Five Forces Strengthening the Natural Resource Boom

Jupiter, Fla. (PRWEB) May 31, 2008

Larry Edelson discusses five forces that help explain why the boom in commodities and natural resources is going to explode. Mr. Edelson takes a closer look at how each of these forces is strengthening the natural resource boom.

Edelson believes nearly every natural resource is about to enter the second, most powerful phase of their bull markets, eventually reaching highs that make the recent record prices seem tame by comparison. Edelson sees five persistent, strengthening forces that help explain why the boom in commodities is poised to explode.

    The first force is demand continues to soar. During his recent visit to Asia, Edelson learned that China’s 2008 copper demand will increase by as much as 15%, while India’s will jump nearly 10%; Asian demand for foodis growing faster than Asian economies’ GDP, and is expected to jump as much as 50% by 2020; and oil demand in China for the first quarter of this year shot up 8%.
And Asia is not the only place with strong demand for natural resources. Demand is increasing in almost every corner of the globe.

    According to the World Gold Council, dollar demand for gold reached US$ 20.9 billion in the first quarter of 2008, a 20% increase over the same period in 2007 and more than double the level of four years earlier. Investment surged 163% to 284 tonnes in the first quarter of 2008.
    IEA forecasts global oil demand for 2008 to reach 86.8 million barrels per day.
    Global steel demand growth is forecast to reach over 1.45 million tonnes in 2011.
    Global demand for cement will grow 5.3% annually through 2012, driven by strong increases in construction activity in developing countries.
    In 2007, global demand for platinum increased by 8.6% to a record 7.03 million ounces.
    Up to a 50% increase in demand for agricultural commodities in the next 20 years could be seen.
The second force helping to strengthen commodities is dwindling supplies. The global platinum market ended 2007 in a deficit of 480,000 ounces, with demand of 7.03 million ounces surpassing supply of 6.55 million ounces. According to the World Gold Council, in 2007 gold supply decreased 3% to 3,469 metric tonnes. Of that, mine supply decreased 3% to 2,047 metric tonnes. The International Energy Agency is concerned that future crude supplies could be far tighter than previously thought. The new 2008 copper supply will only feed an additional 2.3% into the market. And global grain reserves are unstable at only 1.7 months of consumption. Wheat inventories have reached a 30-year low.

The third force is the weakening U.S. dollar adding upward price pressure. The dollar has tried to rally recently, but the bounce failed and now it’s hovering just above its all-time record low. There is no solution to the dollar crisis that’s occurring. The Federal Reserve wants the dollar pummeled lower and as much asset inflation as possible as the only way they can deal with the massive mountains of debt that exists in the U.S. is by devaluing the dollar and inflating asset prices relative to fixed debts.

This leads to the fourth force, central banks all over the world will remain passive on inflation. There is not a central bank on the planet that will aggressively hike interest rates to dampen domestic inflation rates. Most are much too weak to handle higher interest rates. Plus, there are too many mouths to feed in the world today, literally and figuratively. And because there isn’t a central banker on the planet today who is willing to choose deflation over inflation, recession or depression over growth, even if the growth is merely a mirage and covered up by inflation.

“The fifth and final force is natural resource-based wars. This is already happening in Nigeria, over oil, and in the East and South China Seas, over the Sprately Islands and the huge oil reserves that lie beneath. They’re also happening in the form of trade tariffs, export constraints in food markets, and arms-smuggling in Darfur and the Sudan to support local genocidal groups in order to get access to everything from oil to cocoa. Natural-resource based terrorism and actual wars are going to be on the rise from here on out, unfortunately. Besides the terrible human cost, these conflicts will dramatically cause prices to rise even more,” Edelson states.

To read this issue online, please visit:

http://www.moneyandmarkets.com/Issues.aspx?Natural-Resources-entering-most-powerful-phase-of-their-bull-markets-1831

About Larry Edelson and Money and Markets

With nearly three decades of experience in precious metals and natural resources markets, Larry Edelson has played a pivotal role in training Weiss Research staff and in guiding Weiss Research’s customers to prudent investments in the sector. His Real Wealth Report, Gold Trader Hotline and Energy Options Alert provide a continuing education on natural resource investments, with recommendations aiming for both profit and risk management. His team of technical analysts helps enhance the timing of investment recommendations with the aim of continually improving the performance results for investors.

Mr. Edelson is also a regular contributor to the daily e-letter, Money and Markets. Recognized as an expert in precious metals and natural resources, he is often called upon by the media for his investing views. Mr. Edelson has been featured on Bloomberg, Reuters, and CNBC as well as The New York Times, New York Sun, and Marketwatch.com

Mr. Edelson holds a B.A. degree from Columbia University.

Money and Markets (http://www.moneyandmarkets.com) is a free daily investment newsletter from Dr. Martin Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Weiss Research, Inc. is located in Jupiter, Florida. For more information about our editors, or to set up an interview, please contact Jennifer Moran at 561-627-3300 or visit http://www.moneyandmarkets.com.

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