At 0.013% the 10-year bond hardly sounds an attractive investment but the fact that its been negative since May 2019, and was still minus 0.4% last month, is a guide to how fast markets are changing in the face of high inflation and move by central banks to start increasing interest rates.

Australia’s 10-year government bond is also edging closer to a pivotal point having risen this week to 1.99%, also the highest in almost three years with Westpac Bank forecasting an August start to Australia’s rate rising cycle, while other banks believe the cycle could start sooner after yesterday’s surprise fall in the unemployment rate to just 4.2%.

Commodities, at this stage of the cycle, are largely immune from increasing interest rates, as the head of commodities at Goldman Sachs, Jeff Currie, said earlier this month: “The best place to be right now, particularly given the Fed (U.S. central bank) pivot, is commodities”.

Even gold, which generally struggles against high interest rates, performed strongly this week, adding $US23 an ounce to trade around $US1840/oz, driven by a shift by investors out of depreciating cash and demand for safe haven assets.

Local miners rose with the higher gold price, led by Northern Star, which added 34c this week to trade at $9.50, but with banks such as RBC Capital Markets tipping a price for the stock of $12.50.

Best move by a small gold company came from Rox Resources, which added 13c (38%) to 48c after reporting a 1.34 million ounce increase in the Youanmi Deeps gold resource to 3m/oz.

Other upward moves by gold stocks included Perseus, up 3.5c to $1.58 after releasing fresh high-grade results from the Yaoure mine in Ivory Coast, Carnavale, up 0.4c (50%) to 1.2c thanks to bonanza drill intercepts from its Kookynie project in WA, and a 31c (15%) rise by the almost forgotten Kingsgate Consolidated which edged closer to re-starting its Chatree mine in Thailand.

Important as gold is to Australian investors, there were more exciting moves in other parts of the resources sector, including nickel hitting an 11-year high of $10.67 a pound thanks to strong demand from battery makers and reports of production problems at mines in Myanmar.

IGO topped the local nickel sector with a rise over the week of 80c to $13.15, but that price was a bit hard for some analysts to swallow because of a view that a correction looms. Euroz Hartleys, for example, has a hold recommendation on IGO and price target of $10.50, far below the market price for the stock.

Credit Suisse also reckons the nickel market is overheating with its new year commodity tip sheet having nickel at $US8.70/lb in the current quarter, sliding to $US7/lb by the end of the year. RBC is more optimistic but its end of year nickel price forecast of $US8.75/lb is also well below the current spot market price.

Other nickel moves of interest included:

  • Lunnon Metals, up 11c to 85c after reporting encouraging drill results from the Baker Delights project near Kambalda in WA with a hit of 7 metres at 9.22% nickel from a depth of 120m, followed by a 2.7m intersection at 10.72% nickel and 10m at 6.82%.
  • Nimy Resources added 3c to 35c as drilling started on its Mons project in WA.
  • Aston Minerals also put on 3.5c to 15c after releasing of encouraging drill result from its Edleston project in Canada, while Chalice was steady at $8.70 as drilling started on its promising Hartog prospect in the Julimar state forest close to Perth.

Copper, which is benefitting from the same new-energy speculation as nickel, was rated the metal most likely to succeed at the year’s first big mining conference, the Future Metals Forum in Saudi Arabia.

High profile gold miner, Mark Bristow, set the tone when he said that “if he was a young man today, he would be getting into copper”, a view endorsed by another big mining name, Robert Friedland, who said copper was an example of “the revenge of the miners” as a huge deficit developed in the metal.

Copper stocks in the news included:

  • Sandfire, which added 35c to $7.34 after releasing a strong December quarter report which earned it a buy recommendation from RBC and a price forecast of $8.75.
  • New World Resources which rose by 0.5c to 8.7c after releasing fresh high grade drill results from its Antler project in the U.S. with a best hit of 17.9m at 4.8% copper equivalent (copper plus zinc, lead gold and silver) from a depth of 918.6m, and
  • Critical Resources which added 4c (46%) to 13c after reporting intervals of chalcopyrite (high grade copper ore) across a 7.6m zone during drilling at its Gibsons project in NSW.

Lithium retained its fascination for investors with one investment bank, UBS, describing current pricing for the battery metal as an “up crash” but also warned that there were bumps in the road ahead.

Morgans, another bank, echoed the UBS warning with a research note which said the market could remain hot for a little longer but hinted that it could turn after a stellar rise which has seen the London Metal Exchange lithium hydroxide price rise by 177% over the past eight months.

Calidus, better known as a gold stock, benefitted from a new lithium venture with Haoma Mining covering tenements in the Pilbara region of WA. On the market, Calidus added 9c to 84c.

Other lithium moves included:

  • Pilbara Minerals up 10c to $3.79, edging closer to its all-time high of $3.89 reached earlier this week.
  • Allkem, the new company created by the merged of Galaxy and Orocobre, was sold down over the week, shedding 44c to $11.04 but with Citi, an investment bank tipping it as a buy and assigning a price target of $13.40 – well ahead of Bell Potter’s $11 (and hold tip), and
  • Lake Resources added 3c to $1 after releasing an optimistic report on its Kachi lithium brine project in Argentina. Bell Potter reckons the stock is heading up to $1.40.

Records, as mentioned earlier, were set in a number of commodities, including tin which really has gone ballistic, adding $US5000 a tonne in three weeks to be selling for $US42,292/t, an all-time high. Metals X, the local miner most exposed to tin, did not move this week, trading steady at 55c.

Coal continued to defy doomsayers with supply shortages bumping into strong demand to lift the price of thermal material back to near-boom conditions at $US223/t while metallurgical (steel making coal) hit an all-time high of $US430/t, up 35% in two months.

Local coal stocks largely discounted the higher commodity prices. Whitehaven added a modest 8.5c to $2.96, and New Hope was up 10c to $2.44.

Oil is also benefiting from a supply/demand disconnection with the price of Brent quality crude rising to $US87.86 a barrel, the highest in eight years with Beach Energy one of the better performers, up 7.5c to $1.47 but with Canaccord Genuity increasing its price forecast from $1.60 to $1.74.

Iron ore moved back to $US130/t but local leader Fortescue Metals was unmoved, trading at $21.16.

Other news and market moving events during the week included:

  • Red River rising by 2c to 22c after reporting encouraging zinc assays from drilling at its Cougartown project in north Queensland with a best hit of 86m at 2.3% zinc.
  • South32 slipping 3.5c to $4.18 after revealing a cost blow out at the company’s Taylor zinc project in Arizona. Company boss Graham Kerr defended the development saying investors were blind to a coming zinc boom.
  • Group6 Metals added 2.5c to 17c after releasing an updated development timetable for its Dolphin tungsten project on King Island north of Tasmania with mining scheduled to start in November and first exports in March next year.
  • BCI Minerals shed 1.5c to 42c despite announcing that its Mardie potash and salt project in WA was fully funded. Bell Potter retained a buy tip on the stock but cut its price forecast by 5c to 66c, and
  • Lynas Rare Earths added 19c to $11.23 after announcing that it was chartering its own vessels so it can reliably deliver Australian mined rare earth ore to its Malaysian processing plant.