Is Investment in Coal Better than Gold?

Source:

Despite its status as the most 'environmentally incorrect' source of energy, coal provides 25% of the world's energy and generates about half of the electricity in every state in the United States, except California. And the price of coal has been soaring to record levels.

Profits from coal may be even bigger than from gold, which is viewed as coal's more glamorous and higher profile rival," notes Nick Vardy.

In his Global Bull Market Alert he explains, "The Market Vectors Coal ETF (NYSE: KOL) enables you to buy a basket of 39 coal-related companies from 12 different countries." Here's his overview of the exchange-traded fund.

"Despite its status as the most 'environmentally incorrect' source of energy, coal provides 25% of the world's energy and generates about half of the electricity in every state in the United States, except California.

"Coal plays a key role in the production of steel, with approximately 70% of the global steel production depending on coal as a source of energy. And the price of coal has been soaring to record levels.

"Macquarie Bank expects metallurgical coal to reach an average price of $150 per metric ton in 2008. Citicorp is even more bullish, forecasting that the annual contract price for thermal coal will reach $100 per metric ton in 2008, while the price of metallurgical coal may hit $200 per ton.

"What's behind the bull market in coal? First, demand for coal is exploding. South Africa and fast-growth Eastern European economies rely heavily on coal as their main energy source. Even slow-growth Western Europe's demand for coal increased 15% in 2007.

"But the real story is in China. Coal supplies 80% of China's current power capacity, even as China is building seven coal fired plants a month. Even in the best of times, there just isn't enough oil to fuel China's exploding economic growth -- and coal is playing an ever increasing role as a source of energy.

Related Articles

Get Our Streetwise Reports Newsletter Free

A valid email address is required to subscribe