Yellow metal could become white hot, analysts say, citing history, rate cuts and global fears

But even with that warning the leading U.S. investment bank said that gold, and its sister metal silver, could keep rising if past booms are a guide.

In theory, using gold’s five-year moving average price as a benchmark, it could replicate the 1980 boom when it rose by another 111% after passing the five-year average, or the 2011 boom when it added 87% after breaching its five-year average.

“Hence, while momentum has become stretched, historical precedents leave room for greater long-term upside,” Morgan Stanley said in the latest edition of its Global Insights newsletter.

The bank’s case for gold came in a week when the price rose by a remarkable US$262 an ounce (6.2%) to an all-time high of US$4220/oz or A$6500/oz on conversion to Australian dollars.

ANZ Bank described the gold rally as “unstoppable” thanks to four factors: monetary policy (falling interest rates), a lower U.S. dollar, the worsening political backdrop and investor demand.

Silver did even better than gold as the threat of a short squeeze on supply drove the price to an all-time high of US$53.44/oz, a rise which flushed out the silver bulls who forecast a rush to US$80/oz as the silver stockpile in London dropped to an all-time low, forcing traders to expensively airlift the heavy metal from warehouses in New York.

Gold miners rose with their metal, led by sector leader Northern Star which added $2.58 (11.2%) to its own all-time high of $25.92, before easing slightly. The latest share price move lifted the stock to the 16^th most valuable company on the ASX with a capitalisation of $36.6 billion.

It wasn’t all optimism this week with warnings that gold could be a canary in the mine, tweeting a warning that the China v U.S. trade war could destabilise the global economy, as could the near certain pricking of the artificial intelligence (AI) balloon.

Adding his considerable professional weight to the case for gold was the world’s top commercial banker, JP Morgan chief executive, Jamie Dimon, who said while he is not a gold buyer there is a “semi-rational” reason to have gold in a portfolio.

“I’m not a gold buyer because it costs 4% to own it,” Dimon told an investment conference in Washington, with the cost a comment on gold, in its bullion form, not paying interest.

But, having disowned gold for himself, Dimon acknowledged that it could easily rise to US$5000/oz, or even US$10,000/oz “in an environment like this”.

Instability is the environmental issue which worries Dimon, along with a growing list of other highly regarded investment and financial market professionals.

Bank of England governor Andrew Bailey said a stock market bubble could be about to burst as fears grow about AI valuations.

“Asset valuations could now be at odds with the uncertain economic and geopolitical outlook, leaving markets susceptible to a disorderly adjustment,” Bailey said in classic central banker speak which could be reduced to a single word, correction, or crash.

Robert Friedland, a billionaire mining entrepreneur, was on the same page as Bailey, warning that geopolitical tension is contributing to the breaking down of the international order with “far reaching consequences for global supply chains.”

Speaking at this week’s most important conference, LME Week, organised by the London Metal Exchange, Friedland said the tensions were over the “Balkanising” of the global economy, driving costs higher.

“It doesn’t matter what you’re ordering, the lead times are extending, and building new mines is getting more and more expensive,” he said.

U.S. Treasury Secretary, Scott Bessent, blamed China for the deteriorating outlook, warning that the latest round of Chinese rare earth export restrictions could force the U.S. and other countries to “de-couple” from China.

“If China wants to be an unreliable partner to the world then the world will have to de-couple,” Bessent said.

While most share prices rose this week, lifting the ASX all ordinaries index by 1.5%, the metals index by 4% and the gold index by 5%, there were negatives which indicate that some stocks are getting ahead of their underlying value.

Three examples of overheating can be found in an outbreak of downgrades from investment banks, led by the ever-cautious UBS which gave Evolution Mining a lashing over what was said to be a weak September quarter production report.

UBS rated Evolution as a sell with a price target of $9.70, down 15% on last sales at $11.47. Sandfire Resources, a local copper favorite, got the same treatment with a sell recommendation and price target of $13.10, down 18% on last sales at $15.94, while another copper miner, 29Metals was said by CG Capital Markets to be a sell with price target of 25c, down 5c on an earlier tip by the broker, and 44% below last sales at 45c.

Offsetting those sell tips were an equally eye-catching collection of spectacular share prices rises by small explorer/miners, including:

• Litchfield Minerals, up 54c (280%) to 74c after reporting a thick (104 metre) intersection of copper-rich core from drilling at its Oonagalabi project in the Northern Territory, with hand-held “assays” up to 1.37% copper equivalent.

• Cobalt Blue, up 14c (129%) to 25c thanks to a steep increase in the price of cobalt which rose by 10% over the week, meaning it is up 75% since the start of the year.

• Morella Corporation, up 3.7c (160%) to 6c after reporting a high rate of rubidium extraction from work at its Mt Edon project in WA. Rubidium is used in lasers, atomic clocks, and other advanced technologies, and

• Nova Minerals, up 79c (135%) to $1.37 after announcing plans to become a supplier of military grade antimony in the U.S.

Iron ore, which is supposed to be falling, continued to rise, shrugging off attempts by the Chinese Government to talk it down. Over the week, iron ore added US$1 a tonne to trade at US$105/t, helping Fortescue rise by 28c to $19.75, and Fenix by 2c to 50c.

The high iron ore price might eventually fade, according to top local producer Rio Tinto, which said the latest price was a result of “front loading” by steel mills keen to secure future supplies of raw material as the China v U.S. trade war worsened.

The prospect of a lower iron ore price might not be all that miners of the mineral have to worry about with disturbing reports surfacing about an Indian iron ore broker, Radiant World, facing inquiries about the documentation associated with its business which has emerged from a modest start a few years ago to be one of the world’s major iron ore traders.

Gold stocks, as mentioned earlier, had another bumper week with moves that included:

• Genesis, up $1.32 to $6.99 after reporting record quarterly production of 72,878 ounces of gold at an all-in sustaining cost of A$2529/oz.

• Sun Silver, up 48c to $1.50 after reporting fresh exploration success at its Maverick Springs silver/gold project in Nevada.

• Catalyst Metals, up $1.24 to $8.44 after announcing receipt of initial approvals to dig an exploration decline at its Four Eagles project in Victoria.

• Meeka Metals, up 5.5c to 26c after reporting thick, high grade gold intersections from first drilling at its Turnberry North project in WA, and

• Mithril Silver and Gold up 6.5c to 67c after reporting high grade silver and gold assays from the latest drilling at its Copalquin project in Mexico, and

Rare earth stocks marched higher thanks to their central role in the China v U.S. trade war, led by Lynas which added 6c to $20.53, taking its rise for the year to $13.99 (214%), followed by Iluka, up 66c to $8.55, and St George, up 3c to 16c.

Paladin was the pick of the uranium sector, up 95c to $9.83 with Macquarie tipping it as a buy with a price target of $11.25.

Explorers and miners continued to pull in fresh capital with raisings this week including Brazilian Rare Earths, $120 million. Boab Metals $50 million. Kairos Minerals $27 million and Carnaby Resources $12.5 million.