The trick in understanding the lithium rise is that the battery metal really had nowhere else to go having fallen by 80% over the past two years.

The test now is to see whether price recoveries by local lithium miners such as Pilbara (up 45c) and Liontown (up 6c) can continue or whether some of their increase is the result of a squeeze on short sellers trapped by the unexpected closure of a Chinese lithium mine.

Pilbara shares, before the Chinese closure, were the third most heavily shorted stock on the Australian market with close to 16% of its issued capital sold short by investors betting on a continued fall in the price of lithium. Liontown was 13% shorted and fifth on the shorts list.

The 32% rise in the Pilbara price over the past month and a 7% rise by Liontown (which would have been more if not for a big share issue) will have been costly for the shorters.

Other commodities also moved higher this week on what looks to be improving fundamentals of supply and demand with iron ore leading the way with a rise to US$104/t, taking its increase since June 30 to US$11/t (12%).

Fortescue, which reports its full year result in two weeks, was the big winner from the higher iron ore price, adding $1.12 (6%) this week, taking its gain for the month to $2.68 (16%), aided by yield hunters chasing Fortescue’s traditionally generous dividend.

Mineral Resources also rose with the higher iron ore price, up $2.71 at $36.02, which could be as far as it can go according to UBS which downgraded the stock from neutral to sell on the strength of its share price recovery.

Interest rate cuts, and the promise of steep falls in the U.S., are not only buoying investor confidence, they are helping drive down the value of the U.S. dollar which, in turn, lifts most commodities.

Next big event for financial markets (and the world) is the Trump/Putin summit in Alaska which very much falls into the category of an “unknown unknown” a confused expression made famous by a former head of the U.S. Defence Department Donald Rumsfield.

U.S. investors will be watching closely to see what comes out of the summit and whether it might signal an end to the war in Ukraine and ease trade war tensions which are starting to strain the U.S. domestic economy and raise questions about stock values.

Palantir, a defence technology specialist and artificial intelligence leader, best demonstrates the sky-high values being placed on U.S. technology stocks which is where the next correction could start.

With a share price of US$184, Palantir has risen by 506% this year and is trading at 290-times forward earnings, levels not seen since before the 2008 crash which is a warning that’s hard to ignore.

Locally, the stock market was led higher by mining stocks with both the broad-based XMM index up 5.4%, and the XGD gold index up 4.5% outperforming the overall market, as measured by the all-ordinaries, which rose by a far more modest 0.8% over the week thanks to heavy selling of spectacularly over-priced Commonwealth Bank.

The 6% fall by Commonwealth adds to a thesis that investors are rotating out of the relative safety of bank stocks into higher-risk, higher-reward resources companies as part of the cyclical re-pricing which always follows interest rate shifts.

Gold, as mentioned earlier, had a solid week, trading between the tramlines of US$3350 an ounce and US$3400/oz with a combination of interest rate policy, the U.S. trade war being waged against everyone, and the Trump/Putin summit being reflected in the price.

Central bank buying, which is where the current gold boom started three years ago, remains a potent force in the market with a new player in that game, Uganda.

International gold interest was also boosted by news that a big new goldminer will soon list in London. Navoi Mining, the goldmining arm of the government of Uzbekistan, produces 3.1 million ounces of gold a year and is expected to command a valuation of US$20 billion when floated.

Other gold news and moves (mainly up) this week included:

  • Benz Mining rose by 23c to $1.13 after raising $30 million to accelerate drilling at its promising Glenburgh project in WA.
  • Many Peaks Minerals added 27c to 98c after reporting thick and rich results from drilling at its Ferke project in Ivory Coast, with a best hit of 75 metres at 6.11 grams of gold a tonne.
  • Evolution Mining pleased the market with a strong profit and generous dividend which lifted the stock by 39c to $7.95 with an increasing share of its profit coming from copper.
  • Ballard Mining continued to rise after its July listing putting on another 3c this week to trade at 48c. Bell Potter reckons the target price is 65c.
  • Alkane Resources added 2c to 86c after reporting fresh assays from drilling at the El Paso project near its Tomingley mine in NSW with hits that included 8.2m at 3.74g/t and 32.1m at 1.65g/t.
  • West African Resources added 3c to $2.72 as investor warmed to its 10-year production forecast. Macquarie reckons the stock is heading up to $3.40, and
  • Westgold Resources rose by 5c to $3.04 after releasing strong production and earnings guidance. CG Capital Markets has a target of $5.25 on the stock.

Lithium stocks, as mentioned earlier, performed well thanks to a mine closure in China and concern that the Chinese Government is forcing its miners to cut production to reduce excess competition, a process called “involution”.

Core Lithium, on a percentage basis, was the biggest local winner with a rise of 2c (19%) to 13c. Other winners included: Wildcat, up 2c to 19c. Patriot, up 3c to 49c, and Independence, up 68c to $5.43.

Rare earth stocks continued their strong performance thanks to ongoing animosity between China and the U.S. with Lynas leading the way up, adding $1.80 to $13.79. The stock has now risen by $7.20 (110%) since the start of the year.

The rare earth sector could have a lot further to run as governments throw money at the industry with cash for project construction and by standing in the market to create a floor price which will guarantee future revenue flows.

The U.S. Government price of US$110 per kilogram for a mix of neodymium and praseodymium is close to double the Chinese price for the mix, though that looks modest alongside a forecast from UBS that a more realistic price could be as high as US$209/kg.

Copper continued to settle after the excitement of a U.S. tariff caused spike in the New York price of the metal which this week edged up by US20c to US$4.49

Copper winners included Capstone, up 65c to $10.34. Sandfire, up 28c to $11.66, and Terra Metals up 1.4c (21%) at 8c after reporting a maiden resource of copper, titanium and gold in its Dante project in WA.

Other news and market moves of interest this week included:

  • Santana Minerals, up 3c at 62c after securing $60 million through a placement at 58c to fund work on the company’s Bendigo Ophir gold project in New Zealand.
  • Kingsland Minerals, up 5c (44%) at 17c after reporting the potential to produce high-value gallium from its Leliyn graphite project in the Northern Territory.
  • Energy Transition Minerals, up 3.5c (74%) at 8.2c after announcing a deal to buy the Penouta tin, tantalum and niobium project in Spain, and
  • Metro Mining up 0.2 at 7c following reports that bauxite exports from Guina were dropping which could add to the value of the company’s Queensland project.