The global rush to build energy-intensive artificial intelligence (AI) data centres was the driver in copper rising up to an all-time high of US$6.67 a pound on Tuesday, while the long-term uranium price, also an AI beneficiary, hit a 14-year high of US$95 a pound.

Coal continues to gain traction after 10-years in the sin bin, rising by 11% in its electricity generating form (energy coal) to US$147 a tonne, while steel-making coal was up 2% to US$245/t.

An interesting, though perhaps misleading, way of looking at coal is that at its latest price, energy coal has risen by 40% over the last 12-months, better than gold’s 33% increase and copper’s 31% rise. 

Investment bankers and stockbrokers are yet to wrap their minds around the coal recovery but it is a potent sign that investors are losing faith in Australia’s struggling renewables-only national energy policy which is highly unlikely to provide the power for both data centres and metal processing.

Whitehaven Coal led its sector with a rise this week of 62c (7%). to $9.53, taking the increase since the start of the year to 22% and since this time last year to 75%. New Hope added 32c to $6.14 and Stanmore rose by 13c to $2.86.

Data centres have also emerged as one of the few positive elements in the Australian economy which is struggling with unpopular changes to capital gains tax which has destablised the residential property market, the country’s biggest single source of wealth.

It was the $8.7 billion invested in data centres in the March quarter which helped Australia eke out a small increase in gross domestic product (GDP) in the last quarter. though the outlook is for slower growth and higher inflation, a mix pointing to the dreaded disease of “stagflation,”.

Copper remains a favorite of Citi which is tipping a price rise to US$7.25/lb over the next few months and then up to US$7.50/lb in the next six-to-12 months as demand overpowers supply which is being dragged down by mine outage events.

Citi is equally bullish on uranium, forecasting a rise above US$100/lb over the next three months as the U.S. moves to boost nuclear fuel refining capacity to meet soaring data centre electricity demand, the same force behind the copper boom.

“We continue to see increasing appetite for and interest in nuclear energy, supporting our long term bullish view on uranium demand,” Citi said.

Locally, uranium stocks surged early in the week before running out of steam as traders took some of their money off the table.

Paladin initially jumped by 15% to $11.87 on Wednesday before sliding back to $10.79, a 4% fall over the week. It was a similar story with other uranium stocks which rose and then fell. Boss was up 10% to $1.36 before falling to $1.27.

Copper stocks also boomed then faded as investors charged before retreating in what could become a feature of the market in the lead up to the end of the financial year on June 30.

Sandfire rose to $20.27 but then slipped to $19.66 to be down 5c over the week. Capstone rose to $15.72 but then fell to $15.11, hanging on to a miserly 2c gain.

It was an equally mixed story with gold where the price has become bogged down at around US$4450 an ounce with the highlight on the local market being the start of corporate activity at Northern Star, where activist investor Elliot Management has demanded change after a series of management bloopers.

The entry of Elliott, the same firm which forced BHP to restructure its business 10 years ago, saw Northern Star’s share price rise over the week by $1.51 to $20.61. Citi sees the stock rising further with the bank setting a target price $29.70.

Jarden disagrees, downgrading its Northern Star target price from $22.30 to $21.60 because of what is sees as an overly-optimistic resource and reserves report released midweek.

Overall, the ASX gold sector weakened with its index declining by 3.5% thanks to a US$150/oz fall in the gold price.

Share price moves, mainly down, included Genesis, down 18c to $5.69. Greatland, down 30c to $13.20. Perseus, down 8c to $5.03 and Evolution, down 21c to $13.02.

It wasn’t all bad news for gold investors. UBS refreshed its sector analysis with a bitter/sweet theme of higher prices for selected “high quality” stocks able to ride out a period of rising costs as fuel prices rise and profit margins are squeezed.

Genesis, according to UBS, should rise to $10.15, close to double its latest price. The target price for Greatland is $16.50, and Perseus could reach $6.75.

“While we remain constructive towards the (gold) sector, still seeing elevated margins, the potential mark-to-market downgrade presents a short-term headwind,” UBS said.

“We see growing rationale to rotate to quality and defensiveness with higher margin stocks such as Newmont and Evolution appearing better placed than growth peers as rising capital expenditure and permitting risks create headwinds.”

Longer term, and after the inflationary outbreak caused by the Iran war and high oil prices, is undoubtedly positive for gold and easily measured through the global rush to acquire the metal.

During the week, the European Central Bank reported that gold had overtaken U.S. government bonds as the world’s top reserve asset following years of strong central bank buying.

Gold, aided by its strong price rise over the last three years, now represents 27% of all central bank reserve assets, up 20% from 12-months earlier. U.S. Treasury paper has fallen from 25% to 22% and euro-denominated assets are steady at 15%.

RBC Capital Markets in its latest commodity sector outlook said a divergence is becoming more apparent as bulk commodities (iron ore and coal) and base metals (copper and aluminium) rise with inflation while precious metals (gold and silver) are buffeted by rising interest rate expectations.

The two big boys of mining, BHP and Rio Tinto, started well thanks to their copper exposure but were hit by a wall of selling as news filtered in about a sharp increase in iron ore exports from Africa’s “Pilbara killer”, the Simandou mine in Guinea, which lifted exports from 1.3 million tonnes in April to 2.2m/t in May.

Fortescue paid a heavy price as more high-grade ore from Simandou adds to the pressure being felt by its low-grade Pilbara ore. Over the week, Fortescue fell by 73c to $21.14, taking its fall over the past three weeks to $1.85.

Lithium stocks initially rose strongly before being hit by selling despite more investment bank optimism including a sector-wide upgrade by RBC Capital Markets which told clients that “stronger downstream demand is colliding with lean inventories and delayed supply normalisation.”

PLS led the way up early in the week for lithium stocks with a rise to an all-time high of $6.81 before dropping back to $6.31, down 5c over the week.

PMET rose by 7c to 77c after receiving a financial offer for its Canadian project while Liontown ran out of steam with a slide of 5c to $2.42.

Other news and market moves included:

  • Lynas losing $1 to $18.85 as the rare earth sector weakened. Brazilian Rare Earths fell by 23c to $5.60, and
  • Barton Gold raised $25 million to fund work at its Challenger gold project in South Australia, a positive sign that the fund raising tap has not been completely turned off by government tax changes.