A Weekly Recap of All Things Resources to Friday, September 27th

‘That’s a Wrap’

By Rod Bake

As the brokers, investors, investment advisors and portfolio managers opened their terminals for the week ahead – there was a collective belief that with the North American major markets back on track at record or near record highs – it looked as if world’s central bankers were indeed on the way to pulling off the improbable soft economic landing.

Meanwhile, gold bullion at US$2,620 continued to confuse industry pundits, with its quest to reach new all-time highs at a time of year when the yellow metal usually came under seasonal selling pressure. In addition, silver at US$31, was only a dollar or so away from breaking out to new highs going all the way back to 2013.

The way I see it – Historically, a true breakout bull market for gold has to be confirmed by silver. That is – the price of silver increases at a greater rate than gold. This is because of silver’s dual role as a precious and industrial metal. Plus, as gold gets more expensive, investors tend to turn to silver to stay in the game but a lesser cost.

This correlation between gold and silver is best expressed by the gold/silver ratio. Currently, the gold/silver ratio of US$2,620/US$31 is about 84.5, after beginning this year at about US$2,055/US$23 = 89. Historically the gold/silver ratio hovers around 60, so today silver would seem to be underpriced compared to gold – but the ratio looks to be coming down.

During the last two generational moves up in gold – in 1980 and 2011 – the gold/silver ratio went from U$$150/US$3.50 = 43 to US$850/US$50 = 17 in 1980 and from US$295/US$5 = 59 to US$1,825/48 = 38 in 2011. A 40/1 ratio today with gold at about US$2,600 would put a value for silver at about US$65 to confirm the current move. Keep an eye on the gold silver ratio. A dropping gold/silver ratio confirms the precious metal bull market. If it stays near 85 or goes higher – the current move may be in jeopardy.

As if on cue – silver then rose to close at a new 13-year high of US$32.21 a troy ounce (t oz.) and gold bullion reached a new all-time closing high of US$2,673 a t oz.

MAG Silver Corp. ‘MAG-T & N.A’ shares’ rose to close at a new 1^3/4-year high of $20.59.

New Gold Inc. ‘NGD-T & N.A’ stock reached a new 6^3/4-year closing high of $4.27 while Agnico Eagle Mines Ltd. ‘AEM-T & N’ closed at a new 4-year high of $113.67.

Commodity stocks got a lift on word that China was taking initiatives to stimulate its economy.

Faraday Copper Corp. FDY-T’ reported drill hole FCD-24-073 at the Vancouver, BC based company’s Copper Creek Project in Arizona returned 259.98 metres (m) of 0.68^% copper and 1.57 grams per tonne (g/t) silver.

Lumber rose to close at a new 4-month high of US$534 per 1,000 board feet (mbf).

Which no doubt helped Doman Building Materials Group Ltd. ‘DBM-T’ stock to close at a new 4-month high of $7.76.

Infrastructure company Aecon Group Inc. ‘ARE-T’ shares’ rose to a new 3-year closing high of $20.93.

Another bit of uncertainty entered the electrification of everything sphere after Sweden’s Northvolt sighted slowing electric vehicle (EV) sales in Europe as reason for giant EV battery manufacturer to review its operations and lay off about 20^% or 1,600 workers in Sweden. The company stated that the current review would not affect its proposed operations in Quebec.

This as Lithium Royalty Corporation ‘LIRC-T’ dropped to close at a new all-time low of $5.86.

Natural gas rose to close at a new 2-month high of US$2.93 per million British thermal units (MMBtu).

The influential Baker Hughes Petroleum Rig Count reported the number of active American drilling rigs fell by 1-rig in the past week to 587, down by 36-rigs from this time last year. Up north – the number of Canadian active rigs rose by 7-rigs to 218, up by 27-rigs from one year ago.  

Energy sensitive utility TransAlta Corporation ‘TA-T & N’ stock closed at a new 13-month high of $14.11.

Uranium Energy Corp. ‘UEC-N.A’ stock rose by $0.65 or 11.73^% to US$6.19 after the Casper, WY based uranium company announced it had agreed to acquire all of the Rio Tinto Group ‘RYO-N’ Wyoming uranium assets included the fully licensed Sweetwater Plant in an all-cash deal valued at some US$175-million.

Copper rose to a new 2^1/2-month closing high of US$4.59 a pound (lb).

Which no doubt helped Taseko Mines Ltd. ‘TKO-T’ & ‘TGB-N.A’ to close at a new 3-month high of $3.56.

Zinc rose to close at a new 4-month high of US$1.41 a lb.

The CRB Commodities Index reached a new 3-month closing high of 343.

The U.S Dollar Index ‘DXY’ fell to a new 14-month closing low of 100.35.

The TSX Venture Exchange ‘TSX-V’ reached a new 2-month high closing high of 597 and the TSX Composite ‘TSX’ rose to a new all-time closing high of 24,034.

Down south – the S&P 500 and Dow 30 Indexes rose to close at respective new all-time highs of 5,751 and 42,313.

Natural gas and copper led commodities higher on the week, while crude oil was the only drag.

The four major North American equity markets stayed positive going into the weekend while the TSX Venture fell to a small loss.

For the Week – the DJI gained 0.59^% to 42,313, with the S&P 500 up 0.61^% to 5,738, and the NASDAQ ahead 0.96^% to 18,120. Across the line – the TSX rose 0.37^% to 23,957 while the TSX Venture fell 0.34^% to 583. The CBOE Volatility Index or VIX rose 5.02^% to 16.96.

With currencies – the Canadian dollar gained 0.38^% to US$0.7399, while the U.S. dollar ‘DXY’ lost 0.39^% to 100.39. 

With commodities – gold bullion gained 1.22^% to US$2,652, with silver ahead 1.77^% to US$31.64, as copper rose 6.09^% to US$4.53, and lithium gained 2.27^% to US$10,530. Crude oil lost 3.69^% to US$68.60, and natural gas gained 20.08^% to US$2.93, while uranium rose 2.20^% to US$81.20. With soft commodities – lumber gained 4.12^% to US$531. Overall – the CRB Commodities Index gained 0.90^% to 338.