Driving gold up another US$100/oz this week, to within touching distance of US$3900/oz, was concern about the effects of the US Government shutdown and fear of an October crash to level the bloated values of technology stocks exposed to artificial intelligence (AI).

Some of the world’s top investors are concerned about an October event, including James Anderson of British fund Baillie Gifford – who rang the alarm bell during the week after computer chip maker Nvidia said it would invest US$100 billion in OpenAI.

“I think one needs to be honest that those sudden increases in valuation that people are willing to place on OpenAI, Anthropic and the like are disconcerting,” Anderson told the Financial Times.

But for Australian investors, the more interesting issues this week were Citi’s “gold as art” remark and a suggestion that two surprise resignations could be the trigger for a mega merger of the world’s top two gold stocks – setting off a chain reaction of gold mergers.

The art valuation point was raised in a discussion about why gold and silver buyers were bidding up the price of the precious metals.

“We are reluctant to call a ceiling,” Citi said.

“Gold is like the art market; prices have completely disconnected from marginal production costs with the highest producer profit margins in 55 years and we are at lofty price levels on most valuation metrics.”

“Next year could be different,” the bank said, “with a rotation out of gold into copper and aluminium amid a more growth friendly macro-backdrop.”

Citi’s comment about next year being a recovery time for base and other industrial metals carries weight as the world adapts to competing super-powers in what’s shaping as a return to the days of the Cold War.

Back in the 1950s and ‘60s, the supply of commodities could not be taken for granted with producers and consumers more tightly bound than they have been during the fading era of globalisation.

What’s happening today is that buyers of commodities, especially critical and strategic metals, are adapting a variation of the Japanese manufacturing policy of “just in time” deliveries to buying raw materials, “just in case” there’s an outage, man-made or a natural event.

Before Citi’s rotation out of gold has a chance to develop (or not) there might be another wave of corporate deals to stoke investor interest in gold stocks, with the world’s two biggest goldminers – Newmont and Barrick – possibly edging towards a blockbuster deal.

The companies involved have not commented but that didn’t stop London stockbroker SPAngel from floating the merger balloon soon after Tom Palmer said he is leaving Newmont sooner than expected and Mark Bristow shocked the mining world with his early departure from Barrick Mining.

Losing one chief executive, as Oscar Wilde said of losing a parent, “is misfortune, losing two looks like carelessness.” More to the point, the exits from Newmont and Barrick point to shareholders demanding more value creation from their companies and that could come by merging interests which often overlap, especially in the US hotspot, Nevada.

Newmont shareholders in particular are keen to get a slice of Barrick’s world-class Four Mile discovery, which has been hailed as the world’s best in 25 years.

Barrick shareholders, in turn, love their gold in the US and worry about Bristow’s inability to sort out a dispute with the Islamic government of Mali and his keen interest in the Reko Diq project in a corner of Islamic Pakistan where it bumps into Islamic Afghanistan and Islamic Iran.

Whatever the eventual outcome of a Barrick/Newmont merger, there is little doubt that investors expect more from both gold miners as they struggle to match the performance of their underlying metal.

Last week, as gold continued to stretch its envelope, Barrick shares fell by 1% in New York to US$33.71. Newmont fared a little better, up 3% at US$85.95, with both moves possibly reflecting US investor angst over the state of government in their country.

Closer to home, gold stocks continued their outperformance, with the ASX gold index rising by 6% over the week, comfortably ahead of the ASX All-Ordinaries which surprised with a 2% rise.

Gold moves of interest included leaders Northern Star up $2.11 (8.9%) to $24.84 and Evolution, up $1.13 (11.5%) to $11.04.

Other gold and silver moves and news included:

  • James Bay Minerals, up 34c (51%) at $1.01. Once best known as a lithium explorer. the company has been staking a claim in gold and silver, including a deal this week to buy the high-grade Shafter silver project in Texas.
  • Dateline Resources, up 17c (41%) at 56c after reporting a start on drilling at its Colosseum gold and rare earths project in California.
  • Ballard Mining, up 7.5c at 63c after its took investment bank analysts on a tour of its Ballard Fault project in WA. Bell Potter said the stock is heading up to 80c, and
  • Ramelius Resources, up 45c at $4.03 after reporting an increase in gold reserves.

Iron ore was the other major news maker this week thanks to a return of the China trade war, which started with a ban on one BHP product (Jimblebar fines) and spread to a blanket ban on all BHP material as an attempt to drive down the iron ore price – which remains comfortably around US$105 a tonne.

Now for young investors, the import ban – if it is indeed really happening – is straight from an old Chinese (and Japanese) playbook which was rolled out annually during talks to fix tonnages and prices.

The introduction of spot market pricing in 2010 replaced an event on the iron ore calendar called the “mating season” when miners and steel mills met, generally at a golf course with a well-stocked bar, to hammer out terms for the year ahead.

What’s happening this time is unclear, with iron ore shipments appearing to be continuing as normal, although BHP’s share price did ease back by a marginal 38c to $42.15 while arch-rivals Rio Tinto rose by $1.79 to $124.67 and Fortescue added 22c to $19.21.

Mineral Resources, iron ore’s troubled producer, continued to dig itself out of a hole (or smooth its highway if you prefer) with help from BHP. MinRes was down $1 early in the week but bounced back on news of BHP’s possible China problem, rising by $2 to $40.98, perhaps on its way to Bell Potter’s tip of $49 in a report headed “The turning point”.

Copper stocks performed well this week as the price of the metal moved back up to US$4.86 a pound, helping Sandfire add $1.46 to $14.83 and Aeris rise by 4c to 45c.

Orion Minerals took advantage of the market’s strong appetite for copper, boosting a $5 million capital raising to $7.7 million, one of a long line of capital raising moves this week that included:

  • Hillgrove (another copper miner) securing $28 million. Tungsten Mining raising $9.5 million for gold mining. Tesoro $34 million for its El Zorro gold project. Yandal $13.5 million for exploration. Matsa $15 million and Gateway $22.5 million, also for exploration, and Saturn Metals raising $45 million for its Apollo Hill gold project.

Other news and market moves this week included:

  • Liontown Resources rising by 6c to 98c but copping a fresh sell note from boutique investment Jarden, which reckons the stock will slide back to 52c because of weakness in the lithium market.
  • Pilbara Minerals shook off negative lithium sentiment to rise by 6.5c to $2.49.
  • Uranium stocks had a mixed week. Paladin added 26c to $8.66 while Boss slipped 3c lower to $2.07.
  • Lynas led a stronger rare earth sector, up 43c to $17.42, a 14-year high.