Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21
China / US Stock Markets Divergence - 10th Oct 21
Can US Save Taiwan From China? Taiwan Strait Naval Battle - PLA vs 7th Fleet War Game Simulation - 10th Oct 21
Gold Price Outlook: The Inflation Chasm Between Europe and the US - 10th Oct 21
US Real Estate ETFs React To Rising Housing Market Mortgage Interest Rates - 10th Oct 21
US China War over Taiwan Simulation 2021, Invasion Forecast - Who Will Win? - 9th Oct 21
When Will the Fed Taper? - 9th Oct 21
Dancing with Ghouls and Ghosts at Alton Towers Scarefest 2021 - 9th Oct 21
Stock Market FOMO Going into Crash Season - 8th Oct 21
Scan Computers - Custom Build PC 6 Months Later, Reliability, Issues, Quality of Tech Support Review - 8th Oct 21
Gold and Silver: Your Financial Main Battle Tanks - 8th Oct 21
How to handle the “Twin Crises” Evergrande and Debt Ceiling Threatening Stocks - 8th Oct 21
Why a Peak in US Home Prices May Be Approaching - 8th Oct 21
Alton Towers Scarefest is BACK! Post Pandemic Frights Begin, What it's Like to Enter Scarefest 2021 - 8th Oct 21
AJ Bell vs II Interactive Investor - Which Platform is Best for Buying US FAANG Stocks UK Investing - 7th Oct 21
Gold: Evergrande Investors' Savior - 7th Oct 21
Here's What Really Sets Interest Rates (Not Central Banks) - 7th Oct 21
CISCO 2020 Dot com Bubble Stock vs 2021 Bubble Tech Stocks Warning Analysis - 6th Oct 21
Precious Metals Complex Searching for a Bottom - 6th Oct 21
FB, AMZN, NFLX, GOOG, AAPL and FANG+ '5 Waves' Speaks Volumes - 6th Oct 21
Budgies Flying Ability 10 Weeks After wings Clipped, Flight Feathers Cut Grow Back - 6th Oct 21
Why Silver Price Could Crash by 20%! - 5th Oct 21
Will China's Crackdown Send Bitcoin's Price Tumbling? - 5th Oct 21
Natural Gas News: Europe Lacks Supply, So It Turns to Asia - 5th Oct 21
Stock Market Correction: One More Spark to Light the Fire? - 5th Oct 21
Fractal Design Meshify S2, Best PC Case Review, Build Quality, Airflow etc. - 5th Oct 21
Chasing Value with Five More Biotech Stocks for the Long-run - 4th Oct 21
Gold’s Century - While stocks dominated headlines, gold quietly performed - 4th Oct 21
NASDAQ Stock Market Head-n-Shoulders Warns Of Market Weakness – Critical Topping Pattern - 4th Oct 21
US Dollar on plan, attended by the Gold/Silver ratio - 4th Oct 21
Aptorum Group - APM - High RIsk Biotech Stocks Buy, Sell, Hold Investing Analysis for the Long-run - 3rd Oct 21
US Close to Hitting the Debt Ceiling: Gold Doesn’t Care - 3rd Oct 21
Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
Original Oculus VR HeadSet Rift Dev Kit v1 Before Facebook Bought Oculus - 3rd Oct 21
Microsoft Stock Valuation 2021 vs 2000 Bubble - Buy Sell or Hold Invest Analysis - 1st Oct 21
How to profit off the Acquisition spree in Fintech Stocks - 1st Oct 21
�� Halloween 2021 TESCO Shopping Before the Next Big Panic Buying! �� - 1st Oct 2
The Guide to Building a Design Portfolio Online - 1st Oct 21
BioDelivery Sciences International - BDSI - High RIsk Biotech Stocks Buy, Sell, Hold Investing Analysis for the Long-run - 30th Sep 21
America’s Revolving-Door Politics Behind the Fall of US-Sino Ties - 30th Sep 21
Dovish to Hawkish Fed: Sounds Bearish for Gold - 30th Sep 21
Stock Market Gauntlet to the Fed - 30th Sep 21
Should you include ESG investments in your portfolio? - 30th Sep 21
Takeda - TAK - High RIsk Biotech Stocks Buy, Sell, Hold Investing Analysis for the Long-run - 29th Sep 21
Stock Market Wishing Away Inflation - 29th Sep 21
Why Workers Are NOT Returning to Work as Lockdown's End - Wage Slaves Rebellion - 29th Sep 21
UK Fuel PANIC! Fighting at the Petrol Pumps! As Lemmings Create a New Crisis - 29th Sep 21
Gold Could See Tapering as Soon as November! - 29th Sep 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The Mega Commodity Move: Why It's Happening

Commodities / CRB Index Mar 29, 2008 - 08:41 PM GMT

By: Aden_Forecast

Commodities Best Financial Markets Analysis ArticleThe precious metals have been soaring. Gold, silver, platinum, palladium… you name it. If it's a metal, it's been booming. The same is true of other commodities too. So are commodities the new bubble? Have they replaced the real estate bubble, which replaced the tech stock bubble, as investors move from one bubble to another? It sure looks like it. But the big difference is that this metals and commodities bubble has a lot further to go. Why?


THE PERFECT STORM

Basically, the perfect storm has been gathering and it's going to fuel a mega rise that will likely last for years to come. We've often discussed the most important reasons why but since these markets have been picking up steam, we'll review these basics again.

Most important is China and other growing nations, which are keeping demand and prices super strong. But also important are spending, soaring global money creation, inflation, the falling U.S. dollar and international tensions. But let's take China first…

China power

China 's growth has been astounding at over 9% each year for more than 25 years. During that time, China has lifted 300 million people out of poverty and it's quadrupled the average income.

This is the fastest economic growth in recorded world history. Many felt it couldn't last, but year after year it has, and it's going to continue.

Since wages are higher in urban areas, 500 million rural Chinese are expected to move to the cities over the next couple of decades in search of the good life that former migrants have already found. This growing middle class is proudly spending money on homes, cars and other consumer goods.

Retail sales, for instance, recently soared 20% and China has become the world's second largest oil consumer. This huge demand for all things, from food, to oil, gasoline, metals and other commodities has been one of the main factors driving these markets higher.

The Chinese government's top priority is to close the gap between rich and poor. And they want to make a big splash on the world stage as a major power during this year's Olympics. But something more important is also happening.

As Time magazine points out, comparing China to the U.S. , China is cramming two important eras into one. The post World War II prosperity that fueled the flight to the suburbs is coinciding with the 19th century Industrial Revolution that lured people from the farms to the cities.

This is powerful stuff. Demand for everything is huge and there's no end in sight. This reinforces that the mega commodity uptrend will continue.

Demand growing

That's especially true combined with another source of growing demand, which is new money looking for good returns. With stocks and real estate down, the metals and commodities have become increasingly attractive, and with good reason.

The metals have gained between 12% and 30% so far this year. Commodities are up between 9% to 26%. These markets have strongly outperformed all other investments. They are also stronger than any currency, and with the U.S. dollar super weak at new record lows, it makes the metals even more attractive.

Supply limited

Then there's the supply factor, which is critical as well. While demand is soaring, supply is limited. It's also consistently threatened by international tension or internal mishaps.

Considering it takes many years to develop new mines, this supply picture is something that's not going to change quickly. The recent electricity shortage in South Africa , for instance, drove many metals prices sharply higher because miners simply couldn't work and supply was therefore disrupted.

Also, don't forget that events in areas rich in natural resources, like the Middle East, Russia, Nigeria, Venezuela and many other places, could push the price of metals, oil and other commodities sharply higher in a heartbeat, depending on what happens in these countries. Basically, world tensions are truly a big wild card.

Spending & money: Out on a limb

A real biggie, however, is spending and money creation. That's the cause of inflation and there's no end in sight here either.

Spending is skyrocketing. The military budget alone will be the biggest since World War II. The baby boomers are now starting to retire and since 20 million of these upcoming retirees don't have enough money to retire on, it's going to balloon spending to far greater levels in the years ahead.

Meanwhile, money is flowing like mad all over the world. Money supply is up 16% in the U.S. but it's even more in other countries… it's soaring 42% in Russia , 21% in India , 18% in China and so on.

And with the whole world worried about a U.S. recession, as well as the domino effects of the subprime mortgage meltdown, which has already tallied up losses of around $200 billion (so far only half of what's expected), the money's going to keep flowing, all in a concerted effort to avoid a recession at all costs.

You see, a recession could turn into a deflation, accompanied by massive bank failures, and that's something no one wants. Sure, all this money is fueling inflation and the commodity boom. And yes, lower interest rates are making the U.S. dollar super unattractive and driving it to new all time record lows, but low rates will help the economy.

The bottom line is that this inflation option is a whole lot better than the deflation option, and that's what the Fed and the world's central banks have chosen to do. They really have no other choice.

Inflation growing

Remember, gold has always been an inflation hedge. With money flowing, oil above $100 and commodity prices soaring, inflation is surging too. It's moving up at the fastest pace in 26 years, which is not surprising when you see the CRB commodity index hitting record highs (see Chart 1 ). This is also making the precious metals very appealing and it's one of the most important components in this overall big picture ( Chart 2 ). So despite normal ups and downs, the major trends are clearly up, and there's no reason to believe that's going to change.

 

 

HAVE ALL COME TOGETHER

That's the perfect storm in a nutshell. All these factors have come together at the same time, and they're extremely bullish for gold, the other metals and commodities. These are the reasons why the metals and commodities markets are rising and why they'll keep rising.

Interestingly, these factors are also coinciding with the 200 year commodity cycle, in which bull market upmoves have averaged between 17-22 years. Currently, we're only seven years into the current bull market, so this too coincides with the fundamentals, reinforcing that these rises still have years to run.

That's why we've continued to stress keeping a large portion of your investments in gold, silver and their shares. No investments have been better over the past few years and we feel strongly that these markets will remain winners.

We wouldn't trade these markets and this month's strong upmove illustrates why. Just plan to stay with the mega upmove for the long haul. Essentially, the storm is getting stronger and that's not when you want to be jumping ship.

By Mary Anne & Pamela Aden

Mary Anne & Pamela Aden are well known analysts and editors of The Aden Forecast, a market newsletter providing specific forecasts and recommendations on gold, stocks, interest rates and the other major markets. For more information, go to www.adenforecast.com

Aden_Forecast Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

mark
04 Apr 08, 06:05
Perfect Storm -Trashing USA

Only if we had another 60,000 factories to send to China, then we could be screwed even twice as much... Cliton and Bush will get all the credit for trashing the USA, but it was you and me for buy all that cheap crap from China...


wayne
04 Apr 08, 09:04
The Mega Commodity Move: Why It's Happening

Get ready for the "reversion to the mean" on commodity proces. It has already started. Take today's prices and reduce by 50% and that is where they will be in the next 18 months.


abubakkar
09 Apr 08, 12:51
Blame it on...Bilderberg et al!

Blame it on Bilderberg,CFR,Trilateral Commission,Royal Institute For International Affairs........Yes the International Bankers...

For starters please visit:-

http://www.bilderberg.org


Post Comment

Only logged in users are allowed to post comments. Register/ Log in