Hope of an end to the war in Iran is the major factor behind this week’s optimism because if it happens oil will start to flow again out of the Persian Gulf. 

But two other events are moving into view: the breakdown of globalization, which is driving demand for minerals and metals, and U.S. investors fully embracing the potential future benefits of artificial intelligence (AI).

Rio Tinto chairman Dominic Barton told shareholders at the company’s annual meeting in Perth that “fragmentation” of the global economy meant traditional supply chains were breaking down and countries were seeking their own supplies for immediate use and for stockpiling which increased demand beyond simply meeting routine consumption.

The individual country demand element in commodity markets is best seen in Australia’s hunt for supplies of petrol and diesel to use today and rebuild depleted stocks, but similar pressure can be seen in copper and aluminium, which Barton said had lifted overall commodity demand to a 60-year high.

In effect, the Rio Tinto chairman is saying that the seeds are being sown for an exploration and project development boom to meet current and stockpiling demand of countries which once trusted the global supply chain network, but not now, a reaction best described as once bitten, twice shy.

Copper, always a useful pointer to market trends, led the commodity complex higher this week with a rise of 3.8% to US$6.12 a pound, taking its increase over the past month to 6.6%.

Dr Copper, a nickname given to the metal because it is widely used in multiple industries, is sending a message which says the global economy is as healthy as can be expected at a time of high oil prices.

Barton’s company Rio Tinto was a major winner from the higher copper price with its shares rising by $6.47 to $178.49, a fraction less than the all-time high of $179.94 reached early on Thursday. Arch rival BHP, the world’s biggest copper producer, rose by $1.79 to $58.17.

Other copper moves included:

  • Midas Minerals, up 16c to $1.03 after reporting exceptional results from drilling at its Otavi project in Namibia with a best hit of 50 metres at 7.9% copper equivalent (copper and silver). CG Capital Markets sees Midas rising to $1.50.
  • Austral Resources, up 2c to 9.8c after announcing the completion of a deal to buy the Lady Loretta mine in Queensland from Glencore. Shaw and Partners has a price target of 42c.
  • Aeris, up 3c at 39c after reporting strong cash flow in the March quarter, Morgans has a 70c price target on the stock.
  • Centaurus, better known as a nickel project developer, up 7.5c at 66c after reporting that it had identified large copper targets at its Rio Novo project in Brazil, and
  • Sandfire, up 89c at $17.74 thanks to renewed interest in a local copper leader.

The new record high on the New York market was a reaction to the possible end of the Iran war and investor enthusiasm for AI’s potential to unlock scientific and technological puzzles which could revolutionise entire industries especially in medicine, manufacturing and agriculture.

Until now, the AI boom has been all about building data centres with the next phase being what information those data centres generate and the potential wealth-creating effect of industry working harder and smarter. U.S. investors are staking their claim on an AI future.

For Australian investors, the change seen by Barton in commodity supply chains is an important long-term event which will underpin the country’s mining and oil industries for years and perhaps decades as trust in trading partners fades and the commodity markets become a place of everyman for himself.

The immediate focus for many local investors will be next week’s Australian Government budget which is expected to be a socialist classic with expanded spending on social welfare which has already triggered a Reserve Bank reaction with this week’s increase in the cash rate to 4.35%, followed by warning that the key rate could hit 5% by the end of the year.

Citi, an investment bank, told clients that it believes the next Reserve Bank increase will come “sooner rather than later this year”.

Interest rate increases are maintaining pressure on gold which managed to rise by a lowly 1.6% this week to US$4705 an ounce, aided by a slight fall in the value of the U.S. dollar which slipped on the dollar (DXY) index from 98.45 to 97.99.

A share swap merger between Regis Resources and Vault Minerals was the highlight of the gold sector though investors gave both the thumbs down.

Vault slipped 2c lower to $4.64. Regis was down 45c to $6.69 with the falls possibly a result of investors not seeing significant benefits from the deal, and despite Bell Potter tipping a future Regis price of $9.45.

UBS, an investment bank, was also wary about the outlook for gold “skewed to the downside for 2027 production, costs and growth capital”.

“High-order impact of the oil shock and ongoing Middle East conflicts are still propagating through complex supply chains,” UBS said in a research note headed “cash building and M&A is on but financial 2027 risks loom”.

Other share price moves in the gold sector, up and down, included:

  • Genesis, up 9c to $6.14 thanks to its potential as a player in the Vault/Regis situation and fight to consolidate the Laverton/Leonora gold belt in WA.
  • Northern Star, down 44c to $21.36 as doubts linger over its operational problems and because it has been sidelined in the Vault/Regis/Genesis situation.
  • Caprice Resources, up 5.7c (76%) to 13c after reporting bonanza grades up to 66.2g/t over 22m from drilling at Island Project in WA.
  • Minerals 260, up 5c to 77c after reporting fresh high grade results from drilling at its Bullabulling project in WA, including 6m at 14.7g/t.
  • Emerald Resources, up 19c at $6.14 after receiving government approvals to develop its Dingo Range gold project in WA.
  • Gorilla Gold, up 6c at 43c after reporting a third discovery at its Comet Vale project in WA. CG Capital Markets has a $1 price target on the stock, and
  • Linq Minerals, up 2c to 39c after the latest drilling at its Gilmore project in NSW returned assays up to 114m at 1.19 gold equivalent (gold and copper).

Energy metal twins lithium and uranium had a mixed week with no discernible trend as oil, which ultimately sets their price, oscillated with Persian Gulf uncertainty.

Canadian focused NexGen was the best of the uranium-exposed stocks, rising by 19c to $17.65. Most other uranium stocks lost ground. Boss was down 6c at $1.45. Bannerman lost 14c to $4.09 while Paladin rose by 57c to $12.82.

PLS was the best of the lithium sector with a rise of 15c to $6.29. Liontown added 12c to $2.54 while Core slipped 1c lower to 32c and Develop Global, better known as a base metal stock, added 4c to $5.85 thanks to interest in its Pioneer Dome lithium project.

A feature of the week was a surge in capital raisings after completion of a quarterly reporting season in what’s a positive measure of market sentiment and investor interest in resource stocks.

Significant raisings were reported by Waratah Minerals, which raised $48 million for its Spur Gold project in NSW, Tanami Gold, which is in a trading halt as it reportedly seeks $70 million for its Northern Territory gold project, Stellar Resources, which raised $22.1 million for its Heemskirk tin project in Tasmania, and American West, which raised $10 million for its Storm copper project in Canada.

Other news and market moves this week included:

  • Viridis leading a sell-off in rare earth stocks, losing 22c to $2.56 despite a Bell Potter price target of $4.30. Lindian was also hit by the rare earth fall, shedding 13c to 71c.
  • Fortescue added $1.21 to $21.20 thanks to a surprise rise in the iron ore price to US$110 a tonne. Fenix added 2.5c to 34c, and
  • Coal stocks drifted lower as the oil price retreated. Whitehaven lost 45c to $7.94.