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Top Stories This Week: Gold Price Retreats, “X-Date” Approaches; Ford Locks Down Lithium
May. 26, 2023 12:00PM PST
The gold price slipped further this week as investors watched the "X-date" for the debt ceiling. Meanwhile, carmaker Ford signed five lithium supply deals with companies including Albemarle and SQM.
The gold price spent time below the US$2,000 per ounce mark again this week, falling as low as the US$1,940 level. The yellow metal remains historically high with room to move up, but is facing short-term headwinds.
Among those setbacks is the US dollar, which strengthened this week despite uncertainty surrounding the US$31.4 trillion debt ceiling. Democrats and Republicans were still in talks as of the week's end, but had not reported significant progress.
Treasury Secretary Janet Yellen has pegged June 5 as the "X-date," the time by which the US will default if it doesn't raise the debt ceiling, although some commentators have suggested there's more wiggle room than that.
"We now estimate that Treasury will have insufficient resources to satisfy the government’s obligations if Congress has not raised or suspended the debt limit by June 5" — Treasury Secretary Janet Yellen
Market watchers were also looking out for the US Federal Reserve's latest meeting minutes. Released on Wednesday (May 24), they show that the central bank continues to view the American banking system as "sound and resilient."
Its 2 percent target for inflation remains in place, but experts are split on whether there will be another rate hike in June. Friday (May 26) brought the release of the latest personal consumption expenditures price index data, and it shows that the core number rose 0.4 percent month-on-month in April, and 4.7 percent year-on-year; both values were slightly higher than expected.
Ford signs five lithium supply deals
Lithium is a crucial component of electric vehicle batteries, and as the energy transition gains steam, carmakers around the world are moving to secure supply of lithium and other important raw materials.
Ford (NYSE:F) is the latest company looking to lock down its lithium supply. On Monday (May 22), the company signed five deals in a bid to meet its lithium needs. Ford now has arrangements with major miners Albemarle (NYSE:ALB) and SQM (NYSE:SQM), in addition to deals with Nemaska Lithium, Compass Minerals (NYSE:CMP) and privately owned EnergySource Minerals.
Ford's new lithium supply agreements are all with companies that are operating in North America, or in countries that have free trade agreements with the US. This will allow the automaker to benefit from tax credits under the US Inflation Reduction Act, which was introduced last year and is intended to support the buildout of a more resilient American electric vehicle supply chain. Ford already has deals with ASX-listed Liontown Resources (ASX:LTR,OTC Pink:LINRF) and Ioneer (ASX:INR,OTC Pink:GSCCF).
The Financial Times calculates that Ford's new deals could give it enough lithium for nearly 1.1 million electric vehicles a year, assuming that all projects scale up on time and can deliver material consistently. That number doesn't include volumes from SQM and EnergySource Minerals, which have not yet been disclosed to the public.
It's worth noting that not everyone is optimistic about Ford's supply arrangements — expert Joe Lowry of Global Lithium said on Twitter the company is late to the party and playing catch up. He doesn't believe all the lithium it's secured will come through.
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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
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