Archives: 2007 June

If you are a gold bug or one who has a keen interest in gold because of its beauty, usefulness, monetary value, or for any other purpose you will love the World Gold Council website.

You are unlikely to find as much accurate information about the production and demand for gold at any other Internet or off the net location.

Probably, even thought gold has more than doubled in the past three years, we are still in the fairly early stages of what will be a historic bull market. After a long drawn out consolidation in the $600 to $675 price range gold will likely eventually break out to the upside and exceed it’s all time highs at about $875 an ounce.

Some gold bug analysis are projecting a market peak at above $2,000 an ounce at the top of this bull market cycle. I know that sounds mighty high but a lot has changed since the previous market peak more than 25 years ago.

With physical demand from India and China soaring the gold bug analysis may well be right. We will soon see. If there is to be a breakout it will likely happen late this year or early in 2008.

In the meantime, there is a lot of information to digest at the World Gold Council website. If you love gold you are going to spend a lot of time at that site.

The growth of the Chinese economy has been nothing short of amazing. The growth rate has been around the 10% annual rate level for the past several years.

This high rate of growth has fueled a massive demand for industrial commodities.

According to the International Monetary Fund from 2002-05, China accounted for 48% of the increased demand for aluminum. This means that China alone absorbed 48% of the increased world production of aluminum over this time period.

Take a look at the short table below, which shows the percentages for other commodities:

Aluminum, 48%
Copper, 51%
Lead, 110%
Nickel, 87%
Steel, 54%
Tin, 86%
Zinc, 113%
Oil, 30%

Clearly as goes China so goes the market for many commodities, When you trade commodities today you had better keep a watchful eye out for how well the Chinese economy is performing.

Any pronounced slow down in China’s rate of economic growth would cause a rapid decline in commodity price levels, especially in industrial commodities.

Do you want to multiply your money fast?

No problem. Just move to India and collect one rupee coins, melt them down and convert the metal into razor blades.

Indian coins are worth up to 35 times as much as razor blades as they are as coins. This leaves a huge profit margin for those involved in the illegal business of melting down coins.

As you might expect illegal or not such profit margins attract a lot of interest. Coins are in short supply in many parts of India.

Originally, the Indian coins were smuggled into Bangladesh and then melted down and turned into razor blades. More recently enterprising Indians have themselves been melting the coins down and then smuggling the finished product into Bangladesh.

The boom in commodity metal prices caused by rapid growth nations like China and India have caused similar problems for governments in other nations.

Copper is salvaged from melted down stolen telephone lines. Metal manhole covers are stolen from city streets and sold as scrap metal. Cast iron water pipes are ripped from roadways.

As long as huge profit margins remain from such activities the authorities are going to be hard pressed to stop the illegal practices.

This is not only true in countries, like India, that in spite of rapid economic growth still has hundreds of millions of citizens living in poverty, but in developed countries, like the United States, that has a surprising number of homeless and low income people trying to survive one way or the other.