Copper was not the only industrial metal to gain ground. Aluminium, zinc, nickel, tin and even iron ore all rose as investors reacted positively to a potential easing of the China v U.S. trade war.

The improving outlook for hard commodities and property is also a reflection of investor concern about the outlook for inflation in Australia which from London, where this column is being written, goes from bad to worse.

High energy and labor costs have dampened the prospect of the Reserve Bank cutting interest rates on Melbourne Cup day next week.

The London view of gold is that the sell-off has been driven largely by traders taking some of their profits off the table as geopolitical tensions ease, but the decline is also seen as an opening for central banks to resume their gold buying as a hedge against the U.S. dollar.

Bulgaria and Iran are the latest countries reported to have entered the market to bolster their gold holdings with China also becoming more active, along with a drive to get investors to store their gold in Shanghai rather than London, New York, and Zurich.

John Reade, market strategist at the World Gold Council, said he believed a lot people would actually welcome a deeper correction to “blow the froth” off what had become an unsustainable rally.

Big commodity traders normally associated with industrial metals and energy are reported to be expanding their London gold trading teams to satisfy client demand. Both Trafigura and Gunvor are boosting their precious metal trading capacity.

Not everyone is a gold bull. U.S. investment bank Citi told clients that the next stop for gold is US$3800/oz with support not kicking in until the price reaches US$3600/oz.

“Downward price pressure could also grow towards the end of the year,” Citi said, adding that there was the potential for rebalancing some of the US$17 trillion of profits in gold stockpiles given that the average long-term entry price of gold investors was around US$1500/oz versus the latest spot-market price of close to US$4000/oz.

Most Australian gold stocks weakened early in the week before recovering with the price of their metal with moves (and news) of interest including:

  • Northern Star, up just 9c over the week to $23.79 after reporting lower than expected September quarter production of 383,000oz. Bell Potter reckons the stock will hit $30 over the next 12-months.
  • Pantoro fell by 60c to $4.93 thanks to lost production caused by underground mining incidents. Bell Potter remains a keen supporter of Pantoro with a buy tip and price target of $7.30.
  • Perseus was 40c weaker at $4.70 but continues to build an impressive cash pile which makes it a stock to buy according to UBS which has a $6.15 price target on the company.
  • Westgold Resources fell by 25c to $5.01 after releasing its September quarter report but is expected by CG Capital Markets to rally to a target price of $7.80, and
  • Astral Resources lost 2c to 20c but should rise to 45c according to Shaw and Partners.

Copper, as mentioned earlier, rose strongly all week as renewed fears emerge of a shortage developing after a series of mine outage events and increasing demand from the rapid electrification of everything.

On Wednesday, copper on the London Metal Exchange hit an all-time high of US$11,137 a tonne after Glencore, one of the world’s biggest producers, reported a 17% fall in output for the first nine months of the year.

Other supply crimping events include outages at the Grasberg mine in Indonesia, Kamoa Kakula in Congo, and El Teniente in Chile.

Jefferies, a U.S. investment bank, said that it expected sizeable copper supply deficits over the next 12-months.

Australian copper miners enjoyed a week of solid support, led by Sandfire which rose by 67c to $16.29, seemingly on track to overtake its all-time high of $16.99 reached earlier this month.

KGL Resources emerged as a copper stock to watch, rising by 1c to 18c before a trading halt pending an announcement with Morgans tipping a future price of 30c as it moves close to developing its Jervois project in Queensland and it major Indonesian shareholder, Salim Group, plans the development of the Hillside project in South Australia.

The uranium sector had one big winner in Boss Energy which reported strong September quarter production which caught short sellers on the wrong side of the market, forcing some hurried buying to cancel out their positions, triggering a 24c share price rise to $1.92.

Paladin also did well in the uranium sector with a rise of $1.03 to $9.48, but Deep Yellow weakened by another 8c to $1.76.

Lithium stocks continued their recovery with Pilbara adding 20c to $3.30 despite warnings from investment banks that sentiment has driven the stock too far ahead of its fundamentals. Morgans has a sell tip and price target of $2.80. UBS is even more cautious with a target of $2.40.

Other news and market moves of interest this week included:

  • Develop Global lost 6c to $3.60 despite a positive September quarter report with Bell Potter telling clients that the share price weakness was a buying opportunity with the stock expected to rally to $5.
  • Fortescue Metals rose by 60c to $21.45 thanks to the continued strength in the iron ore price which refuses to fall despite Chinese demands for a lower price.
  • Mount Ridley Mines was the micro-cap star of the week rising by 1.9c (315%) to 2.5c thanks to its report of a maiden gallium resource.
  • Larvotto Resources fell by 21c to $1.04 after rejecting a takeover bid from U.S. Antimony Company.
  • BCI Minerals slipped 2c lower to 38c after reporting that earthworks were almost complete as its Mardie salt project, and.
  • Whitehaven Coal continued to swim against the tide of green opinion, rising by 15c to $7.20 thanks to continued strong demand for metallurgical and thermal coal. Morgans has a price target on the stock of $7.95.