The net result was a small rise in the overall Australian market, a small fall in the U.S., a modest uptick in the U.S. 10-year bond rate, and a flat gold price as the metal tried to set a record but ran out of steam.
A fresh attempt at a record gold price is likely as doubts grow around the erratic economic management of the U.S. economy by President Donald Trump.
The most disturbing development of the week is the potential for the next interest rate move in the U.S. being up rather than down, with signs in the bond market that doubts are growing about Trump’s economic policies.
Right now the U.S. 10-year bond is yielding 4.54%, slightly more than the Australian 10-years which is yielding 4.34% – when it would normally be the other way around.
If the U.S. does revert to a rising interest rate trend, it will send a negative signal to the rest of the world, including Australia.
The chairman of the U.S. central bank, Jerome Powell said midweek that he is in no rush to cut rates, preferring to wait and see which way inflation moves under Trump, a stance which could see him sacked.
So far, it’s a different story in Australia as an overdue rates cut edged closer though only to bring the country into line with the rest of the world.
China’s threatened tech-wreck came in the form of cut-price artificial intelligence (AI) software which was big news in the U.S. but less so in Australia with its small technology sector.
There are also doubts about whether anyone with half a brain would install Chinese AI on their computer systems, especially as government authorities around the world ring alarm bells about the Chinese technology, even if it is cheap.
Locally, the most excitement could be found in the uranium sector, where Boss Energy went on a three-day roller coaster ride as evidence grew of a shorts squeeze.
In a week when the uranium price eased slightly, the whopping short-sold position on the Boss share register was matched by the company declaring the start of commercial production at the born-again Honeymoon project in South Australia.
From opening trades at $3.21 last Friday (January 24), Boss fell 13% to $2.79 on Monday before rising to $3.23 on Wednesday and then trailing away to around $3.13.
The Boss trades were against a background of uranium shedding US$2 a pound to US$69.20/lb, which encouraged short sellers to lift their position to 19.35% of the company’s issued capital, rivalled only by another U-stock, Paladin Energy, which has 15.21% of its shares sold short.
The problem for short sellers is that while betting on a future fall in the uranium price might make sense if nuclear power does not blossom with AI driven electricity demand, as forecast, they will have a problem as Boss delivers on its promise of becoming a profitable producer of uranium.
Boss shorters will have looked with concern at the company’s quarterly report which included news that commercial production had started at Honeymoon and that cost guidance of between US$23-and-US$25 per pound of uranium was being maintained – well under the spot market price for the fuel.
Macquarie Bank and Citi piled pressure on the Boss shorters with mid-week research notes which gave the stock a buy recommendation. Macquarie tipped price rise to $4.80 while Citi said $3.60 was its target, 20c higher than an earlier forecast. Both banks said they were impressed by the cost performance of Honeymoon.
Gold, which is an independent “judge” of the world’s economic outlook, gave a mixed performance but with significant signs emerging of a gold “shortage” which could be a spark for the next upward leg in the price.
At US$2760 an ounce, gold is within touching distance of its all-time high of US$2777/oz reached last October, with that price for physical gold transactions the one used by the World Gold Council.
The next few days could see a new high for gold after reports that a US$82 billion stockpile of gold has been amassed in New York by traders concerned about Trump’s use of tariffs and his threat of a trade war with China, and other countries.
So much gold has been shipped to New York that a shortage has developed in London with the Financial Times newspaper reporting that the waiting time to withdraw gold from the Bank of England rising a few days to between four and eight weeks.
“People can’t get their hands on gold because so much has been shipped to New York,” one trader told the FT.
Emerald Resources was the star of the gold sector, rising by 27c to $4.10 after reporting fresh exploration success at its projects in Australia and Cambodia.
At Dingo Range in WA, Emerald reported a series of promising drill intersections with best hits of 13 metres at 2.45 grams a tonne of gold from a depth of 10m, and 19m at 2.59g/t from 75m.
At the Okvau mine in Cambodia the latest drill results included 8m at 5.79g/t from 79m while at the Mermot exploration project the results were topped by a 14.8m intersection assaying 3.94g/t from 288.4m.
Other gold news and market moves included:
- Perseus Mining adding 5c to $2.86 after reporting a solid December quarter.
- Bellevue Gold rising by 3c to $1.22 after investors digested news of a better-than-expected cost performance at its namesake mine. UBS is tipping a rise to $1.60, up 5c on the bank’s last assessment.
- African Gold gained 1c to 6.7c after reporting its first batch of assays from drilling at its Ivory Coast gold assets with a best hit of 155m at 1.1g/t from 105m. The stock also attracted a speeding inquiry from the ASX after its initial surge from 5.8c to 8.3c, before easing.
- Gold Road, up 2c to $2.51 as management continued to assess the situation at De Grey Resources in which it is the biggest shareholder, but which is under takeover threat from Northern Star. De Grey slipped 1c this week to $1.99. Northern Star was down 15c at $17.01, and
- Lunnon Metals rose by 1c to 21c with Shaw and Partners tipping a rise to 60c because the stock is “turning into a gold asset with its nickel for free”.
Iron ore made a return to the headlines when Fortescue snapped up Red Hawk Mining for $254 million, a small outlay but important because it adds a high-grade iron ore asset at a time when questions are being asked about Fortescue’s falling grades.
On the market, Fortescue rose by 38c to $19.15 while Red Hawk rose by 38c to match the bid price of $1.20.
Another iron ore miner, Mineral Resources, was in the news for the wrong reasons with news that its debt load was growing rather than shrinking, and a haul road had suffered damage during last week’s heavy rain in the north of WA. Repairs are underway, but on the market the stock fell by $1.39 to $34.56.
Citi added its views to the debate around the iron ore price saying it could fall to US$75/t in the December quarter but was more likely to trade closer to US$100/t – a forecast which used to be called by two-bob each way by punters.
Pilbara Minerals was the pick of a weak lithium sector thanks to optimistic comments from chief executive Dale Henderson in the company’s December quarter report which helped the stock rise by 2c to $2.38. Morgans has a $3.25 target on the stock.
IGO continued to be burdened by expanding too rapidly in the boom years, slipping 24c to $5.07.
Other news and market moves this week included:
- Sandfire falling by 36c to $9.61 as the copper market came under pressure. RBC Capital Markets reckons the stock will recover to $10.50.
- Metals Acquisition went against the copper trend with a rise of 67c to $18.05. Wilsons Advisory sees a target price of $24.50.
- Bauxite stocks crept higher. Arrow added 0.4c to 4.2c after announcing a $7 million capital raising to advance its Niagara project in Guinea, and Metro Mining rose by 0.2c to 6c after reporting a strong fourth quarter at its Queensland operations. Shaw and Partners is tipping a future price of 17c.
- High purity alumina stock Alpha HPA rose by 3c to 88c after releasing an upbeat report on its Gladstone project in Queensland. Bell Potter has set a price target of $2, and
- Whitehaven Coal fell by 20c to $6.11 despite buy tips from Morgans (price target of $9.50) and Citi (target $8.30.
