Global security threats, especially in the Middle East, seem likely to maintain upward price pressure on precious metals, particularly when combined with the steady decline in the value of the U.S. dollar.

Trouble on the streets of U.S. cities is also playing into a precious metals theme which saw gold rise back to US$3371 an ounce, silver hit US$36.86/oz, and platinum trade up to US$1247/oz. All are nudging record highs.

But whether gold, silver and platinum are rising or the U.S. dollar is falling is an interesting question for investors because the dollar, as measured by the basket of currencies in the dollar index (DXY), has fallen to a three-year low of 98.35, prompted in part by foreign investors trimming their exposure to an unpredictable U.S. government.

There is also a problem with the local rise in the ASX 200 (and the all ordinaires index) thanks to an outsize and perhaps unsustainable contribution from bank stocks.

Commonwealth Bank shares have risen by 18% since January to $181, which means the bank is valued at $304 billion, or $105 billion more than BHP, a direct result of cash flowing out of the U.S. into a “safer” jurisdiction.

Half the ASX top 10 are bank stocks with Commonwealth on top, National Bank third, Westpac fifth, ANZ seventh and Macquarie ninth.

Gold is riding on the same wave of money flowing out of the U.S. with two reports this week highlighting what could be a long-term trend as U.S. budget deficits explode.

The first report was from ANZ which predicted that trade uncertainty will drive gold to US$3600/oz. Then came a European Central Bank study which said gold had displaced the euro as the second most important reserve currency held by central banks.

The ANZ price forecast, plus a comment that gold is “searching for a new springboard” can be seen as just another tip, whereas the ECB study shows the strength of the gold market – or lack of strength in rival assets.

A potential springboard for gold’s next move up could be the resumption of interest rate cuts by the U.S. central bank.

“While the inverse relationship between gold an interest rates broke down during the rate hiking phase, we believe renewed rate cuts will support gold,” ANZ said.

According to the ECB, gold now represents 20% of the reserve assets of the world’s central banks, comfortably overtaking the euro’s 16% and moving closer to the U.S. dollar’s 46%.

“Central banks continue to accumulate gold at a record pace,” the ECB said, pointing out that 10 years ago gold accounted for 14% of central bank reserves.

Local gold stocks rallied after a period of weakness, led by Northen Star which rose by 72c this week to $21.71. Evolution, which fell sharply early in the week to bottom around $8.43, rallied to $8.66 on Thursday to still be down 21c.

Other gold moves and news included:

  • Ausgold, up 9.5 to 77c after reporting the discovery of a high grade shoot in the northern zone of its Katanning project in WA.
  • James Bay Minerals, up 16c at 65c after reporting multiple intercepts of more than 14 grams of gold a tonne in the Rebel Trend at its Independence project in Nevada, and
  • Perseus Mining down 27c at $3.70 despite publishing an optimistic five-year gold production report.

Platinum, as mentioned in last week’s diary, has returned after 10-years on the sidelines, dragging its sister metal palladium along for the ride.

Chalice, the local palladium favorite as it works towards development of its palladium-rich Gonneville project neat Perth, added another 19c this week to trade up to $1.49. It fell as low as 83c in April.

Future Metals, the current owner of the frustrating (on/off) Panton palladium and platinum project in the north of WA, rose by 0.5 of a cent (38%) to 1.8c over the week, but it did get as high as 2.2c.

Southern Palladium added another 14c this week to trade at 61c, using the stronger market to raise $8 million for work on its Bengwenyama project in South Africa. The stock was selling at 20c a month ago.

Silver-exposed stocks had a mixed week. Andean slipped 2c lower to $1.12 but is still 16c higher than it was a month ago. Silver Mines, which has been struggling with its Bowdens project in NSW, had a win with its new Calico North project in California, closing yesterday at 12c, up 2c over the week.

Uranium stocks had a mixed week, Paladin continued to claw back lost ground with a rise of 17c to $6.60. It dipped as low as $3.98 in April. Deep Yellow added 1c to $1.35 while Boss was 23c weaker at $3.82.

Short sellers continue to dog the uranium sector with 5 of the top-20 shorted stocks being uranium-exposed. Boss tops the list with 18.5% of its issued capital reported to be sold short, though that’s an improvement on the 26% shorted in April.

Iron ore stocks also had a mixed week with the major news being a decision by Australia’s richest person Gina Rinehart to consolidated her iron ore interests under the one roof, folding the Atlas Iron business into the bigger Roy Hill to create Hancock Iron Ore.

The move makes sense in terms of efficiency and cost saving but could also be a sign that she sees tougher times ahead for iron ore as Chinese steel demand peaks and the big new Simandou mine in Africa moves closer to a production start.

Fortescue, the local ASX listed iron ore leader, added 40c this week to $15.86 but is down 38c over the past month.

Lithium stocks stirred on speculation that the price of the battery metal might be approaching a bottom after a three-year fall.

Patriot Battery Metals enjoyed an overdue share price uptick with a rise of 5c to 28c after reporting high-grade caesium (pollucite ore) during drilling at its Shaakichiuwaanaan lithium project in Canada.

Pilbara Minerals also enjoyed a boost, adding 15c to $1.40 after it reported a big increase in the resource at its Pilgangoora project in WA. Morgan Stanley sees the stock rising to $1.70. Macquarie has $2.40 as the price target.

The heat went out of antimony stocks this week with one winner, Resolution Minerals, which added 1c to 3c after reporting the acquisition of a project in Idaho, while other antimony stocks lost ground, including Nova, down 6c at 33c, and Trigg, down 1.6c at 6.2c.

Other news and market moves this week included:

  • Talga, up 7c to 46c after securing a key mining permit covering its Nunasvaara graphite project in Sweden.
  • Firefly Metals, up 4c to $1.04 after raising $95 million for work on its Green Bay copper project in Canada. Macquarie has a price target of $1.55 on the stock.
  • Woodside Energy, the local oil and gas leader, rose by $1.11 to $23.91 after the oil price briefly rose above US$70 a barrel thanks to rising Middle East political tension.
  • Ardea Resources added 1c to 40c after reports of Indonesia closing some environmentally-damaging nickel projects, and
  • Lynas Rare Earths rose strongly early in the week to a 12-month high of $9.42 thanks to China at that stage saying it would enforce a ban on rare earth exports to the U.S. but then fell sharply to $8.53 when China and the U.S. struck a trade deal, ending the week down 1c at $8.76.