Research Report ►(comments)

Commodity prices change when there are unexpected changes to supply and demand of the target commodity. WikiWealth tries to predict these unexpected changes by examining the companies, which supply and demand the commodity (See Fundamental Commodity Analysis). When demand potential is greater then supply potential, then prices will increase; the opposite is also true. WikiWealth's Main Street Analysis captures - along with user help - the impact of supply and demand changes by analyzing the commodity's importance. In general, the more important the commodity, the faster the price will increase when commodity demand increases. A "Buy" rating from both approaches mean the commodity has high potential to increase in value.

Gold Summary

Gold Commodity Analysis ► (edit / improve) Gold is a widely used metal in the jewelry industry. Commodity: Gold is rated a Hold, because gold demanders and suppliers have a low potential to increase in value. Investor Survey: Gold’s long term growth potential is moderately favorable due to high scores on difficulty to expand in the short term and many SWOT analysis strengths. SWOT Analysis: Strength: Gold has a large, diverse growth market; Weakness: If the cost of gold is too high, then consumers might substitute other metals for gold. Opportunity to grow: gold acts as an inflation hedge investment. Threat: volatile prices may decrease the popularity of gold. Trading Strategy: commodity analyses hold rating indicates that gold should stay the same price over the short term. A moderately favorable investor survey means gold may increase in price over the long term.

Investment Impacts (help)

South Africa Country Analysis ► (edit / improve) South Africa (ZAR) has a resource rich economy in Sub-Saharan Africa. Currency: South Africa’s currency is undervalued with moderate investment flow potential, high purchase price potential, and interest rate parity potential. Investor Survey: South Africa’s economic environment is moderate. Trade: China, Japan and the US are South Africa’s top export partners, while the leading industry is materials. Commodity: South Africa produces a significant amount of uranium, palladium, diamonds, coal, and platinum for use domestically and especially as an export. SWOT Analysis: The leading South African weaknesses are their high unemployment rates, discriminatory issues and HIV Aids. The World Cup has the opportunity to propel growth, while the outbreak of disease may burden the health care system. Trading Strategy: An undervalued currency, moderate investment flow potential and moderate business environment leads to a slightly positive outlook for South African investments.

Industry Investment Impact

Discretionary Industry Analysis ► (edit / improve) The consumer discretionary industry includes companies whose sales come from consumer discretionary income purchases. Discretionary income = gross income less taxes and necessities such as rent, mortgage and food. Valuation: Based on WikiWealth's Wall Street analysis, this industry is a Hold. The Main Street analysis says a Buy, with SWOT strengths great than weaknesses and SWOT opportunities greater than threats. Trade: Some of the main trade hubs include China, Mexico, Germany and Japan, while the main discretionary commodities include gold, silver, platinum and diamonds. Trading Strategy: The consumer discretionary industry tends to be very sensitive to economic cycles. Look for undervalued discretionary investments during economic recessions when stock prices are low and sell discretionary investments during the late stages of a bull markets when stock prices are high. The global economy is currently in a recession, therefore, it is the perfect time to purchase consumer discretionary investments. Upward sloping stock charts and financial news may indicate a selling opportunity while the opposite means that stocks are becoming undervalued.

- Precious metals rely on the impact of discretionary spending.

Gold is a widely used metal in the jewelry industry¹… ► (edit / improve)

Materials Industry Analysis ► (edit / improve)

Description: The materials industry includes companies whose sales originate from the mining, acquisition and sale of physical substances for manufacturing-related purposes. Read More.

Profit Analysis: The best way to profit from material stock is to find the most undervalued investments (Wall Street and Main Street buy ratings) during economic recessions. Those investments should be undervalued (see Wall Street on left side), and have high Main Street Common Sense investment ratings (see Main Street on right side). When an economic recovery occurs, material stocks tend to outperform the general stock market, because consumers and businesses must increase their inventories quickly to meet demand for manufactured goods. Consumers and business delayed purchases on items they wanted, but resisted buying during tougher economic times. Eventually, material company investments become overvalued, because profits and stock prices increase past their fair values. During the last stages of an economic business cycle, just before a recession, it is best to sell material stocks, because they are likely to decrease in price the fastest. Expensive (overvalued) stocks with low Main Street Common Sense ratings should be sold at any time to invest in better stocks. Two buys ratings are the best and two sell ratings are the worst possible stock investments.

Inflation Hedge: Changes in commodity prices affect material stocks. When commodity prices are high due to increased demand or lower supply, material stocks increase, because demand for their goods also increases. Inflation occurs when the price of goods and services increases. The price of materials are generally the first inputs into the production of goods, so changes in material prices directly affect the cost of products, which is measured by inflation. Therefore, a good hedge against inflation is to own material stock investments. When inflation increases, so do the profits of material companies, which may have directly contributed to the increase in prices.

Trading Strategy: During economic recessions, consumers tend to cut back on spending to save money. Businesses tend to cut back on investments. Industrial companies make the products bought by consumers and businesses, but to make those products, industrial companies must obtain materials. Less spending on goods decreases material business revenue and eventually decreases stock prices. During economic recoveries, consumers and businesses spend quickly to replace or catch up with quickly increasing demand. Material companies quickly receive orders from industrial companies who need to manufacture new products to meet quickly increasing demand. Higher spending increases material business revenue and eventually increases stock prices. During a longer economic expansion, consumer and business demand increases for material companies, but at a slower pace than during the recovery stage.

¹ WikiWealth only uses the largest 30 companies in each industry for the basis of these financial measures. Each statistic is the market weighted average of the 30 companies.

² Investment potential (margin of safety) is a weighted average of the discounted cash flow (DCF), the enterprise value (EV) market multiple, and the Warren Buffett investment methods.

Major Gold Producers ► Press "Edit / Improve"

South Africa Country Analysis ► (edit / improve) South Africa (ZAR) has a resource rich economy in Sub-Saharan Africa. Currency: South Africa’s currency is undervalued with moderate investment flow potential, high purchase price potential, and interest rate parity potential. Investor Survey: South Africa’s economic environment is moderate. Trade: China, Japan and the US are South Africa’s top export partners, while the leading industry is materials. Commodity: South Africa produces a significant amount of uranium, palladium, diamonds, coal, and platinum for use domestically and especially as an export. SWOT Analysis: The leading South African weaknesses are their high unemployment rates, discriminatory issues and HIV Aids. The World Cup has the opportunity to propel growth, while the outbreak of disease may burden the health care system. Trading Strategy: An undervalued currency, moderate investment flow potential and moderate business environment leads to a slightly positive outlook for South African investments.

USA Country Analysis ► (edit / improve) The United States (US) has a highly productive, capitalist economy and is the largest and most diverse market in the world. Currency: the US dollar (USD) has the potential to increase in value especially versus the Australian and Canadian dollar because of the significant potential of undervalued companies. Investor Survey: the economic environment is very favorable for long term economic growth due to high scores on economic freedom and economic diversity. Trade: China, Japan, Mexico, and Canada are the top US trading partners, while the leading export and import are electrical machinery and vehicles, respectively. Commodity: The US produces a significant amount of coal and wheat for use at home and as an export. However, the US consumes a larger amount of oil, which contributes to their trade deficit. SWOT Analysis: The leading US strength is its entrepreneurial culture, while the main weakness is high health care cost. Energy independence has the opportunity to propel growth, while the major threat is the housing crisis, which will lower growth. Trading Strategy: An undervalued currency, high investment flow potential and favorable business environment lead to a positive outlook for US investments, which will also benefit from positive international actions.

Australia Country Analysis ► (edit / improve) Australia (AUD) has a highly productive, capitalist economy with an emphasis on commodity exports, especially to Asia. Currency: Australia’s currency is moderately overvalued with low investment flow potential and negative purchase price parity. Investor Survey: Australia’s economic environment is very favorable for long term economic growth due to high scores on economic freedom and economic diversity. Trade: Indonesia, China, Singapore, the UK and Japan are the top export partners, while the leading exporting industry is materials. Commodity: Australia produces a significant amount of uranium, gold, coal, copper, aluminum, lead, zinc, and silver mostly for export to growing Asian countries. SWOT Analysis: The leading Australian strength is their abundant natural resources, while no major weaknesses were identified. Trading Strategy: An overvalued currency, negative investment flow potential, but favorable business environment leads to a neutral outlook for Australian investments.

China Country Analysis ► (edit / improve) China (CNY) is a fast growing communist country with the largest population in the world. Currency: China’s currency is moderately undervalued. Purchase price parity shows that China’s currency is approximately 40% undervalued, however, the other three valuation approaches show that China is fairly valued. Investor Survey: China’s economic environment is very unfavorable for long term economic growth due to the lack of economic freedom, government transparency, and the SWOT analysis. Trade: Indonesia, Pakistan, Norway, Singapore, Europe, the US are the top export partners, while the leading industry is industrial goods, usually for export. Commodity: China produces a significant amount of coal for use at home. The use of coal to provide energy leads to other health related problems. SWOT Analysis: The leading Chinese strength is their cheap labor, while the main weaknesses are political risk and corruption. Renewable energy has the opportunity to propel growth, while general pollution and an aging population could slow growth rates. Trading Strategy: An undervalued currency, average investment flow potential and an unfavorable business environment leads to a neutral outlook for Chinese investments.

Russia Country Analysis ► (edit / improve) Russia (RUB) is a resource rich, centralized economy with a large land mass and population. Currency: Russia’s currency is significantly undervalued according to the investment flow analysis, purchase price parity, and interest rate parity. Investor Survey: Russia’s economic environment is very unfavorable. Russia’s economic freedom, government transparency and SWOT analysis scores are very low. Trade: China, and Turkey are Russia’s top export partners, while the leading industry is energy. Commodity: Russia produces a significant amount of natural gas, coal, copper, uranium, palladium, and crude oil. Russia exports many energy products to European Union members. SWOT Analysis: The leading Russian strength is their oil and gas industry, while the main weakness is political risk. Proximity to energy hungry Europe has the opportunity to propel growth, while falling oil prices may lower growth. Trading Strategy: An undervalued currency, high investment flow potential, but unfavorable business environment leads to a neutral outlook for Russian investments.

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