Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
S&P 500 – Is a 5% Correction Enough? - 6th Dec 21
Global Stock Markets It’s Do-Or-Die Time - 6th Dec 21
Hawks Triumph, Doves Lose, Gold Bulls Cry! - 6th Dec 21
How Stock Investors Can Cash in on President Biden’s new Climate Plan - 6th Dec 21
The Lithium Tech That Could Send The EV Boom Into Overdrive - 6th Dec 21
How Stagflation Effects Stocks - 5th Dec 21
Bitcoin FLASH CRASH! Cryptos Blood Bath as Exchanges Run Stops, An Early Christmas Present for Some? - 5th Dec 21
TESCO Pre Omicron Panic Christmas Decorations Festive Shop 2021 - 5th Dec 21
Dow Stock Market Trend Forecast Into Mid 2022 - 4th Dec 21
INVESTING LESSON - Give your Portfolio Some Breathing Space - 4th Dec 21
Don’t Get Yourself Into a Bull Trap With Gold - 4th Dec 21
GOLD HAS LOTS OF POTENTIAL DOWNSIDE - 4th Dec 21
4 Tips To Help You Take Better Care Of Your Personal Finances- 4th Dec 21
What Is A Golden Cross Pattern In Trading? - 4th Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - Part 2 - 3rd Dec 21
Stock Market Major Turning Point Taking Place - 3rd Dec 21
The Masters of the Universe and Gold - 3rd Dec 21
This simple Stock Market mindset shift could help you make millions - 3rd Dec 21
Will the Glasgow Summit (COP26) Affect Energy Prices? - 3rd Dec 21
Peloton 35% CRASH a Lesson of What Happens When One Over Pays for a Loss Making Growth Stock - 1st Dec 21
Stock Market Sentiment Speaks: I Fear For Retirees For The Next 20 Years - 1st Dec 21 t
Will the Anointed Finanical Experts Get It Wrong Again? - 1st Dec 21
Main Differences Between the UK and Canadian Gaming Markets - 1st Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - 30th Nov 21
Omicron Covid Wave 4 Impact on Financial Markets - 30th Nov 21
Can You Hear It? That’s the Crowd Booing Gold’s Downturn - 30th Nov 21
Economic and Market Impacts of Omicron Strain Covid 4th Wave - 30th Nov 21
Stock Market Historical Trends Suggest A Strengthening Bullish Trend In December - 30th Nov 21
Crypto Market Analysis: What Trading Will Look Like in 2022 for Novice and Veteran Traders? - 30th Nov 21
Best Stocks for Investing to Profit form the Metaverse and Get Rich - 29th Nov 21
Should You Invest In Real Estate In 2021? - 29th Nov 21
Silver Long-term Trend Analysis - 28th Nov 21
Silver Mining Stocks Fundamentals - 28th Nov 21
Crude Oil Didn’t Like Thanksgiving Turkey This Year - 28th Nov 21
Sheffield First Snow Winter 2021 - Snowballs and Snowmen Fun - 28th Nov 21
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold and Silver Bull Market Set to Continue - Six Reasons Why

Commodities / Gold & Silver Mar 09, 2007 - 05:27 PM GMT

By: Aden_Forecast

Commodities

All of the markets have been volatile and the precious metals have not been an exception. These markets, however, remain bullish. Despite the recent downward corrections, the major trends are up.

In fact, this month marks the six year anniversary of gold's bull market. This has led to some concern that these bull markets may be reaching maturity. But the evidence points to the opposite. While nothing is ever guaranteed with the markets, gold and silver really have everything going for them, suggesting these rises have a lot further to go.


...SIX REASONS WHY

There are basically six main reasons why and they remain solidly in force. To briefly recap, these are…

1. & 2. SPENDING AND MONEY

The first two reasons are spending and money. The world is swimming in money and that's the fuel that's been driving money assets and commodity prices up. But the magnitude of what's currently happening has never been seen before in world history.

The U.S. , for example, is the world's largest debtor nation and its debts are so huge it's hard to imagine. Putting it into perspective, it would take $1 million each day for 189,000 years to pay off the U.S. debt and liabilities. Yet the government keeps spending money it doesn't have.

Since the government doesn't want to cut spending or raise taxes to reduce its debt, it simply produces money to cover its expenses, which is what governments throughout history have always done, and this amount is also huge.

Just over the past year, the amount of paper dollars that've been created is equal to half the value of all the gold that's ever been produced worldwide over the past 2,000 years, which is about $2 trillion. If that shocks you, consider that the war in Iraq alone will probably end up costing the equivalent of what all the gold produced in the past 2000 years is worth.

And it's not just the U.S. , other countries are pumping out money like mad too. In Europe , for instance, money has been growing at the fastest rate in 17 years.

3. INFLATION

All this money is the direct cause of inflation, which is our third reason why gold will keep rising. Gold is the primary inflation hedge and it thrives in an inflationary environment.

Inflation has already been rising over the past three years, using official figures. In recent months, it's been picking up steam and even though it slowed this month, that'll likely end up being a temporary blip. Based on alternate inflation numbers, which exclude “gimmicks added to CPI reporting in recent decades,” inflation has been about 10% over the past two years, which is the highest since 1981.

Whatever set of numbers you choose to believe, the late, great Milton Friedman taught that inflation is always a monetary phenomenon. So as spending, debt and money supply grow, so will inflation.

4. WEAK U.S. DOLLAR

All those dollars that're being produced cheapen the U.S. dollar, which is why it's falling. That's our fourth positive for gold since gold and the dollar generally move in opposite directions.

The dollar's been dropping since the early 1970s against the major world currencies when it stopped having a link to gold, becoming instead a floating paper currency. And investors often turn to gold during times of dollar weakness to protect themselves. With the dollar now in a renewed declined, this will continue to keep upward pressure on gold.

Essentially three factors will keep the dollar weak… the massive record U.S. debt, the record U.S. trade deficit due to the higher oil price and low priced Chinese imports, resulting in the unprecedented situation where one country owes piles of money to the rest of the world, and the fact that dozens of countries are cutting back on their dollar reserves, which have declined 16% in the past four years.

5. CHINA 'S GROWTH

The booming growth in China is #5 on our list and this alone will play an important role driving gold and commodities higher in the years ahead.

Over the past 20 years, China has gone from being a rural, agricultural economy to a major world force and one of the largest, fastest growing economies in the world. This is expected to continue for the next 20 years or more.

In all of world history, no country as large as China has grown as fast and strong as China has in such a short time. Tens of millions of Chinese have left their farms and moved to the cities in the biggest human migration ever. And since China is growing so fast, it needs everything as it builds its infrastructure.

China has been buying up something like 50% or more of all the world's cement, steel, tin and other raw materials. They've become the world's second largest oil importer and commodity imports have been soaring. They've made deals with countries all over the world for oil and natural resources. In Africa , for example, China is involved in over 900 investment projects, they've agreed to buy half of Chile 's copper production over the next 25 years, and so on.

This demand has been a huge factor driving the commodity markets higher. Demand is also growing in India and the former Soviet countries. In India alone, demand for raw materials could triple over the next 10 years.

Remember, 3 billion people are now involved in the global economy who weren't very involved before. That's a lot of new demand and it'll continue driving commodities higher, providing an ideal backdrop for gold in the coming years because gold and the commodity markets generally move together.

6. GEOPOLITICAL TENSIONS

Last but not least are international tensions or war. Unfortunately, that's good for gold too and it's the sixth reason why gold is headed higher.

In 1980, gold shot up to $850 from $400 when Russia invaded Afghanistan . At that time, it was a big deal but compared to what's happening now, the Russian invasion seems almost tame.

We obviously don't know what's going to happen on the geopolitical front in the years ahead. But looking at the world's current hot spots, tensions will likely continue growing in the Middle East .

Iran , Iraq , Palestine , Afghanistan , Syria … the area is volatile and potentially explosive, and any trigger event could send both gold and the oil price soaring.

IN SUM...

Overall, these are the six primary reasons why gold's bull market is not anywhere near maturity. In silver's case, it also has a supply shortage, which gives it an additional boost. Of course, there are other factors involved but these encompass the big picture and we think you'll agree, they're unlikely to change any time soon. That's why we continue to be so bullish on these markets. It's also why we believe gold, silver and commodities are going much higher in the years to come.

By Mary Anne and Pamela Aden
www.adenforecast.com

Copyright 2007 Aden Research
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


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


Comments

Doug Kennedy
28 Jul 07, 01:51
Silver Bullion

What with the surplus coming into the silver market in 2007... plus what looks like plenty of selling off in July... does silver still have a chance at price improvements between late July of 2007 to July of 2009???

I'm not getting any younger with each year... already 62... and long term for myself isn't another twenty years for silver to actually do something.


Post Comment

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