Talk of a global recession, which would drag down the value of most assets, with gold a possible exception, has also resurfaced after the optimism of China’s re-opening, which boosted prices for industrial commodities, including iron ore and copper.

The national December quarter inflation reading of 7.8%, and higher in some States such as WA’s 8.3%, will pile pressure on Treasurer, Jim Chalmers, who bravely predicted early in the week that inflation had peaked.

ANZ Bank and VanEck, a fund manager, said the latest inflation reading guaranteed another 0.25% hike in rates next month by the Reserve Bank.

Overall, the Australian market took a modest knock in early Wednesday trade, which briefly halted what has largely been one way traffic since the start of the year as investors revelled in the China stimulus story.

Despite the mid-week correction, the all-ordinaries managed a 1.25% rise ahead of the Australia Day break, taking this month to a remarkable rise of 7.95%, arguably the best start to a year in decades.

Mineral Resources led the lithium sector higher as speculation grows that management is continuing to look at spinning off its lithium business to satisfy huge demand from U.S. investors. The stock added $5.11 by the middle of the week to trade at $92.36, having earlier reached an all-time high of $96.97, within touching distance of joining the $100/share club.

Liontown was another lithium winner with a rise of 7.7c to $1.55 thanks to investors shrugging off news of a cost blow-out at the company’s Kathleen Valley project. CG Capital Markets took a scalpel to its Liontown forecast, retaining a speculative buy tip but lowering the target price from $2.30 to $1.75.

Other lithium news and share price moves included:

  • Red Dirt Metals, up 7c to 53c after reporting encouraging maiden assays from its Yinnetharra project in WA with a best reading of 55.6 metres at 1.12% lithium. CG Capital Markets reckons the stock is heading up to $1.20.
  • Global Lithium rose by 7.5c to $2.26 after announcing the start of a metallurgical processing program at its Manna project in WA.
  • Lithium Power International announced the start of drilling at its Greenbushes project in the south-west of WA. Its shares added 3c to 50c, and
  • Pilbara Minerals continued its stellar run, rising by $1.12 to $5.12 for a stock market value of $15.3 billion and a spot in the ASX top 30 – not bad for a company trading at 15c less than three years ago.

Gold, as mentioned, continued to attract investors’ attention but is expected to do better later in the year when the interest rate hiking cycle comes to an end.

On the bullion market, gold added another US$20 an ounce in the first three days of the week to sell for US$1940/oz, seemingly on track to clear the US$2000/oz mark thanks to the assistance of a falling U.S. dollar as a debt ceiling crisis agitates Washington.

Other gold news and prices moves included:

  • Evolution rising initially to a six-month high of $3.43 on Wednesday before diving back to $3.27 for a 1c gain after reporting solid December quarter production from the Cowal mine in NSW but ongoing problems at the Red Lake mine in Canada.
  • Aeris rose by 7c to 72c after reporting a maiden mineral resource of 62,000 ounces of gold and 300,000 ounces of silver at the Golden Plateau project in Queensland.

The more interesting gold news this week was a report from Canada that a wave of sector takeovers could be about to break.

Peter Marrone, founder of Yamana Gold, told the Bloomberg news services that the US$4.8 billion takeover of Yamana by Pan American Silver and Agnico Eagle Mines could be the catalyst for “much needed consolidation of the gold industry.”

Iron ore paused after a powerful rally which started in late October when first speculation emerged about a Chinese change of direction which would include the end of Covid lockdowns and economic stimulus.

From US$80 a tonne iron ore peaked last week at US$127/t (a 58.7% rise), but has since eased to around US$124.50/t.

Locally-listed iron ore miners continued to creep higher but were showing signs of running out of steam. Fortescue Metals Group managed a rise of 16c to $22.48. It was selling for as little as $14.70 in late October. Champion Iron added 46c to $7.96 this week but did drop to $4.72 in late October.

China’s re-opening remains the big iron ore driver but there are doubts being raised about the sustainability of the recent sharp price increase with Morgan Stanley, an investment bank, telling clients that the iron ore market has “missing fundamentals”.

The bank noted that the iron ore rally was one of the fastest it had seen but it was also one not supported by tighter supply or demand indications and appeared to be driven entirely by “sentiment and optimism”.

Other news and market moves over the past few days include:

  • Sky Metals rocketed 3.6c (90%) to 7.6c after reporting large-scale rare-earth mineralisation at its Doradilla project near Bourke in western NSW with a best drilling hit of 33m at 0.5% total rare earths from a depth of 15m.
  • New Century Resources moved closer to restarting operations at the historic Mt Lyell soppr mine in western Tasmania with the release of a positive pre-feasibility study. On the market, New Century added 16c to $1.01.
  • Boss Energy said it had reached the halfway mark with work at its Honeymoon uranium project in South Australia, news which lifted the stock by 15c to $2.44.
  • Paladin Energy said in its December quarter report that it had signed three additional uranium offtake deals for material from its Langer Heinrich project in Namibia, lifting the stock by 7.5c to 81c. Shaw and Partners has a $1.30 price target on the stock.
  • Sandfire Resources added 17c to $6.38 after releasing a solid December quarter production report. Morgan Stanley lifted its price target for the stock by $1.05 to $6.85, and
  • RareX reported high grade drill results from work at its Cummins Range rare earth project in WA including a record intersection of 513.8m at 0.5% total rare earth oxides. The stock added 1.2c (22%) to 6.5c.