Currency crisis driving gold through the roof, helped by US warships facing Iran

The U.S. dollar led the way down with the dollar index (DXY), which measures the dollar against a basket of rival currencies, hitting a three-year low of 96.1.

The flipside of the U.S. dollar plunge was a rise in the Australian dollar to a three-year high of more than US70.7c while internationally the Swiss franc soared to a 10-year high as investors rushed to dodge the next act in an unfolding global crisis.

Rapid currency moves mean that investors face a challenge in trying to correctly price assets with values changing almost by the minute with the key question being how much of gold’s rise is connected to the dollar’s fall?

The correct answer is quite a lot but not totally. Gold is reclaiming its historic role as a currency of last resort and a measure of fear in the market which means now is a great time for anyone exposed to gold and a worrying time if you’re not.

Gold price tipping moved into overdrive this week but quickly proved to be a mug’s game as Goldman Sachs discovered with a forecast of US$5400/oz steamrolled in hours, as could be the latest tip of US$7100/oz from RBC Capital Markets.

It’s the speed at which markets are moving perhaps more than the numbers themselves which is alarming because fortunes made today could be gone tomorrow.

Seasoned market watchers such Robert Armstrong at the Financial Times acknowledged his problem with gold, writing midweek that he had been “persistently and hilariously wrong about gold” perhaps setting a world record for “wrongness.”

Ross Norman, publisher of the MetalsDaily website said gold’s rise beyond US$5000/oz reflected a deep malaise in global finance.

“It’s not merely about geophysical tension or uncertainty, it’s about a fundamental collapse in trust and confidence in the system itself,” Norman said.

Much of what’s happening is related to the political turmoil in the U.S. where the President, Donald Trump, is under pressure after a botched immigration enforcement operation which has the country on edge as interest rates rise rather than fall as he is demanding.

Trump is also cheering on the currency crisis, saying he is not concerned about the falling dollar.

“No, I think it’s great,” he said, a comment which points to continued fall in the dollar which will underpin a continued rise in the price of gold and other precious metals such as silver which rose by 21% this week to US$117/oz or up 64% in a month.

The potential for a fresh outbreak of war in the Middle East is also rattling investor confidence and boosting the case for precious metals.

Australia has its own interest rate problem with the Reserve Bank tipped to increase official rates next month after a blow-out in the national inflation rate which has exposed the over-spending by the Australian Government.

The threat of rising local rates could be seen in the ASX all-ordinaries index which rose early in the week before capitulating to higher than expected inflation and international uncertainty, retreating to where it started.

A flat performance by the market overall left the running to gold stocks and special situations such as the proposed merger of Rio Tinto and Glencore which reaches, under London Stock Exchange rules, a “put-up, or shut-up” point next Friday with significant doubt emerging about the deal.

Top of the worry list, which helped rub 2% off Rio Tinto’s share price, are doubts about an ongoing regulator inquiry into Glencore over alleged bribes paid to African government officials, and probing questions from management at Australian Foundation Investment Company (AFIC) about whether a merger would add value to its big Rio Tinto stake.

Gold, however, dominated investors’ interest all week, with news and share price moves that included:

• Greatland Resources, up 25c to $13.66 after reporting strong December quarter gold and copper production of 86,273 ounces of gold and 3528 tonnes of copper at an all-in sustaining cost of A$2196 an ounce. Greatland is now trading higher than yesterday’s Macquarie Bank’s price forecast of $13.

• Northern Star up $1.14 to $29.38 as it continued to dig itself out of a self-dug hole of slow reporting about production problems.

• Horizon Minerals, up 13c to $1.46 after announcing continued high grade results from drilling at its Burbanks project in WA including two metres at 235.7 grams of gold a tonne from a depth of 248.3m.

• Regis Resources, up 29c to $8.40 after a solid December quarter but with a share price which is now well ahead of Citi’s price tip of $7.50.

• Magnetic Resources, up 14c to $1.58 after announcing a resources upgrade at its Lady Julie project in WA, exciting Shaw and Partners which has a price target on the stock of $3.98.

• Redcastle Resources, up 6c to 21c after announcing high-grade results from drilling at its namesake project in WA which included 10m at 50.11g/t from a depth of 10m, and

• Boab Metals, up 14c to 64c thanks to growing interest in the silver content in the ore at its Sorby Hills project in WA.

Uranium, after six-months of minimal movement, burst back to life with a rise of US$7 a pound to US$98/lb with a mid-week peek above US$100/lb for the first time in two years thanks to fresh buying attributed to Canada’s Sprott Physical Uranium Trust.

Local uranium stocks rallied with the price rise. Boss added 22c to $2.03. Paladin was up $1.33 to $14.19. Alligator rose by 1.5c t 5.4c, and Deep Yellow added 54c to $2.89.

Copper stocks performed strongly as the price of their metal moved back over the US$6/lb mark and reports surfaced of Chinese buyers snapping up kilogram-sized bars of copper in the hope that it will follow the explosive rise of gold.

Cannindah Resources rose by 1.1c to 5.3c after reporting a drill hit of 1.15% copper over 28m at his namesake project in Queensland while True North Copper slipped 6c lower to 59c despite a buy tip from Morgans which has a price target on the stock of $1.20.

Local copper favorite Sandfire rose by $1.22 to $21.04 while Develop Global, which is about to start steady-state production at its Woodlawn project in NSW, added 8c to $5.58 with Bell Potter tipping a price target of $6.40.

Tungsten stocks hit the headlines as the drums of war beat louder in the Middle East and Ukraine with price moves, such as:

• Apollo Minerals, up 2c to 3c after reporting that the French Government had reinstated its exploration permit over the Couflens project in the south of France.

• American Tungsten & Antimony, was down 1c at 17c despite announcing the acquisition of a U.S. tungsten project, and

• Tungsten Mining, gained 6c to 28c after raising $53 million for work on its Mt Mulgine project in WA.

The capital raising by Tungsten Mining was one of a flood of cash injections which included Dateline raising $35 million for work on its Colosseum project in California. LinQ raising $15.4 million for drilling at its Gilmore copper and gold project in NSW. Talga raising $7.3 million for its Swedish graphite project and Galan raising $40 million for its Argentinean lithium projects.

Other news and market moves of interest this week included:

• Wildcat Resources being described by CG Capital Markets as developer of “Australia’s next lithium mine” at its Tabba Tabba project in WA but slipping 7c lower to 40c despite the broker’s optimism and a price target of 75c.

• Sun Silver, up 36c to $2.55 after reporting additional gold and silver assays from its Maverick Springs project in Nevada, complete with encouraging antimony mineralisation.

• Terra Metals, up 14c to 34c after reporting high-grade platinum group assays from drilling at its SW5 prospect in the south of WA with a best result of 52.97g/t of platinum group material.

• Koba Resources, up 1c to 4.7c after reporting high-grade tin assays from its Stannary Hills project in Queensland with a best rock chip sample grading 26.1% tin, and

• Chrysos Corporation up 32c to $8.11 thanks to increasing sales of the PhotonAssay technology developed by the CSIRO which is starting to displace conventional and slower fire assays.