Citi, a leading investment bank, sparked a gold sector rally with a note to clients on Tuesday which said that gold equities look attractive versus the underlying gold price, which slipped this week by US$10 an ounce to US$2377/oz.

While gold was falling, top miners such as Northern Star and Evolution were rising, with both up 4% to $13.37 for Northern Stare and $3.78 for Evolution, with further to go, according to Citi which has price targets of $15.90 and $4.40 respectively.

The bank’s “disconnection” theme can be applied across the gold industry, as can be seen in comparing the gold price with the ASX gold index since late May when gold traded up to its all-time high of US$2427/oz.

After that peak was reached, gold eased back by 2% to its latest price of US$2382/oz whereas the gold index two weeks ago was down 10% and is only now closing the gap.

Since the index bottomed in late June, the revival can be seen, but until this week the recovery was far from convincing, ripe for a jolt from a reputable bank such as Citi which pointed out the wide difference.

“Citi’s global commodity team is bullish on gold based on strong physical demand expectations underpinned by our expectation of consecutive interest rate cuts from September,” the bank said.

“We upgrade Northern Star from neutral to buy with the stock now looking cheap versus the physical metal.”

Gold is also high on the commodity pecking order of another major bank, UBS, which has it alongside copper, aluminium and coking coal as its preferred resources with iron ore and lithium in the sin bin.

But along with the thoughtful comments on gold, which is riding high on interest rate forecasts and political uncertainty in the U.S. and Europe, came a fresh series of wild price forecasts at an investment conference in the U.S.

Top of the “over the top” gold price tips was US$27,000/oz from investment adviser James Rickards who sees gold as an enduring safe haven, and US$7000/oz-to-US$8000/oz from newsletter publisher Brien Lundin.

Older investors will take those price forecasts with a grain of salt (if not the whole salt shaker) because they bring back memories of past outrageous forecasts which never came true.

On the local market, the Citi disconnection effect flowed through the gold sector with moves (and news) that included:

  • Regis Resources, up 13c to $1.90 after reporting a strong build-up cash in the June quarter.
  • Red 5, up 6c to 42c after reporting solid June quarter gold sales of 110,800oz with Macquarie noting the cash build like Regis which earned Red 5 a buy tip and price target of 55c.
  • Ramelius rose by 8c to $1.96 after reporting record gold production in the June quarter, and
  • Goldman Sachs putting buy recommendations on Evolution, Bellevue, Gold Road and De Grey.

Silver, gold’s poor relation, shared in the dash for safe havens and earned a comment from Morgan Stanley that it could have further to run even after a 30% increase since the start of the year from US$23.73/oz to US$30.93.

“Silver has outperformed both copper and gold in the year to date rising by 30% with support from fundamental and macro factors,” Morgan Stanley said.

“Three consecutive deficit years have normalised inventories as supply has struggled with reduced output from Mexico, the largest single producer, down 9% in 2023.”

Potentially, according to Morgan Stanley, silver could rise to US$39/oz as demand from investors and industrial users of the metal drive demand.

The ASX copper sector had one outstanding performer this week, the rarely mentioned Augustus Minerals which shot up by a spectacular 6c (150%) to 9.9c which drove day traders mad but needed to be seen against a stock market capitalisation of just $8 million.

What sparked the rise was a report of surface chip samples grading 35% copper and 10 grams per tonne of gold from the company’s Ti-Tree project in WA’s Gascoyne region, close to the Mt Augustus monolith, which is bigger than Eyres Rock and said to be the biggest rock in the world.

A lot more work is required by Augustus Minerals but it is exploring in a region which has seen limited field work but a long history of small but high-grade copper deposits.

Rex Minerals was the other newsmaker in the copper sector, being the recipient of an offer too good to refuse from Indonesia’s Salim family which is already heavily involved in Australian coal mining.

The offer for Rex at 44c was 57% higher than the stock’s last sale before the bid of 28c with the Salim group keen to develop the Hillside copper project in South Australia which has spent a decade on the sidelines waiting for a new owner with deep pockets.

Culpeo Minerals added 1c to 4.8c after an optimistic research note from RM Research based on a thick and relatively rich copper assay from the company’s La Corina project in Chile, though the stock remains a true minnow valued at just $7.6 million.

Most other copper stocks were flat. Sandfire slipped 1c lower to $9.13. 29Metals also lost 1c to 42c while Orion Minerals rose by 0.2c (13%) to 1.7c after reporting new high-grade assays from its Okiep project in South Africa with a best hit of 20.5 metres at 4.99% copper.

Overall, the Australian market made modest headway over the week with the all ordinaries index gaining 0.8% shaking off a poor start. Mining stocks replicated the broader market with their index rising over the week by 0.7% despite the two leaders, BHP and Rio Tinto, losing ground.

Lithium, once the star of the Australian market, rose slightly on Chinese demand, helping Liontown rise by 6c to 97c and IGO to claw back 2c to trade at $5.88.

But the overall tone of lithium sector and other battery metals remained weak, encouraging Morgan Stanley to take the extreme step of downgrading Wesfarmers, a broadly diversified industrial with exposure to a single lithium project.

Investors disregarded the bank’s sell tip and price target of $56.20 on Wesfarmers, driving the stock up by $2 to $67.

Capital raisings were a feature of the market this week as companies topped up their bank accounts led by niobium hopeful WA1 Resources raising $50 million to accelerate work on its West Arunta project in WA.

Other capital raisings included:

  • KGL Resources seeking between $6 million and $15.1 million from a share issue priced at 10c.
  • Dateline Resources raising $5.8 million for work on its Colosseum gold and rare earths project in the U.S.
  • Larvotto Resources raising $5 million for work on its Hillgrove gold and antimony project in NSW, and
  • Summit Minerals raising $2.5 million for work on its Ecuador niobium and tantalum project.

Iron ore continued to generate negative comments about the price outlook though on the commodity market this week it actually rose by US$2 a tonne to US$110/t, not enough to save Fortescue from slipping 46c lower to $21.92 and Champion Iron from losing 31c to $6.35.

Other news and market moves of interest this week included:

  • Hastings Technology Metals rising by 7.5c to 41c after reporting that a Chinese rare earth magnet maker, JL Mag, had snapped up a 10% stake for an outlay of $7 million.
  • Paladin Energy adding $1.13 to $14.13 after receiving strong investor support for its proposed merger with Canada’s Fission Uranium. CG Capital markets reckons the stock is heading up to $16.50.
  • Encounter Resources rose by 11c to 84c after reporting encouraging niobium intercepts at its Crean & Emily project in WA’s West Arunta region.
  • Bannerman Energy added 11c to $3.30 after finalising an $85 million capital raising. Shaw and Partners sees the uranium hopeful reaching $7.40, and
  • Burgundy Diamond Mines slipped 1.5c lower to 18c after announcing mine extension work at the unfortunately named Misery mine in Canada.