The flipside of gold’s continued ascent, which saw it add US$70 an ounce this week to trade close to US$2700/oz, is the bruising political storm battering almost everything else.
Uranium should run a close second next year, a view formed while talking with bankers and brokers during a visit to London, one of the world’s financial capitals and commodity trading centres from where this column is being filed.
The case for uranium, which has suffered a price fade since peaking at US$106 a pound 12-months ago to US$76.80/lb today, was reinforced by a comment in the annual preview of the year ahead by the Economist magazine which has been watching the power games being played by Russia.
Just as China has stirred multiple commodity markets with its embargo threats (think rare earths, gallium and germanium) so too is Russia stirring the uranium market with its dominant position in nuclear fuel.
Home to 44% of global uranium enrichment, Russia has threatened to limit exports of the fuel to the west, which the Economist said could “cause a meltdown in the market for the radioactive metal”.
After gold and uranium, it’s hard to see a clear winner in the first quarter of next year apart from takeover activity as companies with cash try to buy those with a viable project but limited cash.
In hindsight, 2024 has been a mixed year. The overall market is up 17% as measured by the all ordinaries index, beaten easily by the 25% gold index increase.
It’s other commodities which have had a tough time, dragging the ASX metals and mining index, which includes BHP and Rio Tinto, down 12% over the past 12-months.
The outlook is for a repeat in the new year, at least until after Donald Trump’s inauguration next month when he will get the keys to the White House and power to wage his threatened trade wars with China, Mexico, Canada and any other country he dislikes.
As this column was being written early Thursday (London time) gold was being lifted by a new market event and latest geopolitical wild card in the form of a coup in Syria.
On its own, Syria is not significant in the gold market, but when looked at as another fallen Middle East domino, the case for gold as an investment safe haven just got stronger, especially as it could be a precursor to the collapse a much more important country, Iran.
Gold tipping is never easy, and seasoned gold watchers such as Ross Norman from Metals Daily, are concerned that the forces at work in gold are becoming hard to read.
In a brief chat before attending the annual dinner of the London Bullion Market Association in London’s National Gallery, Norman said he had never seen a gold market like that of the past two years with central banks initially leading the way, followed by Chinese buyers and now what feels like the rest of the world joining in.
Despite being a gold bull, Norman is wary about the uncertainty in the gold market, which investors would be wise to consider because when experts admit they can’t get a clear reading on what’s driving gold it could move sharply in either direction.
On the Australian market, Northern Star recovered from the sell-off which followed the announcement of its plan for a share swap merger with De Grey Mining, rising by 92c this week to trade around $16.92, while De Grey added 8c to $1.97.
Other gold stocks also moved higher in harmony with the gold price with gains that included Bellevue up 10c to $1.38 and Genesis up 29c at $2.78.
The overall picture of the Australian market this week was mixed with iron ore stocks recovering lost ground thanks to reports of China boosting its economic stimulus efforts.
BHP rose by $1.40 to $42. Rio Tinto was up $5 to $124, and Fortescue rose by 50c to $20.10.
But those solid moves at the top end of the mining market were offset by South32 falling 3% after it reported the suspension of operations at is aluminum smelter in Mozambique, the latest warning for investors about the risks of exposure to African assets.
UBS said in a note to clients that industrial commodities faced a challenging time with conditions deteriorating over the past month.
What’s worrying UBS is the combination of Trump’s proposed tariffs and China’s “underwhelming” stimulus package.
“There is significant uncertainty in the market about the potential impact of Trump’s tariffs and the magnitude of Chinese stimulus going into 2025, as a result it is too early to turn positive on all industrial metals,” UBS said.
“We prefer commodities underpinned by compelling supply dynamics, and demand supported by energy transition applications (copper and aluminium) as well as gold which benefits from lower real interest rates.”
UBS sees gold rising to US$2900/oz by the third quarter of next year, before easing back to US$2700/oz over the next few years.
Copper, a beneficiary of energy transition, is expected by UBS to rise back towards US$4.50 a pound in the third quarter of next year.
FireFly was the best of the locally listed copper stocks this week, rising by 12c to $1.17 after announcing the best drill result so far from its Green Bay project in Canada, reporting an assay of 3.7% copper equivalent over an intersection of 86.3 metres.
Develop, which is revitalising the Woodlawn copper and zinc mine near Canberra, enjoyed a burst of buying support which lifted the stock by 24c to $2.38 after it announced a $100 million loan facility with big commodities traders Trafigura.
Lithium news, after months of negative reports, turned modestly positive thanks to Vulcan raising funds for its German brine-based business. The stock added 50c over the week to trade at $6.64.
Gina Rinehart, one of Vulcan’s strongest supporters, continued to dive deeper into the lithium business, with her latest plan being to build a lithium processing plant in a joint venture with Posco, a big Korean company.
Local lithium stocks failed to get any beneficial rub-off from the Vulcan and Rinehart news. Liontown slipped 7c lower to 60c and Pilbara Minerals lost 9c $2.27.
