Gold, Copper and a couple of wildcard dollars

The dollars, Australian and US, will be the wildcard in the resources sector in 2023. The market for copper reacted more to the strength of the US dollar last year than demand side pressures said Resources Analyst with Fat Prophets David Lennox. Copper was flat for most of the last half of the year. It topped out at $4.89 USD/Lbs at the start of March and averaged $3.82USD/Lbs where it finished the year. Related: ASX200 closes higher in first week of 2023 That’s not likely to remain the case for long said Mr Lennox. “We do expect that as the auto industry continues to push down the EV mainstream production over the course of the next four or five years, that copper will continue to benefit,” he said. Meanwhile, a predicted recovery in Australian resources in terms of volumes and prices would support the domestic currency over the next 12 months Related: The copper shortage is getting real Gold, on the other hand, had a much more predictable reaction to the performance of the US dollar said Mr Lennox. “The weakening US dollar certainly has given a flip it to the gold price,” Mr Lennox said. “There is that inverse relationship as the US dollar falls or rises, the gold price moves in the opposite direction. “That's certainly been a significantly strong tailwind for the gold price. “Add to the fact that there's still concern over the stickiness of inflation around the world and in the US, that is, it (gold) continues to remain quite high even though it's off its peaks. “Inflation is very good for physical assets such as gold,” he said. “And of course, there's now a growing geopolitical concern. We have seen somewhat of a loss of faith in gold as a safe haven, but as the US dollar's weakened, that faith in gold is a safe haven has returned.” Related: Gold has beaten the market so far this century War, principally in the Ukraine and other tensions were also combining to buoy the gold price said Mr Lennox. “As we've seen the geopolitical concerns rising, obviously we're well of aware of Russia, what's happening between China and Taiwan, of course Korea or South Korea, North Korea and Japan. “And of course, even a little bit what's happening with the US Congress in terms of not being able to get a leader of the house from the Republicans. “So look, all in all, that geopolitical concern is rising and that's just adding that good tailwind to the gold price.” The fate of the sector in the immediate term largely rested with China which was wrestling to free itself from harsh COIVD restrictions said Mr Lennox. “We do believe that China will start to look to perhaps other forms of being able to handle the pandemic,” he said. “That is, look to outside immunizations and we do expect that if that happens, we would see China improving economically and that would be a significant tailwind for their resources sector.”

Gold, Copper and a couple of wildcard dollars

Industry Queensland

Related News

Industry reacts to renewed federal ministry

Finalists revealed for mining and METS sector awards

Elixir launches strategic plan for Taroom Trough growth

Get access to breaking mining news, now.