Gold should continue to rise into 2011:: Macquarie

Visit http://indiaer.blogspot.com/ for complete details �� ��


Gold spoilt for choice
Feature article
 Gold should continue to rise into 2011, although it might be difficult to
generate outperformance relative to other commodities given the impact of
competing concerns on the US$ and Euro on the risks of investing in gold.


Latest news
 Base and precious metals fell on Friday as the compounded concerns
surrounding anticipated tightening in China and problems in Europe impacted
markets. Over the week, Nickel surprisingly bucked the downward trend,
rising 3.3%, while gold was up 0.9%WoW
 Spot treatment and refining charges (TC/RCs) for copper concentrates
imported into China have risen steeply over the last month to now reach
$100/t + 10c/lb, according to Reuters. Chinese buyers, who appear to have
been holding back from the market to some extent in recent weeks, are
continuing to push for further increases and Japanese smelters are reported
now to be seeking a near doubling in contract terms for 2011, from this year's
benchmark of $46.5/t + 4.65c/lb set in January 2010. However, with data
indicating that copper metal stocks have been running down rapidly over
recent months in China, there must be doubts about how much longer buyers
can hold back from the market, which has implications not only for spot
TC/RCs going into next year, but also copper prices.
 Japanese shipments of aluminium products rose 3% MoM and 6% YoY to
~175,000t in October, according to the Japan Aluminium Association. This
marked the eleventh consecutive year-on-year gain and was attributed to
rising domestic demand from can makers, as well as stronger exports,
although demand from domestic automakers was weaker.
 Chinese construction steel prices moved up strongly this week, more than
recouping the losses from last week. Rebar prices were up 1.9% WoW to
RMB4,500/t (US$566/t ex VAT), the highest level since August 2009. Hot
rolled coil prices were unchanged this week at RMB4,400/t ($566/t ex
VAT), still RMB300/t below the April peak and below the rebar price for
the first time since the end of 2009. With inventory falling slightly, the flat
product market finally appears to have achieved balance. Mills are
reporting a pick up in orders from the machinery and auto sectors,
suggesting real demand is improving.
 Steelmaking raw materials have posted another strong week, with The Steel
Index's Ferrous scrap assessment jumping $9/t WoW to $399/t on a delivered
Turkey basis, back to levels last seen in early May. Meanwhile, further
momentum in the coking coal market has pushed Energy Publishing's FOB
Queensland index up 1.5% to $228.3/t, 9% above the current quarterly
contract as the Q1 2011 negotiations enter full swing, with a settlement of
$225/t FOB Australia looking probable. Iron ore also continued to climb this
week, with The Steel Index assessment up 2.3% WoW to $166.5/t. With the
Baltic Capesize Index falling 10% on the week, spot iron ore is now trading at
~23% above the current FOB Australia contract.