Always a useful measure of underlying economic trends, gold is wary of Trump’s agenda and his potential to ignite a winner-takes-all trade war with China which the U.S. would win but at a high price while also bruising smaller countries, including Australia.
This week’s rise in the gold price to US$2755 an ounce means it added US$65/oz in the week of Trump’s inauguration to now be just US$22/oz short of the peak reached in October last year.
The Australian dollar gold price, boosted by a weak currency, reached a record A$4401/oz on Wednesday before easing slightly to around A$4384/oz, a rise of A$81/oz.
At US62.7c (down US3c since Christmas) the A-dollar is signalling a decline in confidence in the Australian economy as pre-election jitters compound the problem of the magnetic pull of the U.S. economy which Trump proposes to supercharge, slashing costs and driving investment.
Gina Rinehart has been an early mover in a group of rich Australians shifting some of their money out of Australia into the U.S., confident that it its economy will outperform the rest of the world over the next few years.
Morningstar, a research house, agrees with Rinehart. It reckons the U.S. stock market, even after the Trump rally which started last year, offers better value than the Australian market which is said to be among the most expensive it covers.
Rinehart is also blazing a trail in a shift back to fossil fuels, one of Trump’s objectives, as she builds a nationally significant natural gas business, first on the east coast through part ownership of Senex Energy, followed by expanding investment in west coast gas assets.
For local investors looking for ways to place a bet on the Rinehart/Trump fossil fuels push, there’s probably no better stock than Strike Energy, the last of the independent gas companies with a sizeable foothold in the re-emerging North Perth Basin.
Strike is a partner with Rinehart’s Hancock Energy in the West Erregulla gas field and is undergoing a management shuffle as well as undertaking a strategic review which is likely to recommend a sale process. Rinehart is the logical buyer.
Over the past week, Strike shares rose by 3c (12%) to an untaxing 24c, valuing the business at $634 million, chickenfeed for Rinehart, given her US$30 billion fortune, but more importantly a potential third gas deal for her in a region undergoing a major phase of development.
The return of government support for fossil fuels has set the U.S. on a collision course with Europe and the global Green Movement with Trump relishing the chance to slam the brakes on the electric vehicle industry by removing EV tax incentives.
Australia’s primary EV exposure is through lithium stocks, which emerged largely unscathed in the first week of Trump thanks to their primary market being China and the rest of Asia, which is fully committed to an EV future.
Local lithium leader Pilbara Minerals went on a roller coaster ride this week as speculation of a lithium price recovery (which is yet to arrive) first lifted the stock to $2.49 before Trump’s anti-EV stance, combined with the threat of imminent punitive tariffs on China, knocked the stock back to $2.36, up 3.5c for the week but trending down.
Other lithium news and market moves this week included:
- Patriot Battery Metals losing 3.5c to 36c despite closing a $69 million deal with Germany’s Volkswagen which failed to offset the problem of being exposed to the Canadian lithium industry, which is largely reliant on demand from the U.S.
- IGO added 11c to $5.24 but like Pilbara was trending down after peaking at $5.48, under the weight of a possible mothballing of its Kwinana lithium hydroxide plant.
- Liontown added 9c to 68c after releasing an upbeat December quarter production report covering its Kathleen Valley project with brokers divided on the next move. Bell Potter says Liontown is heading higher with a price target of $1.40. Macquarie says down with a target of 60c. Investors can toss a coin, and
- Ioneer told the story of the shifting sands in the U.S. initially rising by 5c (30%) to 22c on news of an upsized loan from the outgoing Biden administration for its Rhyolite Ridge mine in Nevada before falling back to 19c for a 2c gain but heading south.
Gold stocks, despite the higher price for their metal, were uninspiring. Northern Star and Evolution, the local leaders, lost ground. Northern Star slipped 11c lower to $17.17 despite a Bell Potter buy tip and price target of $20. Evolution was 6c weaker at $5.60.
Most other gold stocks made small moves up or down with Capricorn an exception, adding 43c to $7.57 after announcing the acquisition of a tenement adjacent to its Karlawinda mine in WA.
Other gold moves included West African up 3c at $1.64 with Macquarie tipping a rise to $2.20. Alkane up 1c at 53c with Bell Potter tipping a rise to $1.25, and Metal Hawk up 3c to 34c after reporting high grade, near surface, assays from its Thylacine project near Leinster in WA with a best surface sample of 63.3 grams of gold per tonne.
Uranium stocks enjoyed a brief moment in the sun when optimism about a Trump-led boost for nuclear power sparked fresh interest in local stocks such as Paladin and Boss, with a burst of buying piling pressure on short sellers of both stocks.
Boss rose by 33c to $3.16 and Paladin put on 87c to $9.26 – but the uranium price barely moved, up US5c a pound ounce to US$74/lb.
Price forecasts for U-stocks are as far apart as the lithium tips. UBS reckons Paladin is heading to $10. Bell Potter says $10.70, and Shaw says $15.80.
AusQuest was the most interesting stock exposed to copper this week delivering a sharp 1.8c (225%) rise to 2.6c after reporting a significant porphyry copper/gold discovery at its Cangallo project in southern Peru.
Multiple wide intercepts were reported from drilling with a hit of 348 metres at 0.26% copper, plus 0.06 parts per million of gold from a depth of 6m, and 188m at 0.28% copper plus 0.07ppm gold from 214m.
Cygnus was another small copper explorer to report encouraging exploration results, including 7.3m at 4.2% copper from 317.8m from outside the resource at its Corner Bay project in Canada, with best result of 2.5m of 9.1% copper. On the market, Cygnus added 1c to 14c.
Other copper stocks failed to fire, led by falls from BHP (down 88c to $39.18) as the copper price slipped US20c a pound lower to US$4.24/lb with metal traders retreating out of concern about Trump’s trade threats which would dampen demand for all base metals.
Iron ore is another industrial commodity under trade war pressure and though the price is holding at US$103 a tonne there are multiple forecasts of a fall ahead.
It’s the outlook which best explains a 36c fall by Fortescue to $18.59 despite reporting strong production results in the December quarter, and a 27c fall by Champion Iron to $5.71.
Other news and market moves in the first week of Trump’s return included:
- Centaurus Metals rising by 5c to 42c after reporting a sharp increase in nickel recoveries from an optimized flowsheet for its Jaguar project in Brazil.
- Iluka Resources dropping by 66c to $4.67 after reporting a poor December quarter which included the announcement of cost cutting. Goldman Sachs reckons Iluka will bounce back, seeing the stock as a buy with a price target of $7.40.
- Greatland Gold rising by 1 penny (15%) to 7.3p on the London Stock Exchange after reporting encouraging results from its recently acquired Telfer goldmine in WA.
- Boab Metals slipped 1c lower to 17c after releasing its December quarter report which included encouraging comments on its Sorby Hills silver and lead project. Shaw and Partners see the stock rising to 40c, and
- Sovereign Metals rising by 2.5c to 76c after releasing an optimized study into its Kasiya rutile and graphite project in Malawi.
