More evidence of copper’s coming price explosion with talk of a Chinese rare earths-style squeeze  

Gold rose by US$180 an ounce (4.4%) to US$4400, taking its increase over the past four weeks to US$430/oz (11%) thanks largely to central bank and cryptocurrency buying, with  Tether adding 14 tonnes to its gold stake, which now stands at 146t, more than most banks.

Copper hit an all-time high of US$6.81 a pound before fading to US$6.58/lb but with mine supply dwindling, warehouse stocks falling, and export bans by some countries, the outlook is for copper to keep rising, in line with demand from the electrification of everything.

Those hugely positive factors in gold and copper failed to prevent a deal involving the long dormant Syerston scandium project in NSW snatching the headlines despite it being a thinly traded metal with tiny global demand of around 70 tonnes a year.

Once most used for alloying with the aluminium used to make golf clubs and fishing rods, a dash of scandium improves metal flexibility and reduces weight, which led to a market in advanced military aircraft.

Selling for up to US$6000 a kilogram and with production largely controlled by China and Russia, it’s easy to understand why a US$400 million U.S. Government funding deal with Australia’s Sunrise Energy Metals for the development of Syerston sent Sunrise stock up to an all-time high of $19.63 on Monday before easing to $18.95.

The magic ingredient in Sunrise is not so much the scandium as the control of the company resting with serial big-project developer Robert Friedland, who has close connections to U.S. President Donald Trump, but with the stock now valued at a remarkable $3.2 billion, the best of the rush might be in the price.

Other stocks with a whiff of scandium on their books joined the rush, including Australian Mines which rose by 0.9c (31%) to 3.8c, West Cobar Metals which owns the Salazar project in WA (up slightly before settling at a steady 1.9c), and nickel project developer Ardea Resources, up 7c (15%) to 52c, thanks to a whiff of scandium in its Kalgoorlie Nickel Project.

Overall, the Australian market moved higher thanks to signs of improving confidence in the global economy with investors shrugging off uncertainty about the price of oil and the prospects for peace in the Middle East.

Of greatest interest is a collapse in Chicago’s Volatility Index (VIX), also known as the fear index, because it attempts to measure the mood of investors (fearful or hopeful). Last week the Vix fell to 14.55, down 8.8% over the week to be down 15% over the month.

Whether investors have become too complacent about the outlook will be tested in coming weeks because the rising gold price appears to be contradicting the Vix as funds flow back into the metal which is a safe haven against government mistakes, including excess spending.

Last week’s Diary, which alerted readers to a brewing U.S. dollar crisis, travelled a long way this week with high profile commentator Ambrose Evans-Pritchard taking up the theme in his latest column headed “The scary truth behind US support for the yen and Fed inaction”.

His conclusion was that the U.S. has become acutely dependent on short-term funding from hedge funds to service the demands of rolling over US$6 trillion (yes, trillion) of debt every three months, the worst structural deficit in U.S. peacetime history.

Katie Martin, a highly regarded Financial Times columnist, joined the party with a column headed “The U.S. bares its financial weak spot.”

In time, the corrosive effect of excess debt will do two things, driving down significantly the value of the U.S. dollar and drive up the price of alternative currencies, especially gold.

Local gold sector leader Northern Star was in the news as the U.S. hedge fund Elliott Management stepped its pressure for change at the troubled company, which slipped 11c lower to $23.19. Investment bank UBS sees the stock reaching $24.05.

Other gold sector news and price moves included:

• Sentinel Metals, up 3.5c to 63c after reporting a maiden drill result of 46.8 metres assaying 5.5 grams of gold per tonne from a depth of 88.2m at its Columbia project in Montana.

• Polymetals, up 8c to 92c after reporting fresh high-grade silver assays from the Endeavour mine in NSW, including 39m at a silver equivalent grade (silver plus lead and zinc) of 676g/t.

• St Barbara, up 7c at 63c as investor interest returns to a beaten down gold stock. Macquarie Bank has a price targets of 96c.

• Meeka Metals, down 1c to 11c despite an analyst site visit to its Murchison gold in WA followed by a buy note from Morgans with a price target of 31c.

• Minerals 260, up 2c to 78c as de-risking of its Bullabulling project in WA continues. UBS has a price target of 90c.

Copper, as mentioned earlier, faded after a strong start, but with its positive fundamentals still in place.

The most interesting issue with copper could be the development of a “China squeeze” much like the control that country has over rare earths.

Brandon Pearson, a former head of the Minerals Council of Australia and an Ambassador to the OECD, likened copper to oil with a “choke point” developing in the smelting of the metal which is dominated by China in a way similar to Iran’s control of the Hormuz oil chokepoint.

In a research paper published by Lowy Institute, Pearson said Chinese copper smelters, mostly state-owned and heavily subsidised “are driving global competition to the wall” with China accounting for 90% of copper smelting growth.

In time, perhaps sooner than is appreciated, China could demand (and get) much higher prices for its finished copper product and also become the only buyer of copper concentrate produced by the world’s copper miners.

Capstone was one of the copper winners this week, rising by 46c to $15.86, perhaps heading to the Citi target of $18.70.

Other local copper moves included Sandfire, up 5c to $21.13. True North, up 1c at 43c. Austral, up 0.1c to 7.1c (but with Shaw tipping a future price of 28c), and AusQuest, up 0.2c to 4.9c after announcing he start of drilling a deep target near Coober Pedy in South Australia.

Other news and market moves of interest included:

• Global Lithium rose by 15c (26%) to 73c after announcing earlier this month that it had received approval for its Manna lithium project east of Kalgoorlie in WA.

• Stelar Metals added 2.5c to 42c after reporting high grade tungsten assays from surface samples at its Hill of Leaders project in the Northern Territory with a best reading of 15.69% wolfram (an ore of tungsten).

• Southern Palladium, down 9c to $1.98 despite initial enthusiasm from investors after the company announced approval for the development of the Bengwenyama platinum group metals project in South Africa which the stock trade up to $2.20 on Tuesday.

• Nickel Industries, up 2c at 83c, after reporting first production of cathode (solid, 99% metal) nickel, another nail in the coffin of Australia’s nickel industry, and

• Accent Resources, a Chinese controlled company in a self-requested trading halt after a spectacular 51c (3650%) rise to 53c this week after reporting successful test work into a magnetite iron ore project near Geraldton in WA.