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Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Why You Should Be A Gold Bull

Commodities / Gold & Silver Sep 19, 2007 - 01:59 PM GMT

By: David_Urban

Commodities

Just the facts:

  • Gold demand in the 2nd Q of 2007 rose 19% YoY to 922 tonnes.
  • Gold jewelry demand in the 2 nd Q of 2007 rose 29% YoY to 675.1 tonnes.
  • India was the largest consumer of gold in the 2 nd Q of 2007 with 240 tonnes, compared to 166.4 tonnes a year ago.
  • Total gold supply for the 2nd Q of 2007 was down 7% YoY at 840 tonnes, down from 902 tonnes.
  • Mine output is at a 10 year low.
  • Gold margin for futures has been increased.

The investment banks are now jumping on the bandwagon with Lehman Brothers, JP Morgan, and HSBC all recommending that investors increase their weightings to commodity stocks. Their argument is that miners have been producing at capacity to meet rising demand from China for metals and raw materials.

Back in November of 2001 gold was at $271 per ounce and oil was $18 per barrel. Excellent returns have been made so far and there are tremendous gains coming in the near future as the fiat system begins to break down as well as increasing demand from India , China , and the Middle East .

Central banks in China , South Africa , Russia , and Qatar are all diversifying their foreign reserves to include gold as the losses from holding Treasury securities begin to pile up.

For those who are looking for gold to hit $800/oz this year, you may have to wait until next year but patience is in order. Take a moment to look at the year end closing prices and returns below:

September 18, 2007 spot price of $723.21, a return of 13.77% so far this year.

2006 year end gold price of $635.70, a return of 23.92% during 2006.

2005 year end gold price of $513.00, a return of 17.77% during 2005.

2004 year end gold price of $435.60, a return of 4.40% during 2004.

2003 year end gold price of $417.25, a return of 21.74% during 2003.

2002 year end gold price of $342.75, a return of 23.96% during 2002.

2001 year end gold price of $276.50.

The gold bull market has been alive and well since 2001. We may see gold get hit one more time before it permanently breaks out above $700 later this year. Indian and Middle Eastern investors have been hesitant to pay more than $700 for gold and back away when the price hits that mark. The question will be when do they capitulate and help push the price up to test all time high? I believe we will see that in the first half of next year.

Let me leave you with a couple of quotes from Barrick's CEO, Greg Wilkins:

"What we have is inflation plus lower interest rates, and that's not something that we've seen before, and I think that's going to be very bearish for the ( U.S. ) dollar, which is conversely good for gold."

"I think it's a perfect storm, to be quite honest with you."

Source: Gold Field Mineral Services, onlygold.com, Reuters

By David Urban

http://blog.myspace.com/global112

Communications are intended solely for informational purposes. Statements made should not be construed as an endorsement, either expressed or implied. This blog and the author is not responsible for typographic errors or other inaccuracies in the content. We believe the information contained herein to be accurate and reliable. However, errors may occasionally occur. Therefore, all information and materials are provided "AS IS" without any warranty of any kind. Past results are not indicative of future results.

PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY FOR GAIN WHEN INVESTING IN THE STOCK, BOND, AND DERIVATIVE MARKETS. WHEN CONSIDERING ANY TYPE OF INVESTMENT, INCLUDING HEDGE FUNDS, YOU SHOULD CONSIDER VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS: OFTEN ENGAGE IN LEVERAGING AND OTHER SPECULATIVE INVESTMENT PRACTICES THAT MAY INCREASE THE RISK OF INVESTMENT LOSS, CAN BE ILLIQUID, ARE NOT REQUIRED TO PROVIDE PERIODIC PRICING OR VALUATION INFORMATION TO INVESTORS, MAY INVOLVE COMPLEX TAX STRUCTURES AND DELAYS IN DISTRIBUTING IMPORTANT TAX INFORMATION, ARE NOT SUBJECT TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE INVESTMENT MANAGER.

Before making any type of investment, one should consult with an investment professional to consider whether the investment is appropriate for the individuals risk profile.

David Urban Archive

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