Resource Market Weekly Recap – Dec 18, 2009

- December 18th, 2009

By Melissa Pistilli-Exclusive to Resource Investing News Coal Investing News Despite China’s assertion that it’s committed to helping curb global warming, coal is still king in the Asian nation. China lacks oil and gas supplies, but is rich in coal deposits, which fuel a large portion of its growing energy needs. And its hunger may … Continued

By Melissa Pistilli-Exclusive to Resource Investing News

Coal Investing News

Despite China’s assertion that it’s committed to helping curb global warming, coal is still king in the Asian nation. China lacks oil and gas supplies, but is rich in coal deposits, which fuel a large portion of its growing energy needs.

And its hunger may help fuel resurgence in global coal demand. Deutsche Bank believes China could change from a net coal exporter to a 150 metric tonne importer by 2011 as demand exceeds supply.

Supplies are already dwindling with coal stocks at power stations falling about 20 per cent through November pushing domestic prices higher. A projected 11 per cent rise in domestic prices in 2010 could boost seaborne spot prices.

In the Green Revolution, China is quite the enigma. While the world’s largest source of carbon emissions, it is also quickly becoming a leader in green technology.

If an alternative and reliable energy source is not found, global coal use is anticipated to increase by about 50 per cent by 2030. China’s focus on carbon-capture technologies make the most sense for its economy and future given its reliance on coal will most likely continue to dominate its energy sector for some time to come.

Gold Investing News

While news that Abu Dhabi will be picking up the tab for Dubai has eased some worries in the market, the possibility of eurozone economies like Greece faltering continue to give investors pause.

As do issues that some gold miners have underperformed 2009’s 27 per cent rise in gold prices.

On Monday, gold recovered some losses to close at $1,124.10 an ounce as the dollar index fell 0.25 per cent.

Tuesday, the dollar changed direction rising against 14 major currencies on speculation that the Fed may raise its key interest rate in the first half of 2010. Gold closed at $1,123.80 an ounce. The dollar is trading at a two-month high against the euro, adding downward pressure to gold prices.

There are some analysts who believe this year’s run-up in the price of gold was mostly based on zealous speculation rather than any real fundamentals in the precious metals market.

However, there are many indications that the greedy fast cash mentality of some “fat cats” on Wall Street continues to dominate financial decisions in some of the largest of American institutions, putting us all on course for another credit crisis; a situation that makes the yellow metal all the more appealing as a safe place for one’s assets.

On Wednesday, gold in New York closed at $1137.50 an ounce, rising the most in two weeks ahead of an announcement from the Fed, which traders expected would keep interest rates low in the medium term.

The Fed said that interest rates would indeed remain near zero “for an extended period” or as long as economic indicators like unemployment levels remain negative and inflation levels low. Although the central bank did seem more positive about the US economic situation than last month and is close to scaling back emergency lending programs.

By Thursday, gold was down again on profit-taking and stop-less selling brought on by a stronger dollar briefly falling as low as $1,098 to finally close at $1,107.40 an ounce.

Despite these end of year setbacks, the outlook for gold into the next few years remains positive. Morgan Stanley‘s latest forecast has the yellow metal rising to a record in 2010 with a base-case peak price of $1,250 to $1,300 an ounce and a bull-case peak of $1,325 to $1,350 an ounce before a decline in 2013. How high gold peaks will depend on how far into 2010 the Fed raises interest rates and the dollar recovers.

Silver Investing News

Better than expected US economic data strengthened the dollar placing further pressure on precious metals prices late last week and early this week. November unemployment numbers fell 0.2 percent and retails sales for the same month were up 1.3 per cent, nearly double their projected increase.

However, Monday’s news that Abu Dhabi is willing to finance Dubai’s debt forced down the dollar against the euro and the yen leading gold up to close at $1127.40 and silver at $17.42 an ounce.

On Wednesday, silver tracked gold to reach as high as $17.75 before closing at $17.69 an ounce. Thursday silver switched direction falling as low as $17.08 before closing at $17.30 an ounce.

While some bears are saying we told you so and are trumpeting the end of the precious metals rally, other analysts are calling the burst bubble notion a bunch of ballyhoo. Rather, say those still confident in silver’s strong fundamentals, this latest setback represents more of a seasonal phenomenon and a warranted price correction after an aggressive run-up.

While more sell-offs are expected before the year is out, analysts are predicting recovery in the silver market to begin in early 2010 as industrial demand picks up from resource hungry economies like China’s, for which many analysts are projected strong growth into next year.

Although silver’s precious metal value helped to carry prices higher this year, its industrial value will be what carries gains in 2010 as a part of the “reflation” or recovery trade.

Uranium Investing News

Australia’s Rudd government may be rethinking its hard-liner stance against uranium sales to India after Canada and several other nations have gained access to the very lucrative market. A new report commissioned by the government has also lent great weight.

The International Commission on Nuclear Non-Proliferation and Disarmament report details how Inida, Pakistan and Israel can gain access to uranium and nuclear technology from nations who oppose trade with non NPT members by signing on to “parallel instruments” that protect against military use of these materials.

The idea of the Rudd government changing its stance on uranium sales to India is big news after it rejected to honour a deal between India and Australia made under the Howard administration.

The decision has garnered the Rudd administration much criticism from the opposition for wasting a huge opportunity to gain a strong foothold in an energy market that is estimated to be worth $25 billion to $50 billion over the next twenty years.

Last month, Canada’s Harper and India’s Singh struck a very important nuclear agreement that may spell relief for the Canadian uranium and nuclear sectors.

Australia’s uranium mining sector has also suffered greatly under the weight of the global economic downturn and could use a growing market like India to help revitalize the industry. For this to be possible the Rudd government really needs to rethink its hard-line position on India and there are many signs that the Prime Minister may be coming around to the idea.

Update: Khan Resources Inc has rejected the takeover bid by Russian state-owned uranium producer ARMZ on grounds that the bid is totally inadequate, highly opportunistic and puts Khan’s assets in jeopardy.

Shares of Khan have had a trading range of 0.61 to 0.64 cents for December after averaging 0.31 cents a shares for the month of November.

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