Building Wealth - Cutting Costs

I have blogged a lot on gold, silver and other metals thus far because I firmly believe that they represent a great hedge against inflation, a good long term investment and because I feel they offer a lot of protection from the coming recession. So when this article from Forbes hit my RSS Reader this morning I was quick to have a look at it. The article is title, Gold’s Allure Growing, and I recommend you give it at least a quick read.

While I found the article interesting and quite accurate I do feel they sort of glossed over a key reason for gold going up recently and a reason that gold will continue to go up for quite a while. Here was the only mention of this factor in the article,

“Demand for the metal is also strong in Asia, for jewelery and as a store of value.”

That was the only mention of this factor in the entire article and I find this very much missing the boat. Why? Well, because with China and India what we have is more then 2 Billion (with a big B) people who are rapidly growing their middle class and both societies have a tremendous appetite for gold jewelry. I recently read a report on of the foremost expert on gold and mining operations who stated that we currently have “at least a 10% shortfall on the production vs. demand for gold most of which is attributed to the rising demand in India and China for gold jewelry.”

In other words those 2 billion people are buying gold faster then it can be extracted from the ground. The big issue with that is it has never happened before. The demand for gold has always been based on how rare it is and that has always created a demand yet until now anyone could always buy as much as they could afford. Today we have unmeetable demand and the demand is growing faster then the production and again this is the first time in modern history that such a condition has existed in the gold market.

I highly advise any investor (small or large) to have a serious heart to heart conversation with your financial advisers about putting at least 10-20% of your holdings into gold, gold funds, etc. The increased demand and declining dollar together make gold a real winning opportunity at least in my opinion right now.

This entry was posted on Saturday, February 2nd, 2008 at 10:27 pm and is filed under Wealth & Investing. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.