China goes past US as the world's largest manufacturer

Now you can call this one key validation of Buffett's increasing interest towards markets outside North America. As per reports, China has replaced the US as the world's top manufacturing nation. As per data, China now accounts for 19.8% of the world's manufacturing output, compared with the US at 19.4%.

This shows the increased competitiveness of the dragon nation and the reduced competitiveness of the world's largest economy. We see this as a fundamental shift in the global manufacturing setup, which is unlikely to be reversed in the future.

Anyways, while the US has lost out on size to China, it stands miles ahead when it comes to productivity. China's manufacturing is supported by 100 m employees. The US does it with 89% less number of employees. Now that's a huge gap that China can only dream to cover, also given its ever expanding labour force! 

A heap of money that can push gold to new highs!

It doesn't matter that the yellow metal has had a phenomenal run in the past decade. Factors like excessive money printing, inflation, public unrest and store of value still hold good and hence, gold can still provide attractive returns from here on.

However, a gentleman named Shayne McGuire has taken the discussion about how high gold prices can go to an altogether different level. McGuire, it should be noted, is a fund manager who manages a US$ 330 m gold portfolio at a US based pension fund. In his recent book, McGuire has argued that US$ 10,000 per ounce gold, a jump of more than 7-fold from the current levels, is well within reach!

Indeed, one is bound to dismiss Mr McGuire's bold prediction as pretty outlandish. But we believe he has a pretty strong reason to support the claim. Do you know who manages the world's largest amount of wealth? Well, it is the world's pension funds. As per estimates, global pension assets were believed to be in the ballpark of US$ 31 trillion. To put things in perspective, it is more than twice the GDP that the US, the world's largest economy by far, recorded in recent memory.

Now, here comes the real surprise. As of now, a mere 0.3% of pension assets are invested in gold and gold stocks. Even if this allocation doubles to 0.6%, still a small number by any yardstick, this will represent close to US$ 100 bn of new money to be poured into gold related assets. It would be worth adding for a perspective that that size of the world's largest gold ETF is US$ 55.2 bn. Hence, the push that this new US$ 100 bn can give to gold prices cannot be emphasised enough.

We are not sure whether this will result in gold witnessing a more than 7-fold rise. But the increase nevertheless is certainly going to be extremely meaningful. Do bear in mind that we have not even considered the scenario where the allocation by pension funds towards gold goes up to even higher levels. Imagine what will happen if pension funds view gold as strategically important as other financial assets like real estate and commodities. In such a case, all bets would be off. Thus, have you considered investment in gold yet? If not, do it before it is too late.