Why is Gold Moving Up-Possible Explanations
Gold has been in a bull trend for a few years now, and the press comes out with new stories and explanations everyday on possible reasons for this move. Let's go over some of the believable, and unbelievable ones.
1. Strength in India and China India and China have come out on top with their gargantuan economies growing at 7+% over the last couple of years. Demand for all commodities, basic materials is shooting up because of extensive buying by these guys. Crude is also moving higher because of Indian and Chinese buying. Note the eerie similarity between Gold and Crude charts.
2. Japanese economy is recovering Japan is in recovery mode, and the Japanese like to buy Gold jewelry.
3. The Middle Eastern States are minting money with higher Crude Oil Prices. They are allocating a portion of their winnings to buying Gold and Gold Stocks. See how Crude Oil and Gold prices are moving higher hand in hand. The middle east also has a fascination for Gold jewelry.
4. Central banks all over the world have realized the potential pitfalls of depending too much on the dollar-the USA is not the only country anymore on the global scene. A united EU is a good functioning economy, and so are emerging players like China, India and Brazil. Central banks have stopped or slowed down their Gold sales, and some even are buying them (e.g. Argentina).
5. Tensions in the Middle East and Iraq are moving Gold up, as a safe haven. This is a flimsy explanation, Middle East has had problems for the last 40 years. The market has factored this in.
6. The collapse in the Gold Prices in the late 90's led to extremely low allocations for new mine development activities, resulting in a huge demand-supply gap. Mining capacity won't catch up with demand for years to come, and Gold will keep going up until then.
Of these, I favor 1) and 6). It could be a combination of them all.
The growth of India and China is pushing up all commodities, and Gold is just one of them.
Gold exploration has been pretty low in the last decade, leading to higher prices in this decade.
Sanjay John G.
PS If you are reading this blog from the US and want to learn about US Real Estate Investing, especially using Real Estate Investment Trust (REIT) Stocks, check out my blog:
http://fonisol.com/blogs/reit-stocks/reit-stocks.htm
1. Strength in India and China India and China have come out on top with their gargantuan economies growing at 7+% over the last couple of years. Demand for all commodities, basic materials is shooting up because of extensive buying by these guys. Crude is also moving higher because of Indian and Chinese buying. Note the eerie similarity between Gold and Crude charts.
2. Japanese economy is recovering Japan is in recovery mode, and the Japanese like to buy Gold jewelry.
3. The Middle Eastern States are minting money with higher Crude Oil Prices. They are allocating a portion of their winnings to buying Gold and Gold Stocks. See how Crude Oil and Gold prices are moving higher hand in hand. The middle east also has a fascination for Gold jewelry.
4. Central banks all over the world have realized the potential pitfalls of depending too much on the dollar-the USA is not the only country anymore on the global scene. A united EU is a good functioning economy, and so are emerging players like China, India and Brazil. Central banks have stopped or slowed down their Gold sales, and some even are buying them (e.g. Argentina).
5. Tensions in the Middle East and Iraq are moving Gold up, as a safe haven. This is a flimsy explanation, Middle East has had problems for the last 40 years. The market has factored this in.
6. The collapse in the Gold Prices in the late 90's led to extremely low allocations for new mine development activities, resulting in a huge demand-supply gap. Mining capacity won't catch up with demand for years to come, and Gold will keep going up until then.
Of these, I favor 1) and 6). It could be a combination of them all.
The growth of India and China is pushing up all commodities, and Gold is just one of them.
Gold exploration has been pretty low in the last decade, leading to higher prices in this decade.
Sanjay John G.
PS If you are reading this blog from the US and want to learn about US Real Estate Investing, especially using Real Estate Investment Trust (REIT) Stocks, check out my blog:
http://fonisol.com/blogs/reit-stocks/reit-stocks.htm
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