3 which is now under pressure.

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

Eureka Outlook Dashboard

4-WD is OFF - Markets are stable but there could be rough roads ahead; The VIX or "fear index" is below 25; bellwether Freeport-McMoRan (FCX) in the low-$100s above its 200-day average of $83.07 (our new warning level, 01/05 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment.

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

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

The YELLOW light is turned on for Inflation Watch as the Federal Reserve resumes buying Treasurys (aka QE2)

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

The ORANGE light is turned on our Fuel Gauge with oil above $90

A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, Miner's claim fee, Miner taxation, Cortez Hills, mercury emissions , General Moly Mt. Hope Water Rights, U.S. House committee debates miner workplace safety bill

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

Commodity Market Morning Update

NYMEX/COMEX: Oil is up $0.80 in early trading at $90.05 (February contract, most active); Gold is up $8.1 to $1382.2 (February contract, most active); Silver is up $0.694 to $29.555 (March contract, most active); Copper is up $0.0700 to $4.3345 (March contract, most active)

Western Molybdenum Oxide is $16.00; European Molybdenum Oxide is $16.70; LME moly 3-month seller's contract is $17.10, LME cash seller is $16.92

Stock Market Morning Update

The DOW is up 45.29 points to 11,682.74; the S&P 500 is up 4.16 at 1273.91. Miners are looking proud:

Barrick (ABX) $49.60 up 1.21%
Newmont (NEM) $58.07 up 0.55%
US Gold (UXG) $7.59 up 4.83%
General Moly (Eureka Moly, LLC) (GMO) $6.23 up 4.71%
Thompson Creek (TC) $15.03 up 3.58%
Freeport-McMoRan (FCX) $120.20 up 1.04% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $34.87 up 0.98% - global steel producer
POSCO (PKX) $110.41 up 2.51% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 2.28% at $1,904,410.47 (what's this?).

Cheers,

Colonel Possum

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

Headline photograph by Mariana Titus