Gold May Test $1,300; Copper Strong - Scotiabank


"Scotiabank's Metal & Mineral Index showed 'broad-based strength in base metals, a surge in gold & silver prices'"

Scotiabank economist Patricia Mohr forecast Monday that gold may test the US$1,300 during a time she referred to as a new gold rush.

Scotiabank's Metal & Mineral Index showed "broad-based strength in base metals, a surge in gold & silver prices and slight gains in sulphur and uranium prices more than offset somewhat softer steel-alloy prices (molybdenum and cobalt)."

Although LME copper prices have edge down from their near-term peak of US$3.15 on November 23, Mohr suggested, "copper remains exceptionally lucrative at $US3.06 per pound in late November, yielding a profit margin of 58% over average world break-even costs (including depreciation)."

She noted copper prices have been barely impacted by the announcement of lower Chinese imports for three reasons: 1) Beijing and Chinese investors/fabricators are expected to be 'willing' holders of these [copper stocks] in 2010; underlying demand for copper in China is expected to advance by 23% in 2009 and at least 8% in 2010, assuming greater availability of scrap next year. Copper scrap is still in short supply; 2) global hedge funds and investors still believe there is good value in commodities as an asset class-particularly vis--vis low yielding U.S. Treasury Securities; and 3) investment funds expect huge re-stocking of basic materials, once the G7 economies fully recover after massive liquidation late last year."

"The decline in the trade-weighted U.S. dollar also continues to boost both Chinese and global investor interest into copper," Mohr said.

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