Global miner Rio Tinto said it had an excellent relationship with Chinalco, despite a decision to scrap a proposed $19.5 billion tie up with the Chinese firm on Friday.
    The failed link up between China’s Chinalco and Rio Tinto in Australia was thought by many observers to be at least partly due to shareholders’ fears that Chinalco was trying to increase its leverage in iron ore deals with Rio.
    Now that the tables have turned, and Rio announced a proposed iron ore joint venture with BHP Billiton in Western Australia the Aussies could get the upper hand in determining prices in negotiations with Chinese steel makers, analysts said.
    If the deal goes through, Damien Ma, political risk analyst for Eurasia Group said BHP and Rio would supply roughly 3/4 of China’s iron ore. “That’s enormous.”
    The deal comes amid very contentious iron ore negotitions with the price down sharply in the last six months.
    The Australians’ proximity to China, and therefore greatly lower freight costs, and the significant operating cost reductions from the planned joint venture would certainly give Brazil’s VALE, the world’s largest iron ore producer, “some competitive issues,” as one analyst put it.
    If Rio and BHP  are able to meaningfully reduce their operating costs at a time when they are already competitively advantaged by the proximity to China and the rest of Asia, analysts said it could force VALE to lower their iron ore prices to remain competitive.

It was Goldman Sachs who famously predicted oil prices to reach $200 a barrel last year, but there are a school of bullish investors who forecast a substantial rally in gold.

Take Gold and Energy Advisor, which predicts gold will soon reach $2,500 an ounce (from today's $895) then to $5,000. The Florida-based firm argues that gold is the only asset class that’s not only private (as opposed to state-owned), but also liquid, portable, fungible, divisible, and valuable enough that a small amount can store a massive amount of wealth.

It also argues that of $11.5 trillion stored in offshore accounts and other assets, if one percent were transferred into gold, that would be almost four times the entire annual investment demand for gold.

Perhaps not as bullish, but Investec Asset Management also reckons that gold could perform well in either an inflationary or deflationary environment.

Investec also argues the potential areas of concern for gold investors: an increasing supply of recycled gold and the potential return of the "Goldilocks" scenario, where the economy sustains moderate growth and inflation in a "not too hot, not too cold" environment.

"This Goldilocks economy would completely remove the safe-haven investment case for gold as a form of insurance against inflation or as an alternative currency. Real yields could once again be obtained in cash and bonds, and equities could begin discounting economic growth," it says.

Marilyn Monroe, who sang "Diamonds are a girl's best friend" in the 50s, might be shocked to find out that the value of dimonds has fallen rapidly in the past six months.

According to Nomura, the average best price for to quality 1-Carat diamonds has fallen below $7,000 from hitting a multi-year high near $9,000 in September 2008.

Perhaps gold might grab her attention. The metal has surged towards $1,000 an ounce in the past weeks as investors rushed to seek save-haven gold when stock markets came under renewed pressure.

The recent spate of shark attacks on Australian beaches could mark a turning point in global deflation and signal a change in fortunes for some beleaguered emerging economies, if Nomura strategist Sean Darby is to be believed.

Speaking at a Nomura investors forum, Darby said a chance sighting of a shark on Sydney's famed Bondi Beach three weeks ago made him realise that prices of grain and other soft commodities -- punished of late by global recession fears -- could be due for a rebound.

"I actually saw a shark on Bondi Beach and that made me wonder about the impact of La Nina and how there's a severe drought around the world at a time when many farmers are finding it hard to access credit," said the Hong Kong-based analyst.

The La Nina meteorological phenomenon has been blamed for bringing deep ocean creatures -- such as sharks -- closer to shore and also for a long-running drought that has hit farmers in Australia, China and North America.

Persistent drought could push food prices higher, potentially benefitting soft commodity-producing economies from Vietnam to Ukraine, Darby said.

"This is one area that could disrupt the picture of global deflation that bond markets have," he said.