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My view is that commodities
in general are on a very strong growth path both in price and investment, we are 5 years in to a 25 year BOOM so it has
only just started.
In the past we have been
talking of expansion of demand in Europe, Asia, UK,
USA
and other smaller economies which is still going on
but at a normal rate. Now we are talking of a MAJOR population demand from China and India
as well as Russia
and the stronger Asian economies which DWARF the populations who in the past
have been making up the demand side of the equation. Commodities are becoming
scarce as there has not been enough investment in NEW deposits either in
Metals or Energy as there has always been enough to go round, now that is
changing rapidly and investments are being made in new areas but most of the
easy deposits have been found and the supply from these deposits is running
out/down.
So
to sum up COMMODITIES are in a MAJOR BOOM CYCLE .
The problem is really with
the market and the way in which it has changed over the past 20 or 30 years
and the players in the market. In the old days it was the producers and the
consumers which meant it was really quite easy to predict demand and supply. Today
we have vast amounts of FIAT currency playing the market through HEDGE funds,
futures ,options and other unusual and in many cases
unexplainable derivatives. This is an unreal market and distorts the supply
– demand cycle and traders who just look at graphs which go up and down
have unreal expectations and don’t even know what the commodity or
product they are playing with is used for, a total ROULETTE WHEEL which is
extremely dangerous as it is just speculation and not based on real demand or
supply and the piper must be paid at some stage because as you are aware
there are very many SHORT positions in precious metals and other commodities.
I have been told that one URANIUM investment group on its own purchased
enough Uranium to push up the price by $ 8 so that is the type of action we
have in the market and have to worry about, what will happen when they try to
sell?.
The costs are going up for
most miners and that in itself will create higher prices for the different
commodities in time as some will close their mines if they can not make a
profit but the demand will still be the same or more in my model, not enough
product will come to the market therefore eventually pushing up the price and
the mine will reopen.
Gold and Silver will continue
to be the investment haven for over 2/3 rds of the
worlds population who are increasing their wealth in FIAT dollar terms but
have always relied on Gold and Silver as real money. Demand ( for Gold and
Silver ) is and will explode in coming years as more real wealth is
transferred from West to East which is happening even as we speak and is
increasing at an alarming rate ( the US deficit !! ).
The investing public in America
the largest investment group in the world have been continually told that
Gold is not the thing to invest in but borrow and invest in Houses, the stock
market , technology, service industries and
derivatives . They do not realize the risks they are taking and have been
caught in the FIAT currency round robin which should continue for another few
years. But the Commodity situation is going to become stronger and Gold and
Silver will appreciate strongly over coming months and years as the
edge/strength comes off the US dollar and interest rates become stronger
resulting in more uncertainty about house prices and overall demand in the US. There
will be a gradual flight to quality and security.
All the above goes out the
window if we have a major DERIVATIVE crash , I
believe this is a very real problem and if another LTCM situation develops
then I don’t think the authorities will be able to contain it (
Too Large many TRILLIONS ) and the resulting disaster will see Gold over
$1000 Silver over $100 and the US dollar in free fall for some time. I do not
see a depression as the demand from Asia, China, India and other economies
internally will still be robust and even though the exports to the USA will
suffer these economies have been building their own demand to such an extent
that they will be able to weather the Storm.
John
M. E. Percival
www.Goldsearch.com.au
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