Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24
How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - 17th Feb 24
Why Rising Shipping Costs Won't Cause Inflation - 17th Feb 24
Intensive 6 Week Stock Market Elliott Wave Training Course - 17th Feb 24
INFLATION and the Stock Market Trend - 17th Feb 24
GameStop (GME): 88% Shellacking Yet No Lesson Learned - 17th Feb 24
Nick Millican Explains Real Estate Investment in a Changing World - 17th Feb 24
US Stock Market Addicted to Deficit Spending - 7th Feb 24
Stocks Bull Market Commands It All For Now - 7th Feb 24
Financial Markets Narrative Nonsense - 7th Feb 24
Gold Price Long-Term Outlook Could Not Look Better - 7th Feb 24
Stock Market QE4EVER - 7th Feb 24
Learn How to Accumulate and Distribute (Trim) Stock Positions to Maximise Profits - Investing 101 - 5th Feb 24
US Exponential Budget Deficit - 5th Feb 24
Gold Tipping Points That Investors Shouldn’t Miss - 5th Feb 24
Banking Crisis Quietly Brewing - 5th Feb 24
Stock Market Major Market lows by Calendar Month - 4th Feb 24
Gold Price’s Rally is Normal, but Is It Really Bullish? - 4th Feb 24
More Problems in US Regional Banking System: Where There's Fire There's Smoke - 4th Feb 24
New Hints of US Election Year Market Interventions & Turmoil - 4th Feb 24
Watch Consumer Spending to Know When the Fed Will Cut Interest Rates - 4th Feb 24
STOCK MARKET DISCOUNTING EVENTS BIG PICTURE - 31st Jan 24
Blue Skies Ahead As Stock Market Is Expected To Continue Much Higher - 31st Jan 24
What the Stock Market "Fear Index" VIX May Be Signaling - 31st Jan 24
Stock Market Trend Forecast Review - 31st Jan 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

A Whole New World of Gold Demand Is Opening Up... Muslims

Commodities / Gold and Silver 2017 Mar 08, 2017 - 06:12 PM GMT

By: MoneyMetals

Commodities

Most analysis of gold and silver markets tends to be U.S.-centric. However, the next secular trend in precious metals markets may have less to do with U.S. debt, U.S. politics, the U.S. central bank, and the U.S. dollar and more to do with a gigantic new source of demand.

It’s not the 1970s anymore. Back then, big moves in the metals markets were centered on United States. The great gold and silver mania of the late 1970s was driven by inflation fears and a rush of speculative demand. Although coin dealers struggled to keep up, there was no actual global shortage of physical metal, and spot prices crashed after manic buying peaked in January 1980.


Today, it’s a whole new world when it comes to sources of gold demand. Gold prices are still quoted in dollars, but international buying and selling now figures much more prominently in determining those prices.

Over the past four decades, the populations and buying power of Asian countries have soared. As they have become wealthier, they have bought more gold. India is now the world’s number one consumer of gold. India and China together now make up more than half of all world gold demand, according to the World Gold Council.

The recently launched Shanghai Gold Exchange will make China one of the leading players in physically settled gold contracts. No longer does the global gold trade have to go through the New York or London paper markets.

Fast-Growing Muslim World Can Now Turn to Gold as an Investment

Going forward, the fastest growing source of gold demand could come from the Islamic world. Iron-fisted Islamic law imposes strict rules on the types of financial instruments that can be held in compliant accounts. Among the assets that are now permitted are physical precious metals.

The Accounting and Auditing Organization for Islamic Financial Institutions recently approved a new Shariah Standard on Gold. This new standard is expected to be widely adopted this year by Islamic banks, brokerages, and other financial institutions. It will enable gold to be held as an investment asset within Shariah-compliant accounts.

The upshot is that investment demand for gold among Muslims could surge by several hundred tons amounting to tens of billions of dollars. Total Shariah-compliant assets under management are estimated by the Islamic Finance Stability Board to grow to $6.5 trillion by 2020. If clients opted for just a 1% allocation to gold, that would translate into $65 billion – or more than half of annual worldwide gold production.

While the fertility rate of most Western cultures has been declining at an alarming rate, the Muslim population itself is rapidly growing worldwide. According to a report by the Pew Research Center, “if current demographic trends continue, the number of Muslims is expected to exceed the number of Christians by the end of this century.” That would make Islam the world’s biggest religion.

Muslim immigration is obviously a hot-button issue in the United States and Europe. But regardless of whether the West finally decides that enough is enough and puts a cap on Muslim inflows, the worldwide Muslim population will keep expanding. That’s ensured by the comparatively high rates of Muslim fertility.

Higher numbers of Muslims, plus rising standards of living in Asia, means non-Western demand for gold and silver can be expected to go up for the foreseeable future.

Supply Will Struggle to Keep Up with Rising Global Gold Demand

Supply, meanwhile, will be difficult to expand. Higher prices could cause new mines and new mining technologies to come online down the road. But for now, the tough economics of the mining industry point toward the likelihood of reduced output over the next few years.

All the gold dug out of all of the mines around the world in a year would amount to an 18-foot cube. That would be enough gold to make one person insanely wealthy! But it wouldn’t be anywhere near enough for each of the world’s 7.4 billion people to have so much as an ounce of gold... or even half an ounce... or even a tenth of an ounce. In fact, total world gold production amounts to less than 1/70th of an ounce per person.

Of course, there remains large above-ground gold stockpiles that could theoretically be sold into the market to meet rising demand for things like jewelry, coins, and gold-backed investment products. The largest gold stockpiles belong to governments and central banks. And lately, they’ve been more inclined to accumulate bullion than to sell it.

It would likely take much higher prices to incentivize major gold holders to sell. In the meantime, rising Asian and Islamic demand for precious metals is a major long-term trend that will continue to play out regardless of where the U.S. economy heads. The impact on prices may not be immediate or even detectable on any given day, but over time it will be significant.

Stefan Gleason is President of Money Metals Exchange, the national precious metals company named 2015 "Dealer of the Year" in the United States by an independent global ratings group. A graduate of the University of Florida, Gleason is a seasoned business leader, investor, political strategist, and grassroots activist. Gleason has frequently appeared on national television networks such as CNN, FoxNews, and CNBC, and his writings have appeared in hundreds of publications such as the Wall Street Journal, Detroit News, Washington Times, and National Review.

© 2017 Stefan Gleason - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

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