Why the commodities boom is different this time - Money Week: "In advanced economies like the US, growth creates little extra demand for such resources. Donald Coxe, chairman of Harris Investment Management, commented recently that Americans spend their marginal dollars “on household furnishings and decorating, video games, gambling, travel, healthcare, philanthropy, pornography… and tort lawyers... Those pastimes don’t create rising metal demand.”
But high-growth emerging economies are increasingly driving global growth. They have “high metal intensity” as they build infrastructure, factories, communications networks and homes. And high energy intensity, too. “When Chinese and Indians progress from abject poverty to lower middle class status, they move into dwellings with indoor plumbing, electricity and basic appliances.
“Within a few years, as their wealth increases, they become car owners. So, at the margin, they become significant consumers of metals and energy.” (In less than a decade, China has moved from being the world’s 20th largest oil consumer to being the second biggest).
“As they become collectively wealthier, they acquire gold, silver and platinum jewellery, which are both consumption goods and investments.”
Global demand is also being boosted by increasing investment and speculative activity. One indication of this is that investment in commodity index funds has risen from less than $30 billion to an estimated $80 billion currently, and is forecast to reach $140-150 billion by the end of next year.
However, it’s not future demand growth that’s at the core of the bulls’ case for commodities – it’s that supplies are not going to increase"
No comments:
Post a Comment