Why Gold Has Further to Run

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Among the many fundamentals still pointing to growth for this asset is the fact that the Central Banks in growing economies around the world are starting to buy, instead of sell, gold. Banks participating in this non-sense have mostly been American, European, and ‘Western World’ entities. Asian banks, such as China and Singapore however, are more than happy to buy up gold and create stronger reserves.

There are a great many factors - economic, fiscal policy-wise, geo-political - which determine which way gold will go. Many analysts have said that we are currently in the midst of the ‘Perfect Storm’ for gold fundamentals. While some may consider this rosy glasses positioning, I do not think it is far from the truth, as the fundamentals for this asset class still point to growth.

1) Global Demand vs Supply

For many years, the global demand for gold has exceeded what has been produced by the worlds mines. In fact, mine production has actually declined in the last ten years. With a world demand often exceeding 5000 tons per year, and a global mine output of a bit over 2500 tons, any sane person would conclude that the price of gold should be going up...

2) Central Banks Have Acted in Unison to Suppress the Price of Gold

It has been well documented that Central Banks have worked together to sell gold into the market from their reserves, a term known as ‘dis-hoarding’, in order to ‘manage’ the gold price. Ultimately, this has to end, because the Central Banks will eventually either run out of gold, or get to the point where they realize that it is no longer smart to do so.. .

3) Central Banks are Starting to Reverse Course

Central banks in growing economies around the world are starting to buy, instead of sell, gold. Banks participating in this nonsense have mostly been American, European, and ‘Western World’ entities. Asian banks, such as China and Singapore however, are more than happy to buy up gold and create stronger reserves. Russia has also stepped up its demand, with announced intentions of weighting their reserves to 10% of their treasury. This trend is destined to continue, as more and more countries come to the realization that you cannot ‘print’ your way to wealth, at least not over the long term...4) Sovereign Wealth Fundsbr>These behemoths of financial investing entities have sprung up all around the world, from China to the United Arab Emirates.. They are the greatest monstrosity in wealth management history has ever seen. Their sole purpose: to take massive stockpiles of US dollars and buy tangible assets that are not depreciating, so that the owners of these funds are able to diversify their holdings before dollars reach their absolute intrinsic value (which is zero)...

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