The billions of increasingly affluent gold investors in Asia are the linchpin of the global world demand and pricing for the precious metal gold. Pricing in economics is always the intersection of supply and demand curves. In this case the demand curve has been pushed way up. Currently China and not the previous heavyweight Japan is the most important determinant in this trendline. In 2006 China gold consumption alone rose by 17.45 %. Although China’s indigenous gold production has currently expanded and grown up 26.55 % to 21 tonnes in Feb for example demand is still nowhere to be satisfied. This increased supply in China of gold production is a direct result of the increased local demand and pricing for the precious metal and metal. Projected Chinese demand is said to be 460 tonnes in 2008. At that rate at least 100 - 175 tonnes will have to be imported from abroad. The Shanghai Stock Exchange Composite Index is up greatly this year , as well as even greater projections in 2008. Hence rising wealth and prosperity among Asian Chinese investors can lead to even much tighter gold supplies , greater demand with the same supply and hence much higher gold prices and gold pricing trend lines in the currency exchange as well as precious metal markets.
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Sphere: Related ContentIt can be said that there are “Seven Reasons why gold should surge”. Indeed there are many more valid reasons for major increases in the price of precious gold metals versus currencies.
Economics , simply supply and demand are the ultimate drivers of long term price trends. Economics all comes down in the end to “Supply and Demand”. If a worldwide surplus of a given commodity exists prices fall. If supply exceeds demand in the marketplace- you can be sure that prices will fall. If a shortage or a defecit exists , then you can be sure that prices will rise. The level at which the price trades today is not relevant. If it is in a bullish situation where the global demand growth exceeds its global supply growth , then the price will and must rise. Gold as a commodity is in such a situation of demand. Worldwide demand for gold far exceeds its demand.
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Sphere: Related ContentAfter taking a vacation from its secular bear to largely drift sideways in 2005 and 2006 , the dollar is once again proving long dead philosophers correct by testing yet new lows. This is a most important development since most everything and most commodities - oil and petroleum , included are denominated in dollars, not euros or yen. Generally the financial media has stayed away from calling a spade a spade.
Any dollar weaknesses further emphasizes valuations of gold - as a hedge, both in our current financial and currency situation and historically. History repeats itself again. You cannot run away from quite obvious historical truths. For any of a number of reasons , including scarcity , raw weigh , desirability , convenience and portability as well as uses in other fields - gold yet again has shown itself to be the hedge of inflation and continuer of constant real valuation and asset and wealth preservations.
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Sphere: Related ContentThe menancing crash of the U.S. will come after a long time period of debasement. Where it will end no one knows or can determine. It is anyone’s and any currency traders guess or estimate. This is uncharted territory. The U.S. dollar has always been considered as ” good as gold” or even better than gold as a store of wealth.
Generally the route is that the more dollars are printed with a stable non changing pool of gold gold’s piece of the pie increases. The same gold vs more deflated dollars. Although the price of gold remains the same in real terms, the value of each dollar or dollars is deflated. More pieces of paper buy the same item as before the dollar was cheapened and devalued. Welcome to the world of inflation. More dollars chasing the same amount of product.
The general rule of thumb historically , that as a value measurement “basket” of value and valuation that one ounce of gold generally sells at a price equivalent to a man’s well made suit. A high end well suit generally sells for $ 3,000 each. A similar comparison of gold can be made with oil, oil is now trading in the range of $ 100.
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