U.S. gold futures rose toward $1,020 an ounce on Tuesday, gaining 1 percent as a sharp deterioration of the dollar’s value triggered investment buying in gold as a currency hedge.

GOLD

* December gold GCZ9 settled up $10.60, or 1.1 percent, at $1,015.50 an ounce on the COMEX division of New York Mercantile Exchange.

* Ranged from $1,004.20 to $1,021.50.

* Gold boosted by a tumbling dollar. Deteriorating sentiment toward the U.S. currency pushed FX dealers to sell it ahead of a Federal Reserve meeting and Group of 20 summit this week. U.S. dollar index .DXY fell almost 1 percent against a basket of major currencies. [USD/]

* Gold’s rally primarily was driven by its inverse relationship with the U.S. dollar – Frank Holmes, chief executive officer and chief investment officer of U.S. Global Investors, a commodities-focused fund manager.

* Gold could still go higher in deflationary economy because of currency devaluation as a result of deficit spending and a strong resolve to keep interest rates negative – Holmes.

* Gold, which is priced in the U.S. currency, usually goes up with a falling greenback. Gold is also seen as an alternative to holding dollar-denominated assets and other major currencies.

* Gold’s status as an investment continues to rise. The world’s largest gold-backed exchange-traded fund, the SPDR Gold Trust GLD, said its holdings stood at 1,101.735 tonnes as of Sept. 21, up from 1,086.479 tonnes the previous day.

* Lack of gold jewelry demand, however, could limit further gains – traders.

* India’s gold imports in 2009 may fall to their lowest level since trade was liberalized 12 years ago as high prices have put off buyers in the world’s biggest market for the metal – top Indian importer. [ID:nBOM512227]

* Worries about imminent shorter-term traders also dragged prices lower, as trade data showed that speculators held a record net long position in U.S. gold futures.

* U.S. crude futures rebounded above $71 per barrel on improved sentiment for demand and a weaker dollar. [O/R]

* Gold-to-oil ratio at 14.21, down from the previous session’s 14.41.

* COMEX estimated final volume at 96,316 lots.

* Spot gold XAU= at $1,013.25 at 2:32 p.m. EDT (1832 GMT) versus $1,002.55, which was the previous session’s late New York quote.

* London afternoon gold fix XAUFIX= was at $1,014 an ounce.

SILVER

* December silver SIZ9 finished up 23.5 cents, or 1.4 percent, at $17.115 an ounce, up with gold.

* Range from $16.830 to $17.345.

* COMEX estimated final volume at 21,997 lots.

* Spot silver XAG= was at $17.07 versus its previous finish of 16.80 an ounce.

* London silver fix XAGFIX= at $17.24 an ounce.

PLATINUM

* October platinum PLV9 ended up $17, or 1.3 percent, at $1,339.20 an ounce on the back of stronger global equities markets.

* Spot platinum XPT= was at $1,329 compared with its previous finish of $1,315.50.

PALLADIUM

* December palladium PAZ9 closed up $3.25, or 1.1 percent, at $302.40 an ounce.

* Spot palladium XPD= was at $300 against its previous close of $294.50.

It is reported that the World Gold Council is planning what it calls an unprecedented campaign to encourage gold sales in rural China, where higher farm incomes and government stimulus programs are feeding demand.

“Rural areas showed better-than-expected demand for gold in the first half in China,” said Gerry Chen, business development manager for China with the World Gold Council.

China is the only country in the world where the demand for gold jewelry has risen in the aftermath of the world financial crisis, the council said. Sales on the mainland rose 9 percent in the first half, while global demand contracted 8 percent.

But demand in China is unevenly spread.

“Gold demand was flat in Beijing, Shanghai and other first-tier cities, while consumption in rural areas showed surprisingly strong growth,” Chen said.

He declined to break down figures and said details of the rural marketing campaign had yet to be finalized.

Throughout China, gold is considered a symbol of good fortune. In rural areas in particular, gold is used to celebrate weddings.

Prosperity is returning to many hinterland areas, where household spending and consumer sentiment are rising faster than in large urban centers.

About 59 percent of rural households said they planned to increase spending in the next 12 months, compared with 41 percent in big cities, according to a MasterCard survey released this week.

China has increased spending in rural areas as part of a comprehensive stimulus program to boost domestic consumption and counter a slump in exports, the nation’s traditional engine of growth.

“The second half will maintain the momentum,” said Chen. “It was hustle-bustle at the Shenzhen International Jewelry Fair last week. Retailers stood in long lines to do business.”The annual fair is deemed to be a benchmark for China’s jewelry market. The busier the show, the bigger the sales going into the Chinese New Year. The fourth quarter is traditionally the high season for gold sales in China.

The council wants to increase that proportion to 15 percent by 2012. While it maps plans to stimulate sales in the nascent rural gold market, the council is expanding its urban campaign to promote high-end, designer 24-carat jewelry, which now accounts for 5 percent of China’s total gold jewelry consumption.

According to China Ministry of Industry and Information Technology (MIIT), it is planning to modify the detail measures of the Steel Industry Reinvigorating Plan with greater attention to be paid towards considering the role of the market.

Presently, MIIT officials are doing research in steel mills throughout the country, including large plants and small and midsize ones.

Unveiled earlier this year, the Plan for Reinvigorating the Steel Industry is a document to guide the adjustment of the industry structure and eliminate obsolete and inefficient production capacity. Impending specifications will be the standard for the structural adjustment of China’s steel industry in the coming three years.

“In the long run, China’s steel industry will have to shift from making average quality products to those of top quality,” said Liu Yongchang, vice director of the Steel Department under the former Ministry of Metallurgical Industry. “However, the current consumption structure won’t change before China is completely industrialized and changes the growth mode of driving investment.”

According to Mr. Liu, the guiding policies for China’s steel industry should match the actual demand structure of China’s steel market.

According to two government officials, China may purchase gold from the International Monetary Fund in order to diversify foreign reserves and increase its influence in the international organization.

President Hu Jintao will put the idea forward while attending the G20 summit to be held in Pittsburgh this month, the sources said.

China’s gold reserve increased to 1,054 tons by the end of 2008 from 600 tons in 2003, Hu Xiaodong, head of China’s State Administration of Foreign Exchange, said early this year.

The country has been seeking ways to diversify its foreign reserves away from the current majority held as US dollar assets.

China’s foreign reserves totaled 2.13 trillion dollars at end-June this year, adding 185.6 billion dollars from beginning of this year.

On September 19, the IMF announced that it will offload 403.3 tons of gold reserve to relieve financial pressures and provide more loans to poor and developing countries.

Currently, the International Monetary Fund, the third largest gold holder next only to the US and Germany, holds about 3,200 tons of gold reserves.

According to the data from the General Administration of Customs showed on Tuesday, China’s imports of refined copper fell for a second straight month to 219,731 tonnes in August from 292,226 tonnes in July.

Imports of primary aluminium to China, the world’s top copper and aluminium consumer, dropped to 117,213 tonnes in August from 131,724 tonnes in July.

Chinese copper and aluminium prices stayed lower than the cost of imports last month following increased domestic stocks resulting from record inflows in the first half of the year, cutting spot buying from merchants and speculators.

It is said from Zhang Dechen, who is a researcher on the steel industry from the Raw Materials Department under China’s Ministry of Industry and Information Technology (MIIT) that The publication of the “Rules for the Reorganization of China’s Steel Industry” being drafted will be delayed until after October as earlier expected.

An earlier statement had said the rules would be published in September.

Zhang also disclosed that the MIIT is also developing a plan for eliminating obsolete and inefficient production capacity, but did not announce a specific timetable.

China’s steel industry has become less concentrated in recent years, according to Zhang. In 2008, the country’s top nine steel plants produced 40.7 percent of the national total output, but the figure dropped by two percentage points between this January and August. China’s top three steel makers, Baosteel, Wugang Steel and Anshan Steel, together own 17.3 percent of the national total output, while the top four of the European Union have 73 percent, the top four of Japan cover 75 percent, and the top two of South Korea 85 percent.

Some market insiders say the long steel products needed for the infrastructure construction the government has invested in have mostly been provided by small and midsize steel plants this year.

Zhang said that the plan for eliminating obsolete and inefficient production capacities would emphasize the role of the government, contain measures for monitoring and controlling the steel mills for environmental protection, and require the banks to strictly limit loans for projects deemed inefficient.

It is said that the Chinese market is becoming increasingly important to international iron ore giants.

The Anglo-Australian mining company Rio Tinto said Monday that its 750 million US dollar sale of iron ore assets, including the Corumba mine to Brazilian competitor Vale, has been approved by the Brazilian Defense Council.

Rio sold the core assets not only to repay debts and reduce liabilities, but also because it has gradually lost its advantage in the global iron ore market.

The case in which Rio employees were accused of obtaining commercial secrets and bribery has given rise to Vale’s market share in China. Apart from large advertising campaigns in China’s mainstream media, Vale even planned to touch down on the Chinese stock market.

CSLA’s China chairman Wu Changgen said on Monday that many multinational companies including Vale have inquired about A-share listings and intend to list on the international board on the Shanghai Stock Exchange.

Statistics show Brazil’s iron ore exports to China came to 82.620 million tons during the first half of the year, up 28.06 million tons from the same period last year. Its exports to Japan, South Korea, and the European market respectively declined 8 million tons, 1 million tons, and 30 million tons.

It is said from ecperts that China has taken 71 percent of Brazilian iron ore exports to date. The Chinese market is critical to Vale’s success on the global market.

It is said from Xiong Weiping (chairman of Chinalco, parent of Chalco) at the World Economic Forum concluded in the last weekend that About 20-30 percent of China’s aluminum production capacity is periodically in excess.

Production capacity of both alumina and electrolytic aluminum is surplus by between 20 to 30 percent in China, but the surplus is not caused by last year’s economic slowdown and decreased demand, Xiong noted.”It is periodical,” Xiong said, “As Chinese economy recovers, and its urbanization and industrialization speed up, the country will definitely demand more base metals.”

Xiong is optimistic about the aluminum prices in the long run. “The aluminum industry is a sunrise industry. Aluminum will be widely used in energy saving, clean production, environmental protection and circular economy.”

But the short-term price trend still depends on whether China’s economy will come to real stabilization soon, according to Xiong.

Xiong negotiations with power generators for direct power supply will continue and there is still no exact timetable.

Although Chinalco’s investment in Rio Tinto fell halfway, Xiong Weiping states that the company will stick to its policy of investing in rich resources and following the market closely.