I have shown in past newsletter issues that gold correlates primarily with inflation rates — not just in the past century, but back to the 1700s!
I have also shown that inflation correlates most with workforce growth. I don’t think we’ll see inflation rates like anything in the 1970s again, or at least not for many decades as births and workforce growth are slowing everywhere.
It was a global baby boom that caused inflation rates to go the highest outside of war times in modern history into 1980. The US saw rates around 14%.
I have also claimed that commodities and gold could see the greatest boom yet into the next 30-Year Commodity Cycle into 2038–40. But how does that happen for gold if inflation rates will be lower in the future, even in emerging countries that have better demographic trends?
Consumer demand…that’s how!
Virtually all of the demographic growth will come in the emerging world after this boom — and most of that in the developed world in the last 30 years came from the US and its large immigration patterns into 2001.
Emerging countries spend disproportionately more on commodities — more like 60% of income in India today and 40% in China. This is why I see a strong commodity boom and bubble in the next cycle despite lower inflation rates (yet, still higher than in the current deflationary period).
I have also projected that India, not China, will be the largest country in GDP in the world by 2065, and even more dominant by 2100 when Asia will rule more completely on a 165-year East-West cycle.
Just guess which consumers spend the most on gold – for jewellery and investment?
India! And by a lot.
Here’s the top 10 countries in consumer purchases of gold as a percentage of GDP and household spending. This table ranks by the highest percentage of GDP.
Source: The World Bank
China has the largest overall spending on gold due to being the largest emerging country in GDP by far and the second largest overall.
But China at 0.30% does not even make the top 10 list on gold spending here as a percentage of GDP, although Hong Kong does at 0.59%. India is a whopping 1.14% and 1.91% of household income.
Vietnam and Thailand come next at 0.99% and 0.65%. Southeast Asia is my second region for stellar growth in the next global boom.
Just for reference: The global average is 0.16% of GDP and 0.29% of household income.
Note that all of the top 10 here are in Asia or the Middle East. The US is a mere 0.03% of GDP, and Germany, second only to Switzerland in Europe, comes in at only 0.11%. Developed Western countries do spend much less relatively on gold and commodities.
Conclusion: The next global boom looks like it will be dominated by emerging countries, especially Asia and India. China and India together are already 53% of global consumer gold demand…
Imagine what happens when India grows nearly as fast as China did in the last boom and spends three to four times as much on gold with Southeast Asia and much of the Middle East chiming in at high rates.
Gold production only grows historically at about 2% a year. The demand from emerging countries led by India will be much higher than that!
PS: Watch the full video interview with The Rum Rebellion’s Greg Canavan and Jim Rickards, US economist and gold expert. Click here to watch.