Editor’s note: The following is a guest commentary from one of WND’s sponsors, Kevin DeMeritt, president of Lear Financial. If you would like to learn more about investing in precious metals, take advantage of the free information Lear Financial is making available to WND readers.
Despite rising world unemployment, sinking consumer confidence, and surging debt defaults, one key economic factor has held steady. That’s gold. In figures just released by the World Gold Council, gold demand is actually reported to be up 1 percent over the same period last year, due largely to personal investment use, “currency replacement,” and strong jewelry sales.
These positive world statistics could have continued their torrid first-quarter pace (ahead 6 percent over last year) had demand not been dampened in areas where the economic slowdown is more pronounced. For example, Latin America, with its Argentina default, and Japan, where bad loans are now estimated to make up 40 percent of the country’s Gross Domestic Product, both saw sharp declines in gold demand, mostly in the jewelry sector.
Conversely, and despite slowing economic conditions, the United States continued its strong appetite for gold.
Robust bullion coin sales by investors and collectors and mounting gold jewelry interest, coupled with strong consumer demand, pushed U.S. gold demand to a mighty 80 tons, 4 percent higher than at midyear of 2000.
The Middle East, perhaps reflecting an abundance of cash from higher oil prices together with renewed economic preparations in the event of war in the region, also showed a 10 percent increase in demand.
Commenting on the figures, Haruko Fukuda, Chief Executive Officer of the World Gold Council, said: “Gold demand is not independent of economic conditions. However, growth is holding up in key markets such as India, the Middle East and the U.S.A., demonstrating the continued importance of gold.”
There are many reasons why demand continues to hold in a soft world economy. One factor is supply. It was recently reported by a South African brokerage, that world gold mine supply will suffer a 35 percent decline over the coming eight years.
“The impact of the decline in world gold production will result in an increasing deficit between supply and demand, which is likely to change market perception significantly and subsequently put upward pressure on the gold price,” the report by Standard Equities stated.
In another recent report, by the World Gold Council, the case was presented that the rapid expansion of the gold derivatives market throughout the 90s may have come to an end. Many investment experts believe that this market and central-bank lending has had an effect on demand and had been the principal reason why gold traded in a disappointing range throughout most of the past decade.
When you take into consideration the supply and demand issues, gold continues to be well-positioned for strong growth. Forecasts by Merrill Lynch, Salomon Smith Barney and other brokerages for gold to climb to the $320-$350 range is yet another indicator of the potential gold has to offer.
While gold has been historically seen as a hedge against volatile markets and a weakening dollar, more and more investors are now looking to gold for profit and protection for both savings and retirement accounts. In fact, gold is already up 10 percent since its recent low and continues to outperform 90 percent of stock equity funds this year.
While no one knows exactly how high gold prices will go in the next 12 to 18 months, one thing remains certain – many investors are now taking gold more seriously.
Special for WND readers, Lear Financial is making available free information on investing in precious metals.
With more than 20 years of industry experience, Kevin DeMeritt is president of Lear Financial, one of today’s fastest growing and most successful precious metals investment firms.
