Much of the energy index rise can be attributed to strong gains by the big two of Australian oil and gas, Woodside and Santos, but the energy security factor can also be found in the impressive gains made by uranium stocks since early April.

The Israel v Iran war, and the potential entry of the U.S. into the conflict, is the latest event to lift the share prices of energy stocks but there is also evidence of a sea-change as gold peaks and concern grows about a possible 1970s-style blockade of oil tankers in the Persian Gulf.

Adding to the case for investors to take a fresh look at energy as an investment theme is the takeover bid made for Santos by Adnoc, the national oil company of Abu Dhabi which faces a stiff test by the Australian Government’s Foreign Investment Review Board (FIRB).

Adnoc’s Santos offer is an example of how Middle East countries are stitching up control of the global oil and gas industry while the western world pursues the theory of a renewables-only energy future which may, or may not, prove viable.

Oil over the past week has risen by US$10 a barrel to US$76/bbl. Uranium is up US$5 a pound to US$74/lb. Gold is down US$50 an ounce to US$3379/oz.

Those prices could easily flip next week but with the U.S. being slowly dragged into the Iran war, it is oil and uranium which seem more likely to outperform with gold at risk of a significant fall after a spectacular 12-months which has delivered a US$1000/oz increase.

Citi, an investment bank, warned clients during the week that gold was poised to drop by more than 20% later this year or early next year. If right, the gold price after Christmas could be around US$2800/oz, still handsomely profitable for most miners, but the reversal of a trend which has underpinned investor sentiment for three years.

Other banks disagree with Citi. ANZ’s price forecast of US$3600/oz mentioned here last week was reinforced this week with a fresh report that focused on the pressure being applied to the U.S. dollar by the country’s burgeoning budget deficit and signs of stress in the bond market.

Locally, it was energy stocks which outperformed this week, led by uranium producers and explorers which benefited from the rise in the price of the nuclear fuel and a fresh US$200 million investment in uranium by Canada’s Sprott Physical Uranium Trust (SPUT).

U-moves included:

  • Boss Energy, up 84c (22%) to $4.67 after reporting that it had met first year production guidance of 850,000 pounds of yellowcake.
  • Lotus, up 4c (23%) to 20c after reporting that it had started recommissioning work at its Kayelekera project in Mali.
  • Deep Yellow, up 38c (28%) to $1.71, thanks to the sentiment effect of the SPUT investment. Morgans reckons the stock will rise to $1.92, and
  • Paladin, rose by $1.03 to $7.47, Bannerman, was up 71c to $3.41, while Alligator Energy requested a trading suspension after a 1c (33%) rise to 4c.

Adding to the pressure building in the uranium sector is a deeply significant switch by the World Bank which is lifting a three-decade ban on funding nuclear power to help meet demand for low emission electricity, a switch with obvious political implications in Australia, which remains steadfastly opposed to nuclear power.

In the oil and gas sector, interest was focused on Santos after it received the $8.99 a share takeover offer from Adnoc which failed to excite investors.

Santos added $1 but failed to get anywhere near the bid price, last trading at $7.76, an indication that the Adnoc might face a tough job convincing the FIRB that the acquisition of Santos is in Australia’s national interest.

Woodside, the energy sector leader, rose with the oil price to $25.53, up $1.25, but it was among the smaller oil and gas stocks where signs of renewed interest in a largely forgotten sector can seen with moves that included:

  • Beach Energy, up 10c to $1.37 with Ord Minnett seeing a possible rise to $1.75.
  • Beetaloo Energy, up 2c to 19c with Morgans tipping a target price of 73c thanks to growing interest in its exploration program in the Northern Territory’s inland Beetaloo Basin.
  • Carnarvon Energy up 1.5c to 12c, and,
  • Tamboran Resources, another Beetaloo explorer, up 2c to 19c.

Gold leaders weakened in line with the gold price. Northern Star lost $1.62 to $20.39, and Evolution was down $1.27 at $7.81.

UBS, an investment bank, said it remained a gold bull but “guidance risks loom” in the reporting season which starts next month. The bank expects Evolution to sink further to a target of $6.70.

Most interest among gold investors is the imminent listing of Greatland Gold on the ASX. A star on the London market, Greatland own the big (but old) Telfer mine in WA and has high powered backers but over the past week its London shares have slipped 3.5% lower.

Other gold moves and news this week included:

  • St Barbara, down 5c to 32c after another gold production downgrade.
  • Genesis Minerals, down 41c to $4.51 despite an upbeat research note from UBS and an increase in the bank’s target price from $4.50 to $5.50.
  • Brightstar Resources, down 4.5c to 52c despite reporting another high grade drill intersection at its Sandstone project in WA with a best hit of 10 metres at 43.8 grams of gold a tonne, and
  • Southern Cross Gold, up 52c to $7.93 thanks to a drill hit of 3.9m at 124.6g/t at its Sunday Creek project in Victoria with an individual assay of 2110g/t (more than 60 ounces to the tonne).

Iron ore stocks struggled as the China v U.S. trade war continued to weigh on economic activity in both countries, rubbing another US$2.50 off the iron ore price which is down to US$92.45 a tonne on the Singapore exchange, to now be down $12/t down in four months ago.

Fortescue dropped through the $15 mark to trade around $14.80 for a loss of 94c over the week, and $4 since the start of the year.

BHP, the iron ore sector leader was down $1.78 to $36.24 and Mineral Resources fell by $1.45 to $22.26, a drop aided by the need for the company to inject $150 million into a struggling lithium project.

The big news in the lithium sector was not good news with another oil major, Chevron, joining ExxonMobil in the lithium business having acquired a 125,000 acre plot in north-east Texas to drill for lithium-rich brine.

On commodity markets, the lithium price continued to weaken, taking most producers with it. Liontown slipped 1c to 66c and Pilbara was down 3c at $1.36.

Rare earth stocks had a mixed week as China and the U.S. continued to work on a trade deal.

Lynas, the local rare earth leader, performed best with a rise of 51c to $9.37 after reporting the first production of terbium oxide, one of the critical metals used in modern armaments.

Viridis was another rare earth winner after reporting plans to expand into a U.S. based rare earth refinery, news which lifted the stock by 4c to 50c.

Most other rare earth stocks weakened, including Hastings, which fell by 3c to 27c.

Other moves of interest this week included:

  • FMR Resources, up 9c (48%) to 28c after billionaire prospector Mark Creasy emerged as a major shareholder in the microcap explorer which has its foot on a promising copper project in Chile.
  • Galileo Mining slipped 1c lower to 11c despite reporting encouraging palladium and platinum assets at its Norseman project in WA. Chalice, the local palladium leader, rose by 5.5c to $1.61.
  • Element25 rose by 3.5c to 23c after reporting that the Australian Government’s northern development agency would provide $50 million to help expand the Butcherbird manganese project.
  • Iltani Resources rose by 1c to 24c after reporting continued exploration success at its Orient West silver project in Queensland with a best hit of 1m at 1334.8g/t, and
  • Unico Silver also added 1c to 28c after reporting its best ever assays at its Cerro Leon silver project in Argentina.