The price of gold is higher than it has been in 17 years. And it's likely to go much higher. Why? There is a very interesting article in the New York Times that caught my attention. You can read it here http://www.nytimes.com/2005/10/24/international/24GOLD.html The article is really about how gold mining companies are harming the environment. But, as an investor, here are some key points that I think are important for the gold market The amount of gold that is left to be mined is extremely small and it is coming from the poorest countries in the world. 70% of gold in now being mined in poor countries. To get one ounce of gold to make a ring, miners have to dig up and haul away 30 tons of rock and sprinkle it with diluted cyanide. According to the Environmental Protection Agency, the cost of cleaning up metal mines could reach $54 billion. According to the World Gold Council, jewelry sales soared to a record $38 billion last year. Just in the last year, gold sales are up 11% in China and a whopping 47% in India, a country with close to a billion people who are huge gold consumers. The United States is the second leading consumer of gold (second to India). The U.S. government has 8,134 tons of gold in reserves. The Federal Reserve and other major central banks have an agreement to severely restrict sales from their reserves. This will serve to support the price of gold. Also, sophisticated investors have a renewed interest in gold as a hedge against inflation and a falling U.S. dollar. So we have a classic demand/supply imbalance that's going to last for years. The long-term fundamentals seem very favorable for gold investments. |
