If you want to follow in Gina’s footsteps, buy gold

The critical element in Rinehart’s SpaceX punt is that she sent a huge amount of money earned in Australia to the U.S., effectively boosting her exposure to the U.S. dollar and trimming her exposure to the Australian dollar – and Australia.

While impossible to compete with Rinehart on size, gold is a way for the average Australian investor to follow in her footsteps because gold is a universal currency which provides international exposure at a time when there is a risk of Australian asset values declining, or should that be declining further.

The question of currency values is one of the issues emerging in the wash-up of the Iran war, a cooling down process which is producing interesting outcomes, including:

• A collapse in the price of oil as Persian Gulf countries rush to replenish their empty treasuries, sparking fears of an oil drought morphing into a glut.

• A potential rise in U.S. interest rates, against the wishes of U.S. President Donald Trump, but a likely outcome as the U.S. economy shows sign of overheating.

• The threat/promise of higher U.S. interest rates lifting the value of the U.S. dollar (also to Trump’s annoyance) and putting short-term pressure on gold and most other commodity prices.

• Central banks and investment funds looking through recent events as they return to the gold market, replace metal sold during the war, and

• A global migration of gold stockpiles out of the U.S. and U.K. as countries shift financial assets inside their borders at a time of heightened global uncertainty.

Britain’s Barclays Bank acknowledged the current weakness in the gold price as currency values adjust after the Iran war but said the long-term outlook for a higher price remained intact.

Australian investors certainly seem to agree with Barclays as can be seen in this week’s stampede into gold companies, a rush which can be measured by a remarkable 19% increase in the XGD gold index compared with a 2.4% rise in the gold price.

It’s that 19% v 2.4% which sends the same message as Rinehart’s SpaceX investment because it shows how average Australian investors are shifting their money into international assets which dodges the tax and low-growth mess developing in Australia.

The rise in the ASX gold index also stands out against a 9.5% increase in the XMM (all resources index) and a very modest 1.8% rise in the all ordinaries index.

Barclays said the case for gold exposure was supported by central bank gold buying and an estimate that a 1% rise in inflation equates to a 5% boost to gold.

Central bank buying, the force which sparked the 2023 start of the gold boom, seems certain to be a major force in the next upward move by gold, according to survey conducted by the World Gold Council.

The WGC found that 45% of central bank managers said their institution would buy more gold over the next 12 months, with 89% of fund managers expecting more central bank gold buying.

Most local goldminers moved significantly higher this week with rises easily outstripping the increase in the gold price with moves that included:

• Minerals 260, up 14c (18%) to 92c after announcing the start of early construction activity at its Bullabulling project in WA.

• Northern Star, up $2.41 (12%) to $21.60 as investors warm to the idea of a takeover tussle for the wounded Australian gold sector leader.

• Ora Banda, up 26c (24% to $1.32 after announcing the award of a contract to expand the mill at its Davyhurst mine in WA.

• Nordic Resources, up 4c (21%) to 23c after reporting encouraging assays from drilling at its Kopsa project in Finland with a best hit of 71 metres at 3.04 grams a tonne.

• PC Gold, up 16c (14%) to $1.29 after reporting rich gold intersections at its Spring Hill project in the Northern Territory with a best hit of 9.5m at 3.04g/t.

• Greatland Resources, up $2.06 (16.5%) to $14.26, and

• Catalyst Metals, up $1.45 (29%) to $6.47.

Copper stocks also had another strong week as they benefited from growing interest in the metal as the major beneficiary of the global electrification rush.

Like goldminers, most copper stocks outperformed the metal which rose early to more than US$6.50 a pound, slipped back to US$6.32/lb and then resumed its rise, much as seasoned investment adviser Rick Rule told a mining conference in Perth.

Rule’s thesis is that copper is clearly the “go to” metal thanks to decades of under-investment and strong organic growth in multiple sectors.

“The fact is that there is no way on earth that we will escape declining production in the copper business over the next five years,” he said.

That means, according to Rule, that the world’s copper majors such as BHP and Rio Tinto will be forced to buy production through the acquisition of small and medium sized miners, leading to “a wave of premium-priced takeovers.”

True North Copper was the pick of the local copper stocks this week, rising 7.5c (19%) to 45c. Sandfire added $1.43 (7%) to $21.12. Capstone put on $1.42 (10%) to $15.55 and Aeris was 5c (13%) stronger at 43c.

Devex was the top uranium stock in a week with a rise of 8.2c (41%) to 24c when the falling oil price might reasonably have been expected to weigh on uranium, as it did with the nuclear fuel slipping 1% lower to US$85.50 a pound.

The outperformance of Devex, which is active in the Alligator Rivers region of the Northern Territory, followed the release of an upbeat research note from Bell Potter which initiated coverage of the stock with a speculative buy tip and price target of 41c.

Other uranium moves included Boss, up 17c (15%) to $1.32 after reporting the discovery of high-grade uranium at the Alta Mesa project in Texas. Paladin, up 90c (9%) to $10.69 and Deep Yellow, up 35c (24%) to $1.78.

Lithium stocks had a mixed week with PLS leading the way up with a rise of 14c to $6.27 and Vulcan leading the way down with a fall of 6c to $3.38.

Other moves were a few cents either way with the overall market possibly influenced by a UBS report based on an update sent to its clients by the commodity research firm Wood Mackenzie which warned of a possible slowdown in lithium demand.

According to Wood Mackenzie there are doubts about the “durability” of the battery energy storage boom and concern that the Chinese electric vehicle market has reached “saturation.”

Rare earth stocks also had a mixed week. Sector leader Lynas added 29c to $17.68 while Hastings slipped 2c lower to 34c. Meteoric was 1c weaker at 17c but was the subject of a bullish research note from Macquarie which reckons it will rise to 45c.

Other news and market moves this week included:

• Fortescue leading a weaker iron ore sector down with a fall of 13c to $19.90, followed by newcomer Killi which slipped 2c lower to 22c.

• Tin-exposed stocks performed poorly despite the price of the metal edging back towards an all-time high at US$55,126 a tonne. MetalsX was 8c weaker and $1.46 and Elementos lost 2c to 38c.

• Alpha HPA, one of the high-purity alumina hopefuls, rose by 7c to 84c and received a fresh speculative buy tip from Bell Potter which set a price target of $1.50 and,

• Encounter Resources added 3.5c to 29c after reporting the start of a multi-rig, 70,000m drilling program at its Aileron niobium project in the West Arunta region of WA.