Will Australian Resource Firms Be The Big Winners From China's Rebound?

Goldman Sachs (GS) recently raised its outlook for the People's Republic of China due to its improving international trade posture. As a result, financial markets around the world rose. Rebounding strongly was the natural resouces sector in Australia with BHP Billiton (BHP) and Alumina (AWC) both up almost 5% for the week.

Other firms doing business in the Australian resources group also have a bullish future with China moving forward again. Wishbone Gold (WSBN) has substantial gold and silver holdings in Australia. Like other commodities, gold (GLD) and silver (SLV) have been down in market action since last November.

This should all change with the Chinese economic growth engine beginning to hit on all cylinders again. China is the world's largest consumer of many commodoties, ranging from copper (JCC) to coal (KOL). For some industrial commodities, China consumes almost half of the world's production.

It is the same with gold, too.

China is the second largest consumer of gold in the world, barely trailing India. The central bank of China has also been a net buyer of gold. As China is the world's second largest economy with the most people, it is likely to supplant India as the biggest buyer of gold in the world now that growth is surging again. Research from the Peterson Institute for International Economics already has China as the world's largest economy by personal consumption.

That is very bullish for Wishbone Gold PLC and others operating in Australia.

China and Australia have a very close trading relationship. Obviously, the gold fields of Queensland are much nearer than those of South Africa. In addition, the Australians have always been more welcoming of business from China than many other nations.

This commerical activity is sure to involve greater purchases of gold due to higher inflation in China as a result of stimulus packages from Beijing. In addition, the quantitative easing measures of global central bankers has also debased fiat currencies, which will inevitably increase the purchases of gold. There is also a distrust of the government in China, which has many moving wealth into gold as a traditional safe haven asset for flight capital.

For Chinese consumers and companies, natural resoures entities operating in Austrailia are the logical supplier for much of the needs. Logistics and established relationships are the most obvious reasons. The proven ability of Alumina, Wishbone Gold PLC, BHP Billiton, and others to meet the commodity demands of China are other important reasons for the positive future for these firms.

The analyst community agrees with the bullish outlook for the Austrailian natural resources sector.

Beaufort Securities just reaffirmed its speculative buy rating for Wishbone Gold PLC in early September. BHP Billiton was recently upgraded in August by Zacks's Research. In July, JP Morgan (JPM) raised its outlook for Alumina.