Why Gold Is Going Higher

By David Galland, Casey ResearchWhile there are

many reasons that gold and silver are

going to keep moving higher as the fiat currencies

trend lower,

at our recent Casey Research Summit in Boca Raton, faculty

member Mike Maloney pointed out a fact

that, while obvious in hindsight, I had never

heard mentioned previously.

Namely that during the last major precious metals bull market in the 1970s, only about 10% of the world could own gold – either due to legal restrictions or a lack of liquid capital.

Today, few countries prohibit gold

ownership, and a far higher percentage

of the world’s population has

transitioned out of poverty.

China provides the most germane

example, having legalized gold and

silver ownership for private citizens in

2004, and through the explosive growth in

national GDP that has

caused Chinese gold purchases to

skyrocket.

Confirming the point, the following is an excerpt from a recent Wall Street

Journal article:Chinese investors are snapping up

gold bars and coins,

buying more than ever before in the

first quarter of 2011 and overtaking

Indian buyers as the world's biggest

purchasers of the metal.

A growing middle-class in China is

raising the appetite for gold there.

China's investment demand for gold more than doubled to 90.9

metric tons in the first three months of the

year,

outpacing India's modest rise to 85.6 tons, the World Gold

Council said in its quarterly report on

Thursday. China now accounts for 25% of

gold investment demand,

compared with India's 23%.

The report underscores the rising

appetite for gold among the growing

middle-class in China. Fears of the country's

soaring inflation,

as well as a search for new investments, is luring investors to

gold, and marketing of the precious metal has also increased in

recent months.

"I think people will be surprised by the strength in the

Chinese demand, but we think this is a trend

that is set to continue," said Eily Ong, an investment research manager

at the gold council.Notoriously active

savers, stashing away on the order of 50% of

their income, the Chinese are

increasingly opting for gold over the renminbi to stash their wealth.

For those wondering just how big a

development this is, consider that in 2007, just before investing in gold became “the

thing to do,” gold demand in India was 61% of the world’s

total while China’s gold demand was

only 9%.In other words,

India is no longer the only elephant in the gold vault. And

they are not alone –

investors around the world are now able, and willing, to buy gold as a way of protecting their wealth from the

inevitable decline of the fading fiat

currencies.

I still don’t think we are out of the woods

on a commodities correction, but there

are so many black swans floating

overhead that literally anything can happen,

at any time.

Thus buying in tranches on

pullbacks over the next four to six

months still makes a lot of sense.

But in the longer term, gold has

almost nowhere to go but up.

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