Gold is the other hot commodity at the moment.
The price has moved over the $US1100 an ounce level in the past six weeks or so after regaining the $US1,000 mark three months ago.
It had been reached the $1,000 an ounce level earlier this year and in March 2008 (for the first time When Bear Stearns failed and was rescued).
As the US dollar has bounced in the past three weeks, gold has eased back to around the $US1120-$US1140 range.
The price is up more than 26% this year, but for Australian producers, the gains have been mostly eaten up by a similar rise in the value of the Aussie dollar.
Next year ABARE sees the gold price rising 9% to average US$1060 an ounce.
This week we saw a report warning of a "bubble" in gold.
According to Nouriel Roubini of RGE Monitor and New York University’s Stern School of Business, (who predicted the global crash in financial markets) the gold market has developed into a bubble and prices face “significant risks of a downward correction”, an excerpt of his report to clients on his website said this week.
"In recent months gold prices have risen dramatically, first breaching the US$1000 barrier, then jumping another 20% in the past few weeks, surpassing US$1200 before correcting downward again to around US$1100.
"Some gold-bug bulls say the gold price could eclipse US$2000 in the next couple years. Is that possible? Is the recent rise of gold prices justified by fundamentals?
"An analysis of the facts suggests that a good part of this rise in gold prices is driven by a bubble."
Professor Roubini said in his report the “only scenario where gold should rapidly rise in value is one where fiat currencies are rapidly debased via inflation.” This could happen if large fiscal deficits were to persist for a long time.
Although “some diversification of gold in central bank and investor portfolios may make some sense”, Professor Roubini saw “little reason” for bullion prices to rise rapidly towards $US2,000 an ounce unless the world enters a period of high inflation or slips into a depression."
He said that if the world economy double-dips and concerns about a worldwide depression and deflation re-emerge, investors would be better off stockpiling canned foods and other commodities such as oil, rather than gold.
Although not as extreme, ABARE bases its forecast on the situation in the US economy.
"Assuming continued improvement in global economic performance and a US monetary policy that remains stimulatory in the short term, investment in gold is expected to remain strong.
"Ongoing weakness in the US dollar is expected to sustain the hedge appeal of gold as an alternative store of value to US dollar denominated assets, especially those with a low rate of return.
"While growth in retail investment in physical gold, such as bars, coins and gold bought in exchange traded funds is expected to moderate in 2010, continued uncertainty as to the pace of global economic recovery is expected to sustain the appeal of holding physical gold as a low-risk asset.
"Over the outlook period, net purchases of gold by central banks are likely to be largely offset by a lower rate of producer dehedging during the year.
"While gold fabrication demand and mine supply are expected to grow modestly, these factors are unlikely to significantly influence gold price movements in 2010," ABARE said.
"In 2010, a forecast higher average gold price is expected to constrain, to some extent, demand for gold used in jewellery and other applications.
"However, an assumed improvement in global economic growth is forecast to result in a modest 3 per cent rise in gold fabrication demand, to 2475 tonnes."
ABARE saw a 3% rise in world gold mine production this year to 2481 tonnes.
This will come from production increases in Indonesia (up 14 per cent), the Russian Federation (up 10 per cent), China (up 7 per cent), Canada and Australia (both up 5 per cent).
Partly offsetting these increases are estimated falls in South Africa (down 9 per cent) and the United States (down 2 per cent).
"In 2010, world gold mine production is forecast to remain largely unchanged at 2503 tonnes.
"The ramping up of new operations in Australia, China and the Russian Federation is forecast to increase production in these countries, while lower ore grades are expected to contribute to declining production in Indonesia and South Africa.
"In contrast to declines over the past two years, Australian gold mine production is forecast to rise by 13 per cent to 246 tonnes in 2009-10.
"The majority of this growth is attributable to the start-up of Newmont’s US$3 billion Boddington redevelopment in Western Australia, which is expected to produce more than 31 tonnes a year for the first five years of operation.
"The ramping up of Apex Minerals’ Wiluna project, Oz Minerals’ Prominent Hill project and Avoca’s Higginsville operations are each expected to add more than 2 tonnes to Australian gold mine production in 2009-10. Several other projects are forecast to increase production by at least 1 tonne each during the year.
""These include Newcrest’s Telfer project, Norton Gold Fields’ Paddington operations, Citigold’s Charters Towers project and Ramelius Resources’ Wattle Dam project.
"Partially offsetting these increases are estimated falls in production of
