Gold boomed and stock markets sank early in the short after-Easter trading week when Trump first threatened to sack the head of the U.S. central bank, Jerome Powell, only to flip, saying he said he had no intention of firing one of the adults in the room.
By refusing to grant him his wish of a premature interest rate cut, Powell joined China in exposing Trump’s bluster and increasingly erratic behaviour, which is slowing global growth.
This week’s turmoil saw Australia’s economy marked down by the International Monetary Fund, which cut its January growth rate estimate of 2.1% to 1.6% while global growth was trimmed from 3.3% to 2.8% as a direct result of Trump’s tariff attacks on China and other trading partners.
Until the U.S. stock market recovered yesterday ,it was on track for its worst April performance since 1932, the depths of the Great Depression.
China, on the other hand is trading ahead with the rest of the world seemingly unscathed, so far, with port shipping data showing a 10% increase in container movement last week despite the threatened 145% tariff on goods delivered to the U.S., which Trump is now saying he will trim.
As well as triggering wildly erratic stock market moves Trump has failed to force China into a corner, a point made by his Treasury Secretary Scott Bessent who said during the week that the trade war is “unsustainable”, and a deal will eventually be worked out.
Gold, the canary in financial markets, sang beautifully early with a rush up to an all-time high of US$3500 on Tuesday, before retreating with Trump’s mood swing to US$3334/oz, close to where it started the week.
The U.S. stock market, as measured by the S&P 500, performed a similar trick but in reverse, opening with a 4% fall, and then bouncing back with a 4% rise.
For Australian investors with an interest in gold, and that’s just about everybody, there are warnings flashing that it could be in the early stages of bubble conditions, driven by Chinese gambling on commodity markets.
London gold analyst, Ross Norman, does not believe gold is in a bubble yet but it “seems to have decoupled from many of its traditional drivers and has its eye on just one metric, uncertainty.”
Lovely conditions as these might be for speculators, they are hard on the hearts of genuine investors who prefer a little more certainty about the values of their assets.
The ludicrous nature of Trump’s abuse of tariffs to try to dictate trade flows was amply demonstrated during the week with reports of his plan to hit solar panels made in Asia with a 3521% tariff.
It’s moves like that which are forcing other countries to edge away from the U.S. with one of the big events of the week being the under-reported sale by Japanese interests of US$20 billion in U.S. Treasury bonds, sparking an observation that the so-called Trump Trade had morphed into a “Sell America Trade”.
Locally, the Australian stock market rode the same roller coaster as the U.S. but with less volatility. A pre-Easter sell-off gave way to an upswing which left the all-ordinaries index up 1.8% if looked at over the past five trading days.
The gold index dropped steeply yesterday as some of the steam came out of the gold price to be steady on a weekly basis but up an eye-catching 14% over the past four weeks and 45% since the start of the year.
Genesis Minerals, described last week by Bell Potter as “the market’s preferred gold stock” rode the Trump roller coaster to an all-time high of $4.59 before sliding back to $3.98, still up 1c over the last five trading days, but running into Ross Norman’s wariness which led to Shaw and Partners downgrading the stock from buy to hold with a price target of $4.
Most other gold stocks had a similar up/down experience though for investors prepared to look through the fog of daily share price movements there is a clear buy signal radiated from every gold producer.
It’s the sea of cash on which gold producers are riding which will continue to drive gold stocks, with some having bank accounts overflowing the $1 billion mark – and with much more to come if the price stays up and costs are kept down.
Other gold news and moves this week included:
- Greatland Gold, the London-listed WA-focused miner, rose by 1.1 penny (8%) to 14.65p as interest grows in its Telfer and Paterson Province growth plans which Macquarie Bank reckons will take the stock up to 18p (A38 cents).
- Saturn Metals rose by 3c to 32c after reporting thick intersections from the latest drilling at its Apollo Hill project in WA with a best hit of 36 metres and 1.92 grams of gold a tonne from a dept of 335m, including 22m at 3.08g/t.
- Magnetic Resources rose by 5c to $1.52 as interest grows in its Lady Julie project in WA with Shaw and Partners tipping price target of $2.53.
- North Stawell Minerals was up 0.7c to 4.3c after reporting high grade drill intersections and its Darlington gold project in Victoria, including 2.3m at 29.2g/t.
- Cygnus Metals added 1c to 9.7c after reporting encouraging assays from its Chibougamau project in Canada, and
- Northern Star rose by 32c to $21.60 but did reach an all-time of $23.30 on Tuesday. Its soon to be absorbed takeover target De Grey performed a similar trick, hitting a 12-month high of $2.77 before fading to $2.56, up 5c over the past five days.
Copper, which has been playing second fiddle to gold for the past 12-months, continued its strong recovery from a Trump caused sell-off.
Over the past two weeks, copper has risen by US88c a pound (22%) to reclaim a price of US$4.91/lb, almost certainly heading back to US$5lb which is the price forecast by UBS in a major copper sector report which focused on waning supply rather than sluggish demand.
“The market continues to underestimate the supply challenges facing the copper industry,” UBS said.
“Miners are struggling to keep copper supply up, given the accelerating industry trends of declining exploration, ageing mines, increasing depth, lower grades, longer development times and higher capital and operating costs.”
Sandfire Resources, up 46c to $9.88 over the past five days, is top of the UBS copper list, potentially on its way to a target price of $13.15.
Emerging copper explorer Caravel Minerals added 1c to 14c yesterday after reporting a simplified process to yield high grade copper and other metals from its namesake project in WA.
Lithium, the sick man of mining, produced one interesting winner in Pilbara Minerals, which rose by 2c to $1.43 even as the lithium price continued to slip lower.
Four broking firms updated their Pilbara research with buy tips and price targets well above the current market.
Goldman Sachs was the most conservative with a Pilbara price forecast of $1.75. Bell Potter said $2, and both Macquarie and Jarden said $2.40 was in sight to the stock.
Other news from a market which refuses to stop bouncing on the Trumpoline included:
- Victory Metals, up 7.5c to 48c after reporting the offer of a US$190 million funding package for its North Stanmore heavy rare earths, scandium and hafnium project in WA.
- Power Minerals, up 1c to 7.1c after announcing that it will soon start drill testing its Santa Anna rare earth project in Brazil.
- Boss Energy, up 21c to $2.59 yesterday after reporting further wellfield expansion at its Alta Mesa uranium project in the U.S., and
- Sheffield Resources, down 1c to 17c, despite reporting solid March quarter titanium minerals from its Thunderbird project in WA.
