When I realized that it was time for an epochal (generational) commodities bull market in 2001/2002, I immediately began exploring the various methods of investing in the coming trend. I quickly decided to focus on energies and precious metals believing they would have the highest relative strength due to the difficulty developing the sources of these materials. They must be dug out of the earth’s crust at great risk to life, limb and capital and it takes decades to fully realize the potential of newly discovered deposits. A great deal of the world’s investable assets have been committed to these endeavors over the past decade and a great deal more must be over the coming years. That means reliably higher prices .
I further decided to focus specifically on gold, believing that it would be the singularly highest relative strength asset class in the markets because its added financial (monetary) value. Not only is it a highly in-demand, highly liquid industrial and luxury commodity, but is also offers the basis of the solutions to many of the problems that develop during periods of weakness in the stock market and other paper assets–inflation of currencies, increased government intrusions into the markets and, of course, wars surrounding scarce natural resources–which generally occurs concurrently with long-term strength in commodities.
Whether it begins in the US or not, it is virtually assured that a gold standard will be enacted SOMEWHERE in the next decade and whatever country does it will have the best currency in the world. Other countries and regions would quickly begin following suit in order to shore up the strength of their currencies, which is still the most important indicator of a countries economic health.
It would not surprise me in the least if China is the first to move. They are aggressively buying as much gold as they can lay their hands on and encouraging their citizens to do the same. That is a 180 degree policy reversal when you consider that until 2010, individual ownership of gold was illegal in the country.
Source Inside Futures