Silver as an investment

Profiting From a Chinese Puzzle

Be prepared for the next great transfer of wealth. Buy physical silver and storable food. / By Sean Hyman / March 7, 2013

Did you know we’re living in the biggest migration period in human history? Yep, it’s happening in China.

In recent years, some 160 million people have moved from rural areas to cities in China. And it’s projected that a further 100 million people will make the move over the next decade.

In just 2012 alone, over 21 million people left rural areas for the cities. Just to get our heads around how large this is… it’s almost like all of Australia moving.

This mass migration is all part of an astonishing recent phenomenon in aspirations, whereby the poor have been presented with an opportunity to live a better life.

This phenomenon is not dissimilar to the population displacement that occurred in the wake of Hurricane Katrina in 2006, when many former
New Orleans residents fled to other states, including the Dallas area, where I live. Once they saw how much better the schools, roads, and economy were in Dallas, many decided to stay.

While there are obvious similarities, this huge shift in population is nothing compared to the migration happening right now in China.

Supply and Demand Work in this Commodity’s Favor

China’s gargantuan population shift has created greater demand for electricity and therefore larger electrical grids. And this is where copper comes into play, because to construct these new electrical grids, vast amounts of copper wiring is required.

Copper has many other uses – for example, home construction, appliance manufacturing and medical applications, to name but a few – all of which will grow as a result of this giant Chinese demographic shift. This commodity is also used to manufacture vehicles, and auto sales have been hitting record highs recently in China.

This is classic supply-demand economics. This year, copper is projected to move to a deficit of 6,000 tons from a surplus of 216,000 tons in 2012, thanks to surging demand – and that is precisely what will drive copper’s price higher.

And adding pressure to this deficit is a dispute between Rio Tinto, the world’s largest miner, and the Mongolian government, which is demanding a greater share of profits.

Rio Tinto has warned that it plans to cease mining operations until the dispute is resolved. And that’s likely to put a squeeze on Mongolian copper supply.


Thanks to BrotherJohnF