Private investors poised to give gold its next leg-up as uranium’s delusional cheer squad takes the yellowcake

Uranium tried to snatch the headlines this week courtesy of intervention by the US President, Donald Trump
18th July 2019
Tim Treadgold


Uranium tried to snatch the headlines this week courtesy of intervention by the US President, Donald Trump, but it was a far richer American, Ray Dalio, who picked the winner when he said gold was the place to be in an unstable world.

Ranked as the world’s 58th richest person with a fortune estimated at $US18.4 billion, Dalio is the founder of Bridgewater Associates, one of the world’s biggest investment funds, and not a person who has previously been associated with gold.

Like many Americans, Dalio can take a long time to get to the point. But anyone who had the time to wade through his 6000-word article posted on LinkedIn would have found his praise for gold as a “risk-reducing” and “return enhancing” addition to an investment portfolio.

Most investors, Dalio wrote, are underweight gold but they ought to be thinking about which investments would perform well in a reflationary environment (artificial government economic stimulus) “accompanied by large liabilities coming due and with significant internal conflict between capitalists and socialists, as well as external conflict”. The answer, he said was simple: gold.

Within minutes of Dalio’s conversion to gold, the price of the metal added $US20 an ounce to reach $US1427/oz, before easing back to around $US1422/oz, a level which took the Australian dollar gold price back to $A2026/oz.

Other prominent investment commentators are also migrating to gold to dodge future potential problem sectors with another big American, State Street Global Advisers, joining the gold cheer squad, advising clients that “gold’s stellar run is tipped to continue”.

With heavyweight investors joining the gold rush, its nor surprising that most ASX-listed gold stocks had a good week with several hitting 12-month price highs, including Northern Star, which reached $12.82 early yesterday before easing to $12.69 for a gain over the week of $1.05.

Gold Road joined the 12-month high crowd with sales up to $1.45, before easing to $1.34 (double where it was in January). Regis rose to a high of $6.20 before easing to $6.07, and Saracen reached a record $4.04 before easing to $4.03.

What happens next with gold could be quite interesting because with Dalio and State Street entering the game, a climate is developing for private US investors to start buying. In effect they become a third force driving gold after the effect of falling US interest rates and the prospect of fresh quantitative easing (QE, or money printing) by the European Central Bank.

If gold was the real winner this week, the prize for leading pretender went to uranium, which was hailed by its supporters for achieving a break-through moment when Trump rejected a proposed tariff on US uranium imports.

Interesting as Trump’s move was in leaving the US open as a market for uranium from countries such as Australia and Canada, the “no tariff” decision only amounted to status quo, which means something bigger has to happen for the uranium price to climb out of the cellar.

The limited reaction on the uranium market (short-term price up US25c a pound to $US24.80/lb) was a measure of what it all meant, as was the share price by Paladin Energy, up 2c to 16c in the initial flurry and then back to 14.5c, up half-a-cent.

Nickel staged a more convincing rally thanks to stronger-than-expected production of stainless steel and speculation that battery makers are buying ahead of an expected increase in demand for electric cars.

Over the past month the nickel price has added $US1/lb to $US6.64/lb, its highest in four years, taking local nickel stocks with it, including Mincor, up 5c to 48c, Western Areas, up 30c to $2.36 and Nickel Mines, which is locally-listed but focussed on Indonesia, up 5c to 49c.

Lithium stocks were subdued as the production surplus weighed on the price. Most producers slipped a few cents while Mineral Resources, which has exposure to a number of commodities, lost 50c to $14.73 after reports of seepage at a tailings dam near its Wodgina project in which US-based Albemarle is planning to buy a 50% stake, though settlement on that deal has been shifted to later in the year.

Iron ore continued to generate headlines with the price-boom likely to continue for some time after BHP and Rio Tinto cited maintenance issues as a reason to slow exports.

Notable losers this week included New Century Zinc, which dropped to an all-time low of 33c before reclaiming 2c to end at 36c. Orocobre, the one-time lithium leader, slipped to a 12-month low of $2.64 before a 7c gain to $2.71 to end the week down 4c, and promising copper and zinc explorer Peel Mining dropped to a low of 30c and stayed there.

Other price moves in a week in which gold was the major news, with nickel and uranium playing cameo roles, included:

  • Venturex added 1.5c to 19.5c after reporting fresh high-grade zinc, lead and silver intercepts from drilling at its Sulphur Springs project in WA with a best hit of 7.75% zinc over 18 metres from a depth of 155m, plus 2.03% lead and 22.8 grams of silver per tonne.
  • Southern Gold reported bonanza grade gold assays from surface work at its Deokon project in South Korea, including 32.4g/t of gold and 1095g/t of silver from an outcrop. On the market the stock added 4c to 15c.
  • Chalice Gold moved up by 1c to 15c after announcing completion of a deal to buy a nickel exploration asset in WA’s Kimberley region close to the recently reported Merlin nickel discovery by Buxton Resources.
  • Cullen Resources made an overdue return to the news cycle with a potentially interesting copper hit near the WA wheatbelt town of Wongan Hills. Best result was a 1m slice assaying 3.72% copper, plus 0.3g/t of gold from a depth of 36m. On the market, the stock added 0.3c to 1.3c.
  • Bardoc Gold continued to improve on its Zoroastrian project near Kalgoorlie in WA with the latest drilling returning an intersection of 4.6g/t from 112m, a result which lifted the stock by half-a-cent to 6.3c.
  • Ausgold said it was pushing ahead with a scoping study at its Katanning gold project in the south of WA by appointing GR Engineering with a result expected by the end of the current quarter. The stock was steady on the market at 1.5c, and
  • Bryah Resources added 1c to 8.1c after reporting continued encouragement from its Black Beauty manganese project in WA with rock chip samples assaying up to 39.9% manganese.

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