Wealth Building Thru Gold Investing - It is All About Supply and Demand

It took me a year and a half to get back to Groove after thrilling during the 2000 internet bombing. It was a very hard year. I tried several of the same old ones since 2000 in early 2002, but with little success. By late 2002, I had discovered the world of Adam Hamilton and commodity stock investment.

I worked in high tech, so I looked directly at how a lot of money was invested in something related to the Internet. PowerPoint presentation engineers earned millions of dollars in venture capital money, but capital-intensive areas such as mining were ignored. The return on investment in the Internet was much shorter than in the mining industry. The mining company had to find the deposit, mine it and sell it. There were environmental and political problems to overcome, as well as potential labor problems. There is little investment in the mining industry, so it makes sense that commodity prices are soaring.

Knowing about the product, I realized why most of the main streets avoided investing in this area. There are too many moving parts to invest in a mining company. In addition to worrying about the basics of the company, the direction of the product itself is also a major factor. Gold stocks rarely rise when gold itself is on a downtrend. There are also political risks. Gold is found in all parts of the world and the government may play with its own rules. Sometimes after a company invests millions in development, a friendly non-mine government seizes the mine. Unfortunately, there are many factors that affect the price of gold. In Adam Hamilton's latest essay, he lists 10 factors that affect Gold's price.

Many people believe that we are in the second phase of the long-term bullish market for gold. If it is true, investment demand outperforms all other drivers. The easiest factor to understand is. Basic economics says that prices rise when demand exceeds supply. Price increases provide an incentive for producers to increase production. However, as already mentioned, creating gold requires more than a PowerPoint presentation. That is, prices continue to rise until demand is met.

The problem can cause excessive investment demand. In November 2004, the GLD Gold Exchange [ETF] was listed on the New York Stock Exchange. Investors were able to buy gold as easily as buying stock for the first time. No further trips to local coin dealers were necessary. No more worries about storage. With just a few button clicks, you become the gold owner. GLD has become one of the fastest growing ETFs in the United States.

GLD not only provided opportunities for individuals, but also for many institutions such as pension funds that were prohibited from directly holding gold. For diversification purposes, it is very convenient to own an asset class that is increasing in value, but not other asset classes. It is well known that commodities do exactly that-they have a negative correlation with stocks. GLD is therefore an excellent way for institutions to further diversify their assets. In May 2006, silver ETFs were listed, and in 2007 there was discussion to introduce platinum ETFs.

It's all good and good, but it's the demand from Asia that is sending us a record high. Asian culture has a strong affinity for gold. Personal wealth is traditionally determined by the amount of gold it owns. Indian brides often receive gold dowry in the form of gold jewels and gold coins. Indian families store extra income from harvests every year in gold jewelry. It really is the cloth of their lives.

China is likely to become the next superpower in the world. As Asian investors become richer, gold ownership increases. There are literally billions of people in China. While it is true that many people do not achieve the standard of living that is enjoyed in the United States, the demand generated by hundreds of millions of Asians purchasing small amounts of gold is unprecedented.

Yes, that demand takes time to come true, but gold investors are very happy today. In 2006, GLD exceeded S & P 500 by 22.5%, up 12.5%. My preferred vehicle Canada Central Fund [CEF] 55/45 mix of physical gold and silver both exceeded 37.2%.

I was trying to convince my friends to buy money by talking about inflation, the fall of the dollar, and geopolitics. Now I just talk about supply and demand.

By the way, GLD was recently listed on the Singapore Stock Exchange.