Gold bulls eye return to US$5000/oz amid renewed Chinese buying and falling US dollar

Since hitting a low of US$4210/oz three weeks ago, gold has clawed its way back to around US$4720/oz thanks to renewed Chinese buying and concern about a fresh slide in the value of the U.S. dollar.

Gold’s fall in March was caused in part by investors, especially those in Middle East gold trading centres such as Dubai, liquidating part of their stock, and by an emergency sale of gold by Turkey to fund its defence force.

Peace talks have boosted investor confidence that normality might return, though when (or if) that happens the focus of investors, including central banks, will swing back to the challenge of reining in U.S. Government debt which has risen to US$39 trillion.

More important than the whopping size of U.S. debt is the speed at which it is growing.

CG Capital Markets, an arm of Canaccord Genuity, said in a mid-week note to clients that the rise to US$39 trillion came just 147 days after the national debt level reached US$38 trillion with spending on the Iran war a key factor in the acceleration.

Other signs of the gold market possibly returning to boom conditions include a decision by the French Government to withdraw 129 tonnes of gold from the Federal Reserve of New York as part of a long-term plan to repatriate the country’s gold, but also a sign of fading confidence in the U.S. and its currency, and growing confidence in gold.

China is also voting with its national balance sheet, launching a fresh burst of gold buying during March’s weakness in the market, snapping up 160,000oz, the most in a month since February last year.

The overall picture of gold demand rebounding after the March price correction encouraged CG to update its gold price forecasts with the long-term price increased by 12.8% to US$5537/oz and the long-term Australian gold price increased by 11.2% to A$7798/oz.

Local gold stocks staged a solid recovery as the war in Iran appeared to be winding down but an initial surge of enthusiasm on Wednesday was fading yesterday as doubt about a lasting peace emerged, Iran persisted with its blockade of Persian Gulf oil exports and Israel continued to bombard Lebanon.

Cash in the bank accounts of the gold miners is fast becoming as interesting as share prices with the first flush of March quarter reports highlighting the size of the piles, including Greatland’s $1.2 billion and the $1.3 billion in Regis.

Greatland traded up to an all-time high on Wednesday of $15.32 before slipping to $14.36 for a gain over the past week of $1.27. Regis rose by 10c to $7.22 but did trade up to $7.40 on Wednesday.

Other gold news and market moves this week included:

• Bellevue Gold, up 32c to $1.88 after reporting the production of 41,000oz of gold in the March quarter which yielded $158 million in underlying cash flow, leaving cash on hand of $181 million.

• Saturn Metals, up 8c to 54c after reporting bonanza gold grades up to 70.03 grams a tonne over 4 metres from a depth of 55m from the latest drilling at its Apollo Hill project in WA. CG reckons Saturn will rise to $1.

• Ramelius Resources, up 17c to $4.01 after reporting rain affected March quarter production of 38,100oz which Macquarie dismissed as a one off event sticking with a buy recommendation and target price of $4.60.

• Northern Star, up $2.09 to $23.98 as investors redevelop confidence in the accident-prone miner.

• Antipa Minerals, up 4c to 62c as interest grows in a pre-feasibility study of its Minyari project in WA scheduled for release later this year, and

• Capricorn Metals, up 60c to $12.27 after reporting strong March quarter production of 30,558oz of gold and an increase in its cash holdings to $507.6 million.

Energy stocks had a mixed week as the Iran war ran hot and cold. Most oil stocks lost ground as prices retreated ahead of a possible opening by Iran of the narrow Strait of Hormuz.

Woodside slipped $1 lower to $33.21 whereas Santos rose by 8c to $7.93 after reporting a strong oil flow from its Pikka project in Alaska.

Emerging oil and gas stocks continued to attract investor attention led by Omega which rose by 5c to 85c thanks to its exposure to Queensland’s promising Taroom Trough.

Uranium and lithium stocks also benefited early in the week from Iran’s oil squeeze but faded later.

Paladin was the early uranium leader rising to $12.44 before easing back to $12.32 for a gain over the week of 66c. Deep Yellow rose to $1.95 before slipping back to $1.82, a fall of 3c over the week.

Boss Energy rose to $1.64, a gain of 5c and ahead of a $1.60 price target set by investment bank Citi.

Uranium star of the week was Cauldron Energy which added 2.5c (80%) to 5.8c after being included in the BetaShares Global Uranium fund thanks to interest in its Yanrey project in WA.

Lithium stocks continued to attract attention as sales of electric vehicles rose in line with the higher oil price and reports of a looming lithium shortage.

Leading producers edged higher with PLS up 3c to $5.30. Liontown up 16c to $1.91 and IGO up 5c to $8.14

Lithium developers firmed with Vulcan up 40c to $3.72. Global up 5c to 52c, but with Shaw and Partners tipping a future price of $1.50, and Wildcat up 2c to 40c.

Investment bank UBS said it is expecting strong cash flow numbers from established lithium producers when they release their March quarter reports with additional support from a lithium price which is expected to continue rising.

Develop Global was the best of the copper exposed stocks thanks to the company reporting that its Woodlawn mine in NSW had reached steady-state production. The stock, which had slipped to a March low of $3.98 rose by $1 this week to $5.45.

FireFly was another copper recovery situation after releasing a fresh crop of drilling results from its Green Bay project in Canada, including 70.8m at 4% copper equivalent over 19.2m, good enough to lift the stock by 5c to $1.97 over the week after touching a midweek low of $1.63.

Sandfire recovered strongly from a pre-Easter low of $16.24 to trade up to $17.23 after reporting reduced March quarter copper production of 22,858 tonnes, down a 5% on the December quarter.

Other news and market moves in a week marked by the start of a fragile peace deal in the Middle East included:

• OD6 Metals, up 4c to 14c after reporting high grade calcium fluoride samples at its Mammoth project in the U.S. including a rock chip grading 53.2% fluorspar.

• St George Mining, up 1c to 13c after releasing a fresh set of high grade rare drill results from its Araxa rare earth project in Brazil, including 165.3m at 4.28% total rare earth oxides and 0.61% niobium.

• EQ Resources, up 3c to 36c thanks to growing investors interest in its tungsten projects. CG Capital Markets has a price target on the stock of 50c, and

• Chalice Mining, up 13c to $1.61 after announcing the appointment of global mining leader Mark Cutifani and his associates to work on plans for the development of the Gonneville polymetallic project in WA.

Odd Spot. Greatland Resources became the latest victim of the Night Parrot in WA with the elusive bird, which hasn’t been seen for years and might even be extinct, used by government regulators to limit development and mining activity close to Greatland’s Telfer mine. Only in Australia!