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Gold is at 27-year highs, about to blast off even higher … and soar to well over $1,000 an ounce.
Oil is also at new record highs … trading over $85 a barrel … on its way to $120 … then, even higher.
The price of wheat just reached as high as nearly $10 a bushel … the highest price ever … up 103% in just six months.
In fact, the prices of dozens of natural resources are soaring like never before. So today, I want to answer …
The Three Key Questions You Must
Ask About the Natural Resources Boom
First, what’s driving natural resources higher?
My answer: There are two very important forces at work:
A. Three BILLION people in Asia are catapulting themselves into the 21st century, with newly awakened needs and wants … with knowledge and awareness of the rest of the world like they never had before (courtesy of the Internet and e-mail) …
And with governments now finally acknowledging that socialism and communism can never survive in a world as open and flat as we have today.
B. The plunging dollar. Since almost all natural resources are traded globally in dollars, as the dollar falls in value, natural resource prices must rise to compensate. This is effectively deflation in the dollar, and inflation in natural resource prices.
Combine the above two forces — and you have the most potent combination for rising natural resource prices that history has ever seen.
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Second, how much longer can this boom last?
My answer: The natural resource boom will continue for YEARS!
Some analysts expect it to continue for up to 20 more years. My cycle studies and indicators are not that optimistic, but they do strongly suggest that this natural resource boom will continue until 2011. In other words, you have at least FOUR MORE YEARS to capitalize on these trends.
Third, how much higher can prices go?
My answer: Prices can go much, MUCH higher.
To give you an idea of the big picture, take a look at this chart of the Commodities Research Bureau Index (CRB), which tracks a basket of 16 of the world’s most traded commodities. This is what the index looks like once it’s been adjusted to account for the decline in the purchasing power of the dollar over the last 30 years …
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As you can see, the inflation-adjusted high in the CRB Index occurred back in 1973 at 1,047 in today’s dollars. Now, the index is trading around just 450!
Bottom line: The CRB Index is still below HALF its inflation-adjusted peak! So prices could easily DOUBLE from where they are now.
And that’s a broad index. It does not show you how much higher specific natural resources can go. For example, gold would have to TRIPLE to reach its inflation-adjusted high. Coffee would have to soar 800%!
It might sound crazy, but it all comes down to supply and demand. And demand, as I mentioned previously, is rising to one record high after another. So much so that …
One Planet’s Worth of Natural
Resources Is No Longer Enough!
In fact, the human race is gobbling up the earth’s resources faster than ever before. The planet is quickly going into an ecological deficit.
According to recent calculations from the Global Footprint Network, a foundation whose mission is monitoring the world’s natural resources, our consumption of Mother Nature’s offerings soared from half the planet’s total capacity in 1961 to over 1.3 planet Earths in 2007!
In other words, the world is consuming 30% more in natural resources than Mother Earth can pony up in a year!
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Think about that: It takes the planet a year to regenerate what humanity consumes in a little over nine months time. And each year it gets worse, with “Ecological Debt Day” coming earlier and earlier.
From the looks of it, there’s no reversing the trend: At current consumption rates, it will take TWO planet Earths to sustain humans in less than 50 years.
That includes “renewable natural resources,” which regenerate if they are not over-harvested. Of course, they are already being consumed at a rate exceeding their natural rate of replacement. Meaning, in effect, that even our renewable resources are becoming non-renewable.
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Ecological Footprint and Biocapacity (2006 Edition)
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||||
|
Population
(millions) |
Total Ecological Footprint
(global acres/person) |
Total Biocapacity
(global acres/person) |
Ecological Deficit (-) or Reserve (+)
(global acres/person) |
|
|
World
|
6,301.5
|
5.5
|
4.4
|
-1.1
|
|
High income countries
|
955.6
|
15.9
|
8.2
|
-7.7
|
|
Middle income countries
|
3,011.7
|
4.7
|
5.1
|
0.4
|
|
Low income countries
|
2,301.1
|
2.0
|
1.7
|
-0.2
|
|
Africa
|
846.8
|
2.6
|
3.2
|
0.6
|
|
Asia-Pacific
|
3,489.4
|
3.3
|
1.8
|
-1.5
|
|
Latin America
|
535.2
|
4.9
|
13.3
|
8.5
|
|
Middle East & Central Asia
|
346.8
|
5.4
|
2.4
|
-3.0
|
|
North America
|
325.6
|
23.2
|
14.0
|
-9.2
|
|
Canada
|
31.5
|
18.8
|
35.8
|
17.0
|
|
United States of America
|
294.0
|
23.7
|
11.7
|
-12.0
|
|
European Union (EU25)
|
454.4
|
11.9
|
5.4
|
-6.5
|
Zoom in on the problem a bit further and unfortunately, it becomes even more startling. For example, the world’s use of non-renewable fossil fuels has jumped more than nine-fold since 1961. Meanwhile, per-capita use of the planet’s biologically productive land and water is 22% greater than the planet has to offer.
High-income countries are the biggest natural resource consumers, using the equivalent, on average, of 7.7 global hectares of land and water for each person.
(And as you might suspect, the U.S. is the biggest consumer, racking up an ecological deficit of 12 hectares of Mother Nature’s bounty for every man, woman and child.)
Only the continents of Africa and Latin America, and the countries of Australia and Canada, offer more natural resources than their populations consume.
More facts that will continue to drive natural resource prices higher …
- By the end of next year, for the first time in history, more than half of the world’s population will be living in urban areas. As a result, consumption of natural resources is sure to accelerate.
- Per-capita grain production started declining in 1984 and continues to fall. Witness this year’s U.S. wheat supplies at their lowest levels in 59 years!
- Even supplies of fish and seafood are dwindling, with per-capita fish production having declined unabatedly since 1980 and recently reaching record low catches in many areas of the world.
- Coal is being mined at a vastly unsustainable rate. At best, the world has 100 years of coal left.
- The world’s supply of oil is projected to last approximately 40 years at current production rates.
- Worldwide, the natural gas supply is adequate for about 50 years.
- Even the world’s gold production is declining, with production in South Africa, the world’s largest gold producer, recently falling to an 84-year production low.
What can you do to protect yourself from this situation?
Stay the course in your natural resource investments!
And if you’re not on board with this market sector yet, see the latest issue of my Real Wealth Report for all of my recommendations. It goes to press this Friday.
Best wishes,
Larry
P.S. We’re so bullish on natural resources right now that Martin and I are holding a special web conference next week. Attendance is absolutely FREE, but space is limited. To reserve your spot right now, click here.
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