Rising prices for commodities such as oil and gold should be coming from greater demand in Asia in the future.
That should have investors pleases as recent bullish reports from China and India had the exchange traded funds for oil, United States Oil (NYSE: UNG), and gold, SPDR Gold Shares (NYSE: GLD), rising. Bullish news also lifts the prices of stocks in companies ranging from in magnitude from the biggest entities with great size such as Exxon Mobil (NYSE: XOM) and Barrick Gold (NYSE: ABX) to smaller concerns with greater potential like Wishbone Gold PLC (OTC: WISHY) and Octagon 88 (OTC: OCTX).
Economic demand for commodities is basically a numbers game.
For the most basic number, India and China have about 40% of the world’s populations. The countries are, by far, the biggest consumers of many natural resources, ranging from gold to iron ore. There is an insatiable demand for fossil fuels such as oil, natural gas, and coal. The demand for natural resources, from both economic demand and for investment purposes, will only increase in the future.
That is due to most of the economic growth emanating from Asia.
In an interview in Barron’s earlier this year, Carl Weinberg, Head Economist for High Frequency Economics, was bullish on China. He was bearish on Europe and Japan. Weinberg stated that Europe is in a depression with Japan still in a recession. Japan is in the 23rd year of its “Lost Decade.”
Whatever Japan “lost” in terms of economic growth can easily be found in China and India, though.
Economic data supports that. Growth ahead for companies such as Exxon Mobil, Barrick Gold, Wishbone Gold PLC, and Octagon 88 in the natural resources sector will come from Asia, in large part. With valuable holdings in Australia, Wishbone Gold PLC and Barrick Gold are situated well to service the investment demand from India, China, and other countries. Exxon Mobil, Octagon 88, Chevron (NYSE: CVX) and other oil and natural gas firms should boom from the higher prices for oil and natural gas.
The chart below shows how well the Chinese economic is doing by the performance of the main exchange traded fund, iShares China Large Cap (NYSE: FXI):