Gold party rages on a cocktail of Trump, Greenland, Japanese bonds and global debt

From a starting price of US$4593 an ounce on Monday, gold rose by 6% or U$288/oz to US$4885/oz when Trump started speaking on Wednesday at the World Economic Forum in the Swiss ski resort of Davos.

By the time Trump finished speaking an hour later gold had slipped slightly to around US$4795/oz as investors reacted to the withdrawal of his threat to impose punitive tariffs on Europe over opposition to his claim to U.S. ownership of Greenland.

Supporters of Trump, who turns 80 on June 14, claim that he got what he wanted. A deal to allow the U.S. to build bigger and better military bases in Greenland, a prize he already had because that was agreed more than 70 years ago.

Diamonds might very well be a girl’s best friend, as the late Marilyn Monroe once sang, but Donald Trump is undoubtedly gold’s best friend, creating chaos wherever he goes, driving investors to seek safe havens with gold at the top of their list and the U.S. dollar too risky.

The Greenland saga was a perfect example of why gold appeals in a sea of turmoil, benefiting from Trump’s inability to govern coherently as his popularity sinks, taking the dollar down with him.

The other precious metals are also benefiting in a strengthening strategy of “sell America” as signs of a global debt crisis grow, possibly starting with an exodus from the U.S. Government bond market, as happened in Japan during the week when bond traders sold heavily.

Ken Griffin, head of the Citadel fund management business and one of the richest men in the U.S., warned in Davos that the dumping of Japanese debt was an “explicit warning” to U.S. politicians to improve the country’s finances.

“The bond vigilantes can come out and extract their price,” Griffin said after a sudden rise in the Japanese 10-year bond rate to 2.35%. It was 1.4% six months ago.

More importantly, and ominously for the U.S., the Japanese ultra-long-term (40-year) bond rose above 4% for the first time, hitting 4.2% on Tuesday. It was 2.6% at this time last year and less than 1% three years ago.

The U.S. 10-year rate rose to 4.3% on Wednesday before slipping after Trump’s peace offering to Europe. It was below 4% two months ago but has been rising as Trump splashes cash on voters ahead of November’s mid-year elections.

Instability in the U.S. economy and fear of a debt crisis which could trash the value of the U.S. dollar is one of the key drivers behind the sharply higher gold price and a belief that it will stay elevated for the rest of Trump’s reign.

In Australia, the local gold price rose to A$7044/oz, boosting the already-overflowing bank accounts of local miners and driving explorers higher. Moves of interest this week, up and down, included:

• Evolution, up $93c over the week to $14.06, which was down slightly on the all-time high of $14.86 reached on Wednesday. Evolution has risen by 144% over the last 12-months and its cash balance hit $967 million on December 31 and is almost certainly above $1 billion today.

• Northern Star, the gold sector leader which has been suffering from operational setbacks and tough analyst criticism, fell by $1.19 this week to $26.66, but is still up $1.88 since the start of the year.

• Greatland Resources, which saw iron ore billionaire Andrew Forrest lift his stake to 18.3%, rose by 27c to $13.01, down on the stock’s all-time high of $13.64 reached on Wednesday.

• Bellevue Gold rose by 19c to $1.82 but did reach a 12-month high of $1.95 on Wednesday after announcing a management shuffle and strong December quarter production. Macquarie reckons the stock will rise to $2. UBS says $2.05.

• St Barbara had a long overdue win with a rise of 13c to 69c after announcing progress at its Touquoy processing plant in Canada.

• Emerald Resources added 57c to $7.35 (but did hit an all-time of $7.99 on Wednesday) after announcing an expanded resource base at the Memot project in Cambodia which could become its second mine in that country.

• Tesoro Gold rose by 4c to $1.35 as interest grows in its El Zorro project in Chille. Morgans reckons the stock will rise to $4.88, and

• Saturn Metals added 4c to 52c after announcing that it had a six-rig drilling program underway at its Apollo Hill project in WA.

The annual gold price tipping competition at one of the world’s top gold “clubs”, the London Bullion Market Association, produced a cautious consensus forecast for the year ahead of US$4741.97/oz. Tips ranged from a low of US$3450/oz from US$7150/oz.

The big picture for investors is that gold and the entire resources sector will be the Australian stock market’s top performing sector this year as banks fade and miners rise.

The best example of the shift away from banks is the market capitalisation race between BHP and Commonwealth bank which Commonwealth was winning easily last year but is now just $7.2 billion ahead of BHP — $250.9 billion v $243.7 billion.

Wilsons Advisory said mid-week that miners would continue to be driven by a weakening U.S. dollar, structural demand tail winds, supply tightness, strong precious metals demand and a consensus among analysts that profit upgrades are on the way.

Rare earth stocks attracted investors interest after Australian Strategic Materials, the company behind the Dubbo zirconia and rare earth project in NSW, agreed to a deal with U.S.-based Energy Fuels, driving ASM’s price up by 87c (115%) to $1.63.

Work on Dubbo dates back 30 years but a complex metallurgy makes separation of metals difficult and expensive and too much for its original proponent Alkane Resources, which spun off ASM to focus on gold.

Lynas Rare Earths rode on the back of the ASM deal which effectively re-priced all Australian rare earths. Lynas added $1.02 to $16.76, Hastings Technology Metals rose by 6.5c to 62c and Sovereign Metals put on 16c to 76c after reporting the recovery of heavy rare earths in rutile at its Kasiya project in Malawi.

Iron ore stocks had a mixed week amid growing concern that China is building a big stockpile as part of a price dispute with Australia’s leading miners of the mineral, BHP, Rio Tinto, and Fortescue.

BHP was sold off during the week though mainly because of another cost blow-out at its Jansen potash project in Canada, shedding $1.07 to $48.12. Fortescue fell by $1.11 to $21.64 while Rio Tinto added $2.76 to $151.10 thanks to growing interest in its possible merger with copper-rich Glencore.

Other news and market moves of interest this week included:

• EQ Resources rose with the tungsten price which reportedly topped US$1000 per metric tonne unit this week, up 25% in three months, lifting EQ by 4c (38%) to 14c.

• Sky Metals added 2c to 16c thanks to an expanding resource base at its Tallebung tin and silver project in NSW. Bell Potter sees the stock rising to 21c.

• Aruma Resources rose by 1c (45%) to 3.2c after announcing the acquisition of a high-grade copper project in Canada.

• Trek Metals gained 1.3c to 9.2c after reporting new high-grade manganese rock chip samples assaying up to 60% manganese at its Kuro project in the north of WA.

• Richmond Vanadium Technology rose by 4.5c to 18c as interest grows in its Julia Creek vanadium project in Queensland.

• PLS went against a weaker trend among lithium stocks with a rise of 21c to $5.01. Liontown slipped 3c to $2.19, and

• Whitehaven Coal led a potentially significant revival among coal stocks, up 24c to $9.04 thanks to a modest rise in the coal price and a series of policy reversals in Queensland and WA as the reality of an underperforming renewable energy sector dawned in government. New Hope Corporation was up 21c at $4.67.