Commodity Calls: Week Ending 23 August 2024

Gold bounces as Jackson Hole sends dovish signals, uranium rallies on weak projected 2025 output, and Pilbara puts its plans for the world’s biggest lithium mine on hold.
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Gold

Bullish

  • Gold bounced above US$2500 after Fed Chair Jerome Powell’s speech at the Jackson Hole Symposium leaned dovish, confirming that rate cuts were coming in the Fed’s September meeting. In all US easing cycles since 1990, gold price has risen by 5% within a week of the first rate cut.1

Bearish

  • Markets have priced in almost 100bps of rate cuts by the end of 2024.2 This would require at least one 50bps cut at one of the Fed’s three remaining meetings – something the Fed has not signalled as being on the table as of August. Gold’s sensitivity to rate-cut expectations could see it affected if projections do not materialise.

Explore physical gold with GOLD.

Uranium

Bullish

  • Kazatomprom, the world’s most prolific producer of uranium, has downgraded its 2025 production guidance due to supply constraints on sulphuric acid, a key ingredient in uranium extraction.3 The new announcement offsets the company’s prior projection of increased production in 2024.
  • Indústrias Nucleares do Brasil (INB), a state-run uranium fuel cycle company, has announced that it is set to resume exploration for uranium.4 The decision marks the first time that any company has prospected for new uranium sites in Brazil in 40 years. In 2022, Brazil produced 43 tonnes of uranium, all of which was used domestically after conversion and enrichment abroad.5
  • China has approved five new nuclear power initiatives including the development of 11 new reactors.6 China now operates 56 reactors with a total capacity of 54.3GW, a further 30 reactors are now under construction.

Bearish

  • Getting approved for mining in Namibia, the world’s third largest producer of uranium, may get more difficult.7 The government has stated that it will take a tougher stance on issuing permits after an analysis saw less than half of all approved mining projects in operation.

Explore uranium with ATOM.

Lithium

Bullish

  • Pilbara Minerals has cancelled plans to double its lithium output in 2024 after poor earnings saw the company’s net income fall 89% YoY.8 One of the major projects that was put on hold is the expansion of Pilgangoora, which had been slated to become the biggest lithium mine in the world.9

Bearish

  • The European Commission is looking to impose additional tariffs of as much as 36.3% on EVs imported from China after an investigation into Chinese government subsidies for the car industry.10 China’s Ministry of Commerce has responded to the move, and the two parties now have until August 30th to provide comments and request hearings on any proposals.11

Explore lithium with ACDC.