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Strategies & Market Trends : Dino's Bar & Grill -- Ignore unavailable to you. Want to Upgrade?

To: Goose94 who wrote (10209)	11/14/2014 11:26:29 AM
From: Goose94	Read Replies (1) \| Respond to of 203541

Long Term Gold Trends: China's Middle Class Is Still Growing It is easy for Western gold investors to focus on U.S. Federal Reserve policy as a key driver for gold prices. But, that also may be short-sighted and narrow focused. Over the past five to ten years roughly 60-70% of all gold demand has been going to emerging markets. Think China and India. Going forward, physical demand will only continue to grow from those regions as their middle classes continue to grow and their economies mature. While the Western media is filled with talk about how China's economy is slowing, even a 7% gross domestic product (GDP) rate is enviable. Let's compare the numbers. For 2014, U.S. GDP is forecast at 2.2%, Japan's growth rate is estimated to grow at 0.9%, and the Euro area is seen growing 0.8%, according to Credit Suisse. The U.K. is doing a little better at a 3.0% pace, while China is forecast at a 7.3% pace. While double digit and 10%+ growth figures may be only seen in the rear view window for China —a 7% growth handle is nothing to shrug off. Digging deeper into the population trends, there is still significant upside for the middle class to grow within China. With an overall population of about 1.36 billion, the Chinese middle class is still growing. Let's look at some numbers. "China’s GDP per capita went from $400 in 1989 to about $7,000 in 2013," said James Pressler, vice president at Northern Trust. What that means if you divide total GDP by the total population that equals roughly $7,000 for every person in China in 2013. And, it is an explosive move over a 24 year period. Is this shift from peasant to middle class over? Not likely? "The western half of China still has population that is not achieving the wealth and affluence. A lot of the people on the western side have a go east strategy," Pressler said. How do those GDP per capita numbers compare to the U.S.? "In the U.S., GDP per capita went from $22,923 to $53,042 during the same period. The last time GDP per capita in the U.S. was $7,000 was 1974 when it was $7,260 – inflation had a lot to do with sending incomes higher at that point. GDP per capita in the U.S. has not been below $500 since the midst of the Great Depression, when it was $456. So, this means it took the U.S. 41 years and a few bouts of inflation to do this, and China did it in just 24," Pressler noted. What's ahead for China? There is still significant room for the middle class to grow, Pressler said. Pointing to the GDP per capita numbers, Pressler estimated "I could see that doubling to $14,000 per head in the next 10-15 years." Looking at the recent gold demand numbers out of China, on the surface the third quarter numbers don't look good. But, then you have to remember this is a year-on-year comparison —and that is what is key. According to the World Gold Council, "In China, jewellery demand for Q3 2014 was down 39% year-on-year to 147 tonnes. Ouch, sounds bad, right? But, remember the year-over-year part. Third quarter 2013 saw blockbuster physical buying from China, which means the comparison, is down from that highly elevated number last year. Let's compare the third quarter China numbers which were "broadly in line with both Q3 2012 and the 5-year average of 148.2 tonnes and 154.9 tonnes," the World Gold Council said. Just shows you, it pays to read beyond the headlines, right? Bottom line? The middle class still has more to grow. And, that means more people with a cultural affinity for gold as a vehicle to store, preserve and growth wealth, actually having the capability to buy gold. Don't underestimate the power of the rising East when it comes to gold. That story is just getting started.