Those who think the China story and its demand for commodities and energy is not important should, in order to gain a grasp of the scale of what is happening in China, ponder on recent words from the country’s government. They said that between now and 2020, somewhere between 300m and 500m people will move from rural areas to cities.
Based on that simple statement, it can be calculated that the scale of new urbanisation required is the equivalent each year of two new cities the size of either London or New York. You might want to read that again. For the next 15 years China will need to build the equivalent of two New Yorks each year.
The writer’s view of this situation is serious enough to have already installed a new generator at his home and he shortly expects to have a similar facility at the office. Those of us old enough to remember the 3-day week of Edward Heath’s government, know how paralysing energy shortages will be.
There is absolutely no doubt in our minds that we are in the midst of a multi-decade bull market for commodities and energy.
Since gold recently made an 18-year high touching $475oz, it has consolidated above $460oz – very satisfactory. Gold is now a bull market in all of the world’s main currencies – a new and very positive development. Our intermediate target for later this year is still $500oz, which should in turn prove to be a significant resistance level. Longer-term we expect at least $1,000oz.
Investments in the Merrill Lynch Gold & General fund have prospered, the fund is still close to its all-time high, although short-term we expect a modest pullback.
By RH Asset Management, in the Onassis newsletter, a fortnightly newsletter that gives insight into the investment markets.
For more from RHAM, visit https://www.rhasset.co.uk/