High Gold Prices: Not a sign of Impending Doom

Implications: 1.) Gold is higher, yes, but all is well 2.) Demand for commodities is driving Gold higher - Not fear. 3.) This demand is not going away anytime soon.

Analysis:

Much has been made recently about the ascendancy of Gold prices due to "inflationary concerns" as the USD weakens, or even as a hedge against general market instability & global geo-political upheaval.

But apocalypse is not imminent. One would be mistaken to assume that these phenomena accurately explain the increase in Gold prices over the last 6 years as they address only a fraction of the picture

More relevant is the dramatic explosion in demand for general commodities (Deutsche Bank's “Liquid commodity” index has gained every year since 2002, returning an avg. gain of 22% annually) from burgeoning new economies such as China, India and Pakistan, and the ‘tiger’ economies of South East Asia.

But the term “commodities” is too general – Which commodities specifically are affected? Let us examine the “trader’s” explanation: The entire non-precious base metal complex (sometimes also referred to as industrial metals) includes minerals, iron, ore, ferrous and non-ferrous metals, nickel, copper, aluminum and stainless-steel. Semi precious metals with industrial applications such as platinum, palladium, cobalt & others have also seen explosions in demand. These metals all trade at a relatively constant “spread” to gold and silver. As demand for the industrial base-metal complex explodes, so too will demand for Gold.

Since the under-arching global demand for industrial commodities is not going away soon, one can expect gold prices to continue to trend higher going forward.

All boats rise in a rising tide. Gold is no exception.