Freeport (FCX) Bullish on Moly; General Moly (GMO), POSCO (PKX) Extend Rallies

Þūnresdæg
Morning Miners!

It is 5:46 AM. Have a hot cup of Jörmungandr Java. Our favorite Norseman is telling more tales of yore about his fierce battles with the monstrous serpent Jörmungandr. Sounds like a lot of B.S. to me but Thor's coffee is sure good. Say, it looks like the Jörmungandr may have left the markets today...

Freeport (FCX) Bullish on Moly

Bellwether miner and copper giant Freeport-McMoRan (FCX) reported its second-quarter and six-month results this morning. Freeport earned a staggering $1.37-billion in the quarter, compared with $649-million a year earlier. The red metal miner's revenue rose 50.4%, to $5.8-billion. Times are good for Freeport which bodes well for the entire mining sector.

What I found interesting were comments about production and sales of molybdenum, an important by-product of copper mining. Freeport reported that they sold 21 million pounds of moly in the second quarter. This is 24% higher than their April estimate of 17 million pounds because of improved demand for molybdenum, a key alloy in specialty steels. Freeport did not change their full year sales forecast of 3.9-billion pounds of copper and 1.6-million ounces of gold, but raised their target for molybdenum sales to 77-million pounds; an over 5% increase from an earlier estimate of 73-million pounds. This is consistent with this Report's opinion and recent inputs from General Moly (GMO) that moly prices should enjoy a rise in the fall. The ole Colonel has bet that spot moly prices will break $16 before Halloween. Trick or treat? Stay tuned.

General Moly (GMO), POSCO(PKX) Bounce

The broader markets are now open and investor sentiment is up on news of a new aid package for Greece and an overhaul of the currency bloc's sovereign rescue fund. The draft plan will be published after a summit meeting of euro-zone leaders concludes today. This is welcome relief in the ongoing sovereign debt drama after spirits were dampened yesterday for any early resolution of the debt ceiling debate in this country.

Notably, General Moly (GMO) is extending its 2-day rally into early morning trading; up 2.3% to $4.83. Yesterday GMO bounced 5.4% adding a lot more daylight from their May 17th low of $3.83. This a long way from $7 territory at the close of 2010 but an encouraging sign. Share price (blue line) is quickly converging on a $5.05 200-day moving average (green line) as shown in this 1-year chart:


South Korean steelmaker POSCO (PKX), a 20% owner of GMO's Mt. Hope molybdenum project, is also up and at em'. This morning PKX popped 2.8% to $111.05 extending its two-day rally too. This is up a healthy 17% from its June 16th intraday low of $95.22 - let's forget May and June, pardner, and end 2011 in bull mode!

Here is a one-year chart of PKX (blue line) showing it is now above its 200-day moving average (green line):




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 341.38, up from yesterday's 296.44 and above the 1-month moving average of 273.33. The EMI is down from the high of January 4th and set a new 2011 low on June 27th at 180.03. The 1-month moving average broke its troubling downtrend on July 5th and is now trending up.

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 to normalize current mining company share price and are updated monthly. Upper and lower trend lines are updated weekly.

Gold Value Index (GVI)

Our newly minted Gold Value Index (GVI) is below-par at 79.04, up from yesterday's 78.49 and below its 1-month average of 79.70. The new high for 2011 is 82.20 set June 23rd. Today's Value Adjusted Gold Price (VAGP) is $1,690.0/oz or $91.4/oz above the current COMEX gold price.

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 is 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 metal that now competes with gold for investment and as a hedge against fiat currencies.

Although gold prices have been on the rise, the GVI has trended down since 6/7/2010 when it had a value of 100; gold regained value recently reversing the trend but now appears to be moving sideways.

The 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 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 $98.95
ICE North Sea Brent crude $118.26
Spread (ICE- NYMEX) = $19.31 (Yesterday, $19.37)

Here are the November contracts* with a narrower spread:

NYMEX light sweet crude $99.70
ICE North Sea Brent crude $118.26
Spread (ICE- NYMEX) = $18.56 (Yesterday, $18.53)

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

Prices are off their crisis highs but we have $115+ Brent and $95+ NYMEX in November favoring high oil prices throughout the summer and into late fall. My 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 OFF - The miners are on smoother roads but caution is in the air; The VIX or "fear index" is below 25; bellwether Freeport-McMoRan (FCX) remains above its 200-day moving average of $52.22 and 150-day moving average of $53.40 (our new key levels, 07/11 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 The Federal Reserve phased out buying Treasurys June 30th (aka QE2) but will maintain low interest rates for now

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

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, 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 $0.55 in early trading at $98.95 (August contract, most active); Gold is up $1.7 to $1598.6 (August contract, most active); Silver is down $0.252 to $39.810 (September contract, most active); Copper is down $0.0470 at $4.3890 (September contract, most active)

Western Molybdenum Oxide is $15.06; European Molybdenum Oxide is $14.65; LME cash seller is $15.06, LME moly 3-month seller's contract is $15.06

Stock Market Morning Update

The DOW is up 113.60 points to 12,685.51; the S&P 500 is up 14.15 points at 1,339.99

Miners are mixed:

Barrick (ABX) $49.84 up 1.32%
Newmont (NEM) $58.32 up 0.52%
US Gold (UXG) $7.02 up 0.72%
General Moly (Eureka Moly, LLC) (GMO) $4.83 up 2.33%
Thompson Creek (TC) $10.06 up 0.60%
Freeport-McMoRan (FCX) $55.76 down 0.29% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $15.93 down 1.64%
Timberline Resources (TLR) $0.80 unchanged

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

ArcelorMittal (MT) $32.64 up 2.54% - global steel producer
POSCO (PKX) $111.05 up 2.78% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is up 0.74% at $1,811,329.69(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)

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

Why The Colonel Isn't Worried about the Price of Gold or Copper

Wōdnesdæg
Morning Miners!

It is 5:35 AM. Have a cup of delicious Moon Walk Java. It is hard to believe that astronauts were kicking rocks on the lunar surface 42 years ago today. Speaking of rock kickers, Old Miner Woden just stepped in the break room. Hmm...he seems to be whistling a happier tune, I wonder why he's so cheery on lower gold prices?

Why The Colonel Isn't worried about the Price of Gold or Copper

Yesterday was a good reminder that headline news can dramatically drive markets. During the President's news conference to announce the new "Gang of Six" plan to potentially break the deadlock on U.S. debt limit negotiations, COMEX gold dropped $14.4 to $1,586.9/oz. This came only hours after gold set a new nominal record high of $1,610.70/oz - in fact, the spread between highs and lows yesterday was a shocking $28/oz. In contrast to this flight from a safe haven asset, the broader markets enjoyed the biggest rally of 2011. This morning, COMEX gold has recovered some from the sell-off trading presently at $1,584.4/oz.

COMEX copper, our fearless canary in the global recovery mineshaft, also had a good morning yesterday hitting a 3-month high at $4.4960/lb. She dipped a little on the news and has fallen further today trading currently at $4.4390/lb. This is most likely profit taking because better-than-expected housing start numbers and falling production in some of the larger copper mines should be price supportive going forward. The ole Colonel has said previously that copper should remain above $4/lb for the remainder of the summer.

So if copper looks promising, what about gold? I was actually encouraged that copper and gold fell together because it reinforces the recent positive correlation of two bellwether metals. We started this month with gold and copper in deep inversion (by this report's definition, inversion occurs when both the 1-month and 3-month correlations are negative). Historically this is a very bearish condition for the mining sector. If copper and other base metals are in price descent, the mining sector suffers. If this occurs on rising gold, the gold miners may initially benefit but ultimately are pulled into the vortex if the trend is prolonged. We have had four copper/gold inversions this year and 2011 has been a pretty lousy year for the mining sector as tracked by the the Eureka Miner's Index(EMI) (see below).

The good news is that copper and gold are back together again and the return to positive correlation has been dramatic. Here is today's chart of the 3-month versus 1-month copper/gold correlation:



The magenta line is the movement in correlations from July 1st to this morning; the white arrow indicates the positive ascent of the trajectory. By the numbers:

July 1st -0.4206 (1-month) -0.3900 (3-month), deep copper/gold inversion
July 20th +0.6174 (1-month) +0.5959 (3-month), strong positive correlation

A scatter plot of COMEX copper and gold futures prices is another way to look at this encouraging development. The Colonel updates a model each month (magenta line) based on price movements of copper and gold for the past 3-months. The aqua lines show a statistical boundary for current price variations from the model (yellow wiggly line). The blue line is a 20-day moving average of the copper/gold price pair (a larger and readable chart is shown at the bottom of the blog trade).



The model suggests higher gold prices will result in lower copper prices (i.e. the magenta line goes from the upper-left to the lower-right), a bearish trend. However, recent data (yellow line) have left the statistical boundaries and are now trending from the lower-left to the upper-right (white dotted line), a decidedly bullish trend.

So what, Colonel? Unless the wheels come off either the Europe or U.S. debt wagon, I wouldn't be surprised to see gold price consolidate on further improving news. As long as the pullback isn't too severe and supply/demand fundamentals continue to support copper price, these two metals should avoid further inversions this year. This sets the stage for an improving mining sector. The Eureka Miner's Index(EMI) had a bottom June 27th and the one-month moving average is on a definite uptrend from this low. I think even Old Miner Woden may be whistling a happier tune for the remainder of the year. Market bear turned bull? 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 296.44, down from yesterday's 308.84 and above the 1-month moving average of 266.15. The EMI is down from the high of January 4th and set a new 2011 low on June 27th at 180.03. The 1-month moving average broke its troubling downtrend on July 5th and is now trending up.

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 to normalize current mining company share price and are updated monthly. Upper and lower trend lines are updated weekly.

Gold Value Index (GVI)

Our newly minted Gold Value Index (GVI) is below-par at 78.49, down from yesterday's 78.91 and below its 1-month average of 79.84. The new high for 2011 is 82.20 set June 23rd. Today's Value Adjusted Gold Price (VAGP) is $1,686.6/oz or $102.2/oz above the current COMEX gold price.

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 is 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 metal that now competes with gold for investment and as a hedge against fiat currencies.

Although gold prices have been on the rise, the GVI has trended down since 6/7/2010 when it had a value of 100; gold regained value recently reversing the trend but now appears to be moving sideways.

The 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 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 $98.99
ICE North Sea Brent crude $118.36
Spread (ICE- NYMEX) = $19.37 (Yesterday, $20.01)

Here are the November contracts* with a narrower spread:

NYMEX light sweet crude $99.82
ICE North Sea Brent crude $118.35
Spread (ICE- NYMEX) = $18.53 (Yesterday, $18.61)

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

Prices are off their crisis highs but we have $115+ Brent and $95+ NYMEX in November favoring high oil prices throughout the summer and into late fall. My 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 OFF - The miners are on smoother roads but caution is in the air; The VIX or "fear index" is below 25; bellwether Freeport-McMoRan (FCX) remains above its 200-day moving average of $52.22 and 150-day moving average of $53.40 (our new key levels, 07/11 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 The Federal Reserve phased out buying Treasurys June 30th (aka QE2) but will maintain low interest rates for now

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

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, 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 $1.13 in early trading at $98.99 (August contract, most active); Gold is down $16.7 to $1584.4 (August contract, most active); Silver is down $1.681 to $38.540 (September contract, most active); Copper is down $0.0290 at $4.4390 (September contract, most active)

Western Molybdenum Oxide is $15.06; European Molybdenum Oxide is $14.65; LME cash seller is $15.06, LME moly 3-month seller's contract is $15.06

Stock Market Morning Update

The DOW is down 8.21 points to 12,579.21; the S&P 500 is up 1.26 at 1,327.99

Miners are mixed:

Barrick (ABX) $48.32 down 0.49%
Newmont (NEM) $57.53 down 0.38%
US Gold (UXG) $6.89 down 1.99%
General Moly (Eureka Moly, LLC) (GMO) $4.48 unchanged
Thompson Creek (TC) $9.97 down 0.30%
Freeport-McMoRan (FCX) $55.90 down 0.71% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $15.82 up 1.80%
Timberline Resources (TLR) $0.79 unchanged

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

ArcelorMittal (MT) $31.81 down 0.31% - global steel producer
POSCO (PKX) $108.36 up 1.83% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is down 0.353% at $1,766,604.72(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)

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 $1,610.7; Copper 3-Month High; More GMO Thoughts on Moly

(Metal Art by Mariana Titus)


Morning Miners!

It is 5:37 AM. Have a cup of Tuesday Bliss. Our market bull Ruby T couldn't be in finer spirits - her herd of favorite metals are running for greener pasture...

Gold $1,602.7; Copper 3-Month High

COMEX gold and silver held hands in the wee hours and reached new highs. COMEX gold touched $1,610.7/oz for a new all time record for nominal gold price at 3:15 AM ET. COMEX silver recorded $40.880/oz at the same time and the closely watched gold/silver ratio remained below 40 at 39.4; a level not seen since early May. If this trend continues, silver may make another dash at Hunt Brother's $50/oz territory. Mining editor Adella Harding reported some of my latest thoughts on gold and silver in yesterday's online edition of the Elko Daily Free Press:

Gold prices break records (ADELLA HARDING Mining Editor, Elko Daily Free Press, Monday, July 18, 2011 3:18 PM PT)

COMEX gold and silver have retreated a bit, now trading at $1,602.8/oz and $40.350/lb respectively.

Not to be outdone by her precious metal friends, COMEX copper jumped to a 3-month high of $4.488/lb. Presently it is trading at $4.4805/lb boosted by expectations of better-than-expected news from the embattled housing front today. As reported by Bloomberg News this morning:

Copper Advances to a Three-Month High as U.S. Housing Starts May Increase (Agnieszka Troszkiewicz, Bloomberg News, Jul 19, 2011 4:57 AM PT)

The other day we reported that billionaire investor Warren Buffet said that he thought housing would "surprise." If this comes true, there is no better remedy for creating new jobs domestically and adding key demand support for construction commodities like copper.

The correlation trajectory of copper and gold continues its positive ascent; a very bullish sign for the mining sector (1-month correlation = +0.5923; 3-month, +0.5486). Another bullish trend is a return to a rock-steady gold:copper ratio. The 3-month average is 367.0 lbs of copper per ounce of gold with less than 2.85% variation (standard deviation/mean). This report considers any variation under 3% as very stable. The ratio is also very near historical norms not seen since last fall (our benchmark date is 11/26/10 when the ratio was 363.2). When copper was setting records in February the ratio was sub-300 (292.8 low, 2/7/2011).

More General Moly (GMO) Thoughts on Moly Prices

One of the big questions for moly miners is whether spot moly prices are near the bottom for the summer with improving prospects for higher prices in the fall. The London Metal Exchange (LME) futures data and expectations of improving supply/demand fundamentals are encouraging but the jury is still out. Here is a comparison of Western moly spot prices as reported by Infomine (bottom chart) compared to the LME 3-month seller's contract (top chart) for the period of May 2nd to yesterday's closing prices (remember, London dates are shown in reverse order from our convention: 3/5/11 is May 3rd):




You will note that the LME price declines in mid-June appear to anticipate the downtrend in spot prices commencing June 21st. Conversely, the uptick in LME moly price last Thursday has now been followed by a rise in Western price yesterday. Western moly oxide and the LME 3-month seller are now both $15.06 ($33,200/metric ton). Up we go?

I asked General Moly's Director of Investor Relations Seth Foreman for his thoughts on the subject yesterday. You may remember he provided the report with a thoughtful seasonal argument for summer-dips/fall-rises in moly prices (General Moly on Moly Prices, 6/7/2011). He too is watching the latest LME data with interest:

"...I believe the increase in LME prices (ahead of any other reports such as Metals Week, Ryan’s Notes or Metals Bulletin) may signal a speculative view that moly prices are going to be moving up soon. Last Friday, Plats Metals Week published its weekly moly price unchanged from last week while Ryan’s notes decreased its price just a bit (to match Metals Week) and LME prices increased. Also, Metals Bulletin decreased their European oxide price on Tuesday only to increase it on Friday.

So that could be three wiggles. 1) LME prices increase; 2) Metals Bulletin decreases but then increases its European prices in the same week; and 3) MW holds its price steady WoW after decreasing them for several weeks straight." (Seth Foreman to the Report, 7/18/2011)

It is always great to hear from Seth and we will follow these wiggles and trends closely in the coming weeks. The ole Colonel has bet that spot prices will break $16.00/lb before Halloween.


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 308.84, up from yesterday's 291.32 and above the 1-month moving average of 261.10. The EMI is down from the high of January 4th and set a new 2011 low on June 27th at 180.03. The 1-month moving average broke its troubling downtrend on July 5th and is now trending up.

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 to normalize current mining company share price and are updated monthly. Upper and lower trend lines are updated weekly.

Gold Value Index (GVI)

Our newly minted Gold Value Index (GVI) is below-par at 78.91, down from yesterday's 79.78 and below its 1-month average of 79.99. The new high for 2011 is 82.20 set June 23rd. Today's Value Adjusted Gold Price (VAGP) is $1,697.1/oz or $94.3/oz above the current COMEX gold price.

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 is 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 metal that now competes with gold for investment and as a hedge against fiat currencies.

Although gold prices have been on the rise, the GVI has trended down since 6/7/2010 when it had a value of 100; gold regained value recently reversing the trend but now appears to be back moving sideways.

The 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 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 $97.82
ICE North Sea Brent crude $117.83
Spread (ICE- NYMEX) = $20.01 (Yesterday, $20.26)

Here are the November contracts* with a narrower spread:

NYMEX light sweet crude $98.63
ICE North Sea Brent crude $117.24
Spread (ICE- NYMEX) = $18.61 (Yesterday, $19.51)

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

Prices are off their crisis highs but we still have $110+ Brent and $95+ NYMEX in October favoring high oil prices throughout the summer and into late fall. My 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 OFF - The miners are on smoother roads but caution is in the air; The VIX or "fear index" is below 25; bellwether Freeport-McMoRan (FCX) remains above its 200-day moving average of $52.22 and 150-day moving average of $53.40 (our new key levels, 07/11 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 The Federal Reserve phased out buying Treasurys June 30th (aka QE2) but will maintain low interest rates for now

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

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, 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 $1.57 in early trading at $97.82 (August contract, most active); Gold is up $0.4 to $1602.8 (August contract, most active); Silver is up $0.008 to $40.350 (September contract, most active); Copper is up $0.0775 at $4.4805 (September contract, most active)

Western Molybdenum Oxide is $15.06; European Molybdenum Oxide is $14.65; LME cash seller is $15.06, LME moly 3-month seller's contract is $15.06

Stock Market Morning Update

The DOW is up 113.15 points to 12,498.31; the S&P 500 is up 12.04 at 1,317.48

Miners are mixed:

Barrick (ABX) $48.72 down 0.63%
Newmont (NEM) $57.63 down 0.79%
US Gold (UXG) $7.05 up 0.43%
General Moly (Eureka Moly, LLC) (GMO) $4.51 up 3.20%
Thompson Creek (TC) $9.91 up 1.33%
Freeport-McMoRan (FCX) $55.85 up 1.45% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $15.27 up 1.40%
Timberline Resources (TLR) $0.81 down 2.41%

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

ArcelorMittal (MT) $31.67 up 1.21% - global steel producer
POSCO (PKX) $106.24 up 1.58% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is up 0.63% at $1,778,183.45 (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)

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 Breaks $1,600; General Moly (GMO) Makes Significant Milestone

(Metal Art by Mariana Titus)

"Stay tuned, $1,600/oz here we come." – Colonel Possum, 5/19/2011

Morning Miners!

It is 5:41 AM. Have a hot cup of Monday Bullion Buster. We made it, pardner!

The Colonel's Metals & Miners Outlook

On May 19th, the ole Colonel predicted that COMEX gold would break $1,600/oz before Labor Day. This morning COMEX gold set a new record in the wee hours hitting $1,603.80/oz (4:50 AM PT) and silver broke $40/oz 15 minutes later at $40.48/oz. Presently both have pulled back a tad trading at $1,598.9/oz and $40.295/oz respectively. The silver bounce is notable because it puts the closely watched gold/silver ratio below 40; a level not seen since May 31st.

The steady rise in gold and silver lately is attributed to the increasing uncertainty surrounding both the euro-zone and U.S. debt issues. Base metals are feeling downward pressure on this worry but copper remains well supported by supply restriction concerns for the remainder of the year. There is also evidence that the Chinese restocking of the red metal has taken a pause on inflation concerns (6.4% year-to-year in June) and Chinese traders waiting for price consolidation. The decline in London Metal Exchange copper inventories tells the story as declines hit a flat spot:



Currently COMEX copper is down $0.0100/lb at $4.3970/lb. I have said before that supply concerns should put a $4/lb floor under copper for the remainder of the summer. The good news for miners is that the copper/gold price correlation is becoming increasingly positive, a bullish indicator for the mining sector (see Oil & Copper Correlations with Gold below).

Molybdenum spot prices may be forming a bottom after a fairly dramatic descent form $17/1b territory to the $14/lb bad lands. Fundamentals and futures indicate that the fall season should enjoy a price rise; I've put money on breaking $16/lb again before Halloween (see Molybdenum Roundup below)

The broader markets have just opened down but our favorite miners are trading up. Barrick Gold (ABX) is up 1.43% at $49.00, bellwether miner Freeport-McMoRan is up 0.80% at 55.78 and General Moly (GMO) is up 1.35% at $4.51.

General Moly (GMO) Makes Significant Milestone

General Moly made a significant milestone Friday on their lingering water rights issue. The Nevada State Engineer granted General Moly's water right applications for the use of 11,300 acre-feet annually of water for the Mt. Hope Project, which will facilitate the pumping of approximately 7,000 gallons per minute. Here is the press release:

General Moly Announces Water Rights Approval for Mt. Hope Project (Press release, 7/15/2011)

Mining editor Adella Harding wrote an excellent piece on this ruling in the Friday Elko Daily Free Press. It includes comments from GMO's Pat Rogers and Zach Spencer as well as Eureka County Commissioner Jim Ithurralde :

General Moly wins OK on water rights (ADELLA HARDING Mining Editor, Elko Daily Free Press, July 15, 2011 3:30 pm)

OK, now let's get on to the Record-of-Decision, buckaroos!

Eureka Miner's Index (EMI)

The Eureka Miner's Index (EMI) gives us the market temperature for the factors that have the greatest impact on mining in Eureka County. Below is a chart of the EMI at Friday's close. The magenta line shows the EMI; a composite of three benchmark miners, key oil and metal prices, the 10-year Treasury rate and market volatility (.VIX). A 1-month moving average is given by the blue line (a larger, more readable chart can be found near the bottom of the blog page):


This morning the Eureka Miner's Index(EMI) is above-par at 291.32, down from Friday's close at 298.66 and above the 1-month moving average of 255.85. The EMI is down from the high of January 4th and set a new 2011 low on June 27th at 180.03. The 1-month moving average has broken its troubling downtrend and is heading north.

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 good lands and bad lands 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.

Gold Value Index (GVI)

Our newly minted Gold Value Index (GVI) is below-par at 79.78 up from Friday's 79.39 and below the 1-month moving average of 80.08. Gold is moving sideways with respect to relative value. Today's Value Adjusted Gold Price (VAGP) is $1,674.6/oz; $75.7 above the present gold price.

The GVI gauges the value of gold in relation to oil, copper and silver independent of currency. Although gold prices have been on the rise, the GVI has trended down since 6/7/2010 when it had a value of 100; gold regained value recently but now appears to be moving sideways. These three commodities were chosen for relative value comparison because 1) oil is a common cost element for all miners, 2) copper has been a reliable proxy for global growth and 3) silver is a precious metal that now competes with gold for investment and as a hedge against fiat currencies.

The 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.

Below is a chart of the GVI at Friday's close. The magenta line shows the GVI, a 1-month moving average is given by the blue line and the dotted line represents a "fair value" for a commodity-based valuation based on historical data (a larger, more readable chart can be found near the bottom of the blog page):


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 wide 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 $96.46
ICE North Sea Brent crude $116.84
Spread (ICE- NYMEX) = $20.38 (Friday $20.26)

Here are the October contracts* with a narrower spread:

NYMEX light sweet crude $96.84
ICE North Sea Brent crude $116.72
Spread (ICE- NYMEX) = $19.80 (Friday $19.51)

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

Prices are off their crisis highs but we still have $110+ Brent and $95+ NYMEX in October favoring high oil prices throughout the summer and into fall. My December prediction that we would see NYMEX $100/bbl oil before the Fourth of July came true on February 23rd.

Oil & Copper Correlations with Gold

Oil & copper correlations with gold give us insight into what may happen next for the metals & miners. With supply and demand fundamentals returning to the commodity space, diminishing correlations between key commodities are less alarming but trends should still be carefully monitored.

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

Oil/Au correlation +0.6093(1-month) -0.0158 (3-month)
Cu/Au correlation +0.5248 (1-month) +0.4810 (3-month)
Cu/Oil correlation +0.8316 (1-month) +0.2424 (3-month)

Here are the numbers from our last roundup (7/11/2011):

Oil/Au correlation +0.3393(1-month) -0.0991 (3-month)
Cu/Au correlation +0.0356 (1-month) -0.0434 (3-month)
Cu/Oil correlation +0.2104 (1-month) +0.4279 (3-month)


There has been significant improvement in the latest numbers. We have only one remaining negative correlation with oil versus gold nearly turning positive on its 3-month. The movement of copper versus gold away from inversion (i.e. 1- and 3-month correlations negative)and into positive territory is dramatic and bullish. Copper versus oil is showing very strong correlation (>0.8) in its 1-month number. The metals & miners tend to do best when all correlations are positive.

According to my new July models, oil is presently near fair value with respect to gold by -0.02-standard deviations and copper is overvalued by +3.35-standard deviations. Copper is presently overvalued with respect to oil by +3.43-standard deviations.

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 1, 2010; the magenta line is more recent data (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 last fall and has was initially in the green quadrant longer. Correlation data in this region is typically considered bullish. The return of oil vs gold to the "+,-" quadrant was bearish but the upward trajectory remains encouraging. The movement of copper vs gold from the "-,-" quadrant to the "+,+" quadrant (white arrow) is a very bullish straight-line trajectory.

Gold:Oil, Oil:Copper & Gold:Copper Ratios

The Report has been tracking the stability of the gold:oil, oil:copper & gold:copper ratios. Although they ended last year rock solid (<3% variation, 1-standard deviation/mean) the ratios have diverged. The period of divergence is what prompted my January 14th comment to Adella Harding, Elko Daily Free Press, "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.". The mining sector remains on shaky but improving ground with a much more stable gold:copper relation.

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. The errors have been falling which suggests a return to greater stability (i.e. declining CRS, see below) with gold:copper dipping below 3% for the first time since late December.

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

Gold:Oil ratio

mean 15.29 bbl/oz
variation > 3.0% limit at 6.20% (1-standard deviation/mean)

Oil:Copper ratio

mean 24.09 lbs/bbl
variation > 3.0% limit at 6.27% (1-standard deviation/mean)

Gold:Copper ratio

mean 366.93 lbs/oz
variation < 3.0% limit at 2.87% (1-standard deviation/mean)

It is notable that by the gold:copper 3-month ratio, $1,600/oz gold suggests $4.36/lb copper. This morning gold is $1598.9/oz and copper is $4.3970/lb, not too bad!

The composite Commodity Ratio Stability (CRS) is 5.35% (i.e the root-mean-square of the three variations above); last roundup was 5.44% - smaller is better.

Weekly Molybdenum Roundup

Spot prices for molybdenum oxide remain below $15/lb except; futures seller contracts are now all above. We have $14.29/lb spot out West and $14.65/lb in Europe. Both spot prices are in an improving contango with 3-month and 15-month London Metal Exchange (LME) 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 $15.06/lb is below the Colonel's mid-range moly price target for 2010 of $15.71/lb and way below my target of $20.21/lb for 2011. The Report will give moly prices a "orange" light on the Eureka Outlook Dashboard for this bearish development. I did believe we could see much higher prices this year although May-June commodity reversals have put a large damper on that expectation.

Here is a detailed pricing summary for last week:

Western Moly Oxide $14.29/lb (FeMo65, the price tracked by Infomine - see the side bar graph in the lower right column)

Moly Oxide, Europe (Mo Drummed Molydbic Oxide EU) $14.65/lb (the price reported in the Metals Bulletin)

LME Futures Contracts

LME cash seller is at $33,200/metric ton $15.06/lb

3-Month (Buyer) $32,200/metric ton $14.61/lb
3-Month (Seller) $33,200/metric ton $15.06/lb

15-Month (Buyer) $33,400/metric ton $15.15/lb
15-Month (Seller) $34,400/metric ton $15.60/lb

Here is a 1-year chart of the LME 3-month contract (seller):




Daily Market Roundup

Enough talk, let's walk the walk:

Eureka Outlook Dashboard

4-WD is OFF - The miners are on smoother roads; The VIX or "fear index" is below 25; bellwether Freeport-McMoRan (FCX) remains above its 200-day moving average of $52.16 and 150-day moving average of $53.41 (our new key levels, 07/08 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 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. The Federal Reserve phased out buying Treasurys June 30th (aka QE2) but will maintain low interest rates for now

The YELLOW light is turned back on for Investor Confidence as some investors turn adverse to commodity-sensitive equities

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

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

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 $96.46 (August contract, most active); Gold is up $8.8 to $1598.9 (August contract, most active); Silver is up $1.224 to $40.295 (September contract, most active); Copper is down $0.0160 to $4.3970 (September contract, most active)

Western Molybdenum Oxide is $14.29; European Molybdenum Oxide is $14.65; LME moly 3-month seller's contract is $15.06, LME cash seller is $15.06

Stock Market Morning Update

The DOW is down 106.41 points to 12,373.32; the S&P 500 is down 9.30 at 1,306.84

Miners are up:

Barrick (ABX) $49.00 up 1.43%
Newmont (NEM) $58.58 up 2.09%
US Gold (UXG) $6.94 up 4.05%
General Moly (Eureka Moly, LLC) (GMO) $4.51 up 1.35%
Thompson Creek (TC) $9.99 up 0.71%
Freeport-McMoRan (FCX) $55.78 up 0.80% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $14.82 up 1.07%

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

ArcelorMittal (MT) $31.58 down 1.93% - global steel producer
POSCO (PKX) $105.56 down 3.31% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 1.15% at $1,771,149.44(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 (Wiki).

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

Copper & Gold Back in the Saddle Again; LME Moly Surprises

I'm back in the saddle again
Out where a friend is a friend
Where the longhorn cattle feed
On the lowly gypsum weed
Back in the saddle again (Gene Autry)


Morning Miners!

It is 5:37 AM. Have a cup of Raine's Full Moon Friday. The lunar cycle appears to be pulling the market tide higher today...


Copper & Gold Elope

With all the recent Europe/U.S.debt whoopy-de-doops and Federal Reserve QE3 jack-in-the-box shenanigans, it's refreshing to see something very positive in the commodity space. Although COMEX gold nearly touching the $1,600/oz level is capturing the daily headlines, the ole Colonel believes the improving relation between copper and gold is just as exciting for the metals & miners. Pardner, I saw copper and gold burn rubber for Las Vegas this morning when I ran my latest numbers. It looks like there may be wedding bells soon chiming for two of our favorite metals.

Some of you are probably thinking I've gone mad. COMEX gold is actually down 6-bucks this morning at $1,583.4/oz while COMEX copper is up $0.131/lb to $4.4035/lb. Looks like the two are arguing again; the old gold-down copper-up, gold-up copper-down discordant behavior we've seen for much of the spring and early summer. Miners typically don't do well as a group when that quarrel is going on...and they haven't. Our Eureka Miner's Index(EMI) plumbed a new 2011 low on June 27th (see discussion below).

What's important is not the day-to-day price fluctuations but what this report calls "correlation trajectory." Copper and gold have moved from negative correlation (i.e. price moves in opposition) to positive correlation (prices move together) in a very strong way since July 5th. The short-term (1-month) and mid-term (3-month) correlations are now increasingly positive, a historically bullish condition for both metals and miners. If you plot the 3-month versus the 1-month, the movement or "trajectory" has been from the lower-left to the upper right in nearly a straight line for 9-market days. Here is the copper/gold chart from two days ago:



The magenta line is the most recent data and the white arrow shows the direction of positive correlation. Yesterday and today the trajectory has extended deeper into "+,+" territory. I will show an updated chart for the Monday Roundup. For the number heads like me, here are the data:

July 5th copper:gold correlation -0.440 (1-month) -0.3830 (3-month)
July 15th copper:gold correlation +0.481 (1-month) +0.421 (3-month)

That's equivalent to a 400hp muscle car burning rubber in the wedding chapel parking lot, pardner.

LME Moly Surprises

There's also a positive sign for moly miners in the ether this morning. After a recent and steady downtrend in moly prices, the London Metal Exchange (LME) 3-month seller's contract reversed yesterday. The price uptick was small and may lead nowhere. However, the last wiggle like this in the opposite direction proved to be a leading indicator of further price deterioration. You may remember I reported in mid-May:

There is another little funny in the metals market - a slight change in moly pricing that may be a harbinger of things to come or just more moon light. Western moly oxide bumped back up to $17.00/lb yesterday while euro-moly dropped to $16.45/lb. No big deal really except the LME moly futures also dropped - the 3-month seller fell to $16.56/lb from $17.01/lb; the 15-month, to $17.11/lb from $17.58/lb. (Eureka Miner's Market Report, 6/15/2011)

Shortly after this futures move, spot moly prices left the $16-17lb ridge and fell to the $14/lb bottom of the canyon.

This time around the 3-month seller bumped back up above the $15-level to $15.06/lb while spot prices out west and in Europe remained unchanged at $14.29/lb and $14.65/lb respectively. This sharpens the "contango" between spot and future prices and halts the descent of the latter. Here is the 2-month price history of the 3-month seller contract:



How about a beer bet? The ole Colonel bets that spot prices will reverse to the upside soon and break $16.00/lb before Halloween. Any takers?


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 275.51, down from yesterday's 299.21 and above the 1-month moving average of 251.37. The EMI is down from the high of January 4th and set a new 2011 low on June 27th at 180.03. The 1-month moving average broke its troubling downtrend on July 5th.

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 to normalize current mining company share price and are updated monthly. Upper and lower trend lines are updated weekly.

Gold Value Index (GVI)

Our newly minted Gold Value Index (GVI) is below-par at 79.64, up from yesterday's 78.97 and above its 1-month average of 80.05. The new high for 2011 is 82.20 set June 23rd. Today's Value Adjusted Gold Price (VAGP) is $1,661.2/oz or $77.8/oz above the current COMEX gold price.

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 is 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 metal that now competes with gold for investment and as a hedge against fiat currencies.

Although gold prices have been on the rise, the GVI has trended down since 6/7/2010 when it had a value of 100; gold regained value recently reversing the trend but now appears to be back moving sideways.

The 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 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 $96.44
ICE North Sea Brent crude $116.70
Spread (ICE- NYMEX) = $20.26 (Yesterday, $20.10)

Here are the October contracts* with a narrower spread:

NYMEX light sweet crude $97.30
ICE North Sea Brent crude $116.81
Spread (ICE- NYMEX) = $19.51 (Yesterday, $18.24)

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

Prices are off their crisis highs but we still have $110+ Brent and $95+ NYMEX in October favoring high oil prices throughout the summer and into fall. My 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 OFF - The miners are on smoother roads but caution is in the air; The VIX or "fear index" is below 25; bellwether Freeport-McMoRan (FCX) remains above its 200-day moving average of $52.22 and 150-day moving average of $53.40 (our new key levels, 07/11 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 The Federal Reserve phased out buying Treasurys June 30th (aka QE2) but will maintain low interest rates for now

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

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, 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 $0.75 in early trading at $96.44 (August contract, most active); Gold is down $5.9 to $1583.4 (August contract, most active); Silver is down $0.209 to $38.485 (September contract, most active); Copper is up $0.0235 at $4.4035 (September contract, most active)

Western Molybdenum Oxide is $14.29; European Molybdenum Oxide is $14.65; LME cash seller is $15.06, LME moly 3-month seller's contract is $15.06

Stock Market Morning Update

The DOW is up 12.41 points to 12,449.53; the S&P 500 is up 2.08 at 1,310.95

Miners are mostly up:

Barrick (ABX) $48.21 up 0.54%
Newmont (NEM) $57.21 up 0.81%
US Gold (UXG) $6.54 down 0.30%
General Moly (Eureka Moly, LLC) (GMO) $4.21 up 0.72%
Thompson Creek (TC) $9.90 up 0.81%
Freeport-McMoRan (FCX) $55.05 up 1.47% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $15.00 up 1.27%
Timberline Resources (TLR) $0.81 down 2.41%

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

ArcelorMittal (MT) $32.03 down 0.25% - global steel producer
POSCO (PKX) $108.49 up 0.22% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is up 0.40% at $1,731,843.95 (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)

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