Australian Global Commodities Markets Update provided by Australian stockmarket analyst Macquarie Research Equities.

This year’s Golden Globe goes to…

It’s around 185 years since James McBrien first discovered gold near Bathurst, New South Wales. It wasn’t long before fortune hunters from Europe, the U.S and even Asia began to immigrate to Australia to find their fortune. And now, almost two centuries later gold is again receiving considerable attention in global commodities markets from these same countries. Often seen as an inflationary hedge, the resurgence in gold over the last 6 -12 months has been driven largely by Chinese demand according to Macquarie Research Equities (MRE). With the Macquarie Gold Rush Conference kicking off today with talks from leading global players, it’s very timely to again discuss the fundamentals of this roaring sector, and why we thing gold is going higher.

The China Factor

The sheer growth of infrastructure within China has contributed to spiking oil prices, rising base metals, heightened inflation concerns and the depreciation of the US dollar.

MRE also forecast that growth in China, combined with a recovery in western world economies in mid-late ’09 and ’10, could result in an environment of high global inflation. This could also potentially drive gold back over $US1000/oz into ’09 and beyond.

The Challenge for Gold Firms

The real challenge for gold firms is cost management. Company bottom lines are quite fragile despite sales growth given the implications of soaring input costs, such as oil, steel, labour, consumable prices, flat production profiles and even declining grades.

MRE Picks

The standout firms for MRE are those with sustainable low cost production, quality growth, exploration upside and attractive relative valuation. Outperform recommendations in the Australian sector include Lihir Gold (LGL) and Sino Gold (SGX) – We are listing a new Deferred Instalment over SGX Today!!