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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: RealMuLan who wrote (34185)	7/25/2005 5:37:56 PM
From: RealMuLan	Respond to of 116555

INTERVIEW:China Gold Demand Could Rise 20% On CNY Change By James Attwood Of DOW JONES NEWSWIRES SYDNEY (Dow Jones)--China's currency revaluation is expected to boost domestic demand for gold and help provide a base for gold prices to rise above the US$440s by the end of the year, according to a leading trader at Rothschild Australia. "Without a doubt, revaluation is going to underpin metal prices, particularly gold, by making them more affordable from a Chinese standpoint," said Darren Heathcote, head of trading at N M Rothschild & Sons (Australia) Ltd. Thursday, the People's Bank of China said the yuan's de facto peg to the dollar would be dropped in favor of a managed float against a basket of currencies. While the move led to an initial appreciation of just 2.1%, many are flagging more changes in China's currency policy with other Asian governments following suit. Heathcote, like others, sees Beijing's de-pegging from the U.S. dollar as a significant step in an ongoing program of market reforms and deregulation that will boost domestic spending. "China already has quite significant physical gold demand and I think a stronger yuan will help that situation particularly," he said. "Last year, China bought something like 230 tons of gold, of which over 90% was jewelry based so I can see quite a pent-up demand from a jewelry standpoint." "I could see demand (growth) rising toward 20% this year from about 13% last year and it's only a matter of years before we see (China) up there with India in terms of overall quantity," Heathcote said. India is the world's largest importer of gold, with 2005 imports expected to exceed 700 tons. Added Demand Seen Pushing Prices Up The added physical buying demand, particularly on price dips, is expected to help drive prices as high as US$435 an ounce in the coming weeks and to around US$442 by the end of the year, Heathcote said. At 0710 GMT, spot gold was trading at US$424.65 an ounce, although other analysts say the U.S. Federal Reserve's recent hawkish approach will stifle any prolonged rally in gold prices. Heathcote conceded "mixed emotions" about the U.S. dollar outlook, with the budget and trade deficits casting a shadow over an otherwise good economy. However, "people are satisfied U.S. rates are going up to 4%-plus (and that is) factored into the gold price (now)," he said. In addition, an appreciating yuan is expected to add strength to other Asian currencies by increasing their competitiveness through trade links with China, he said, adding the euro could also benefit for a stronger yuan. Nevertheless, he said gold prices will be back to current levels within a year: "We'll probably have the usual cyclical dip toward the end of the financial year, but ultimately we're looking at a stronger metal now." sg.biz.yahoo.com