Gold Fundamentals 2


"With flat-to-shrinking supplies, demand is the wildcard that will drive gold prices in the coming decade."

Gold is a rock of stability in a chaotic world, a stark contrast to the complex web of mere promises to pay that is our modern faith-based financial system. Without gold, true diversification and protection from systemic risk is impossible.

Gold's fundamentals are dazzlingly bullish. Like everything else on the planet that is freely bought and sold, gold's price today and in the future is a direct function of its supply and demand. As long as its global demand exceeds its global supply on balance, gold's price will continue powering higher in its secular bull.

With mined supply shrinking and central bank hoards dwindling, gold supplies are very constrained. And no matter how high the gold price goes, mining is not going to get much easier and in fact will probably continue to get more difficult. And central banks are not going to be able to conjure up more gold out of thin air like they do with their fiat paper currencies. With flat-to-shrinking supplies, demand is the wildcard that will drive gold prices in the coming decade.

As mainstream stock investors start to better understand gold's fundamentals, more and more of their massive pool of capital is going to flood into gold. Indeed this is already happening through the new gold ETFs.

The biggest buyers of gold to protect themselves from the ongoing dollar bear will be the Asian central banks. Over the coming decade, the rise of the Asian consumer/investor could be more bullish for gold investment demand than all the other demand factors combined. Asian investment demand barely existed during the 1970s gold bull, yet that bull was still huge. Imagine how big today's will ultimately prove with Asia finally on board.

The bottom line is gold's fundamentals are more bullish today than ever. Despite relatively high prices, mined supply is shrinking. Central banks' relative power in this market is waning dramatically. And thanks to both natural market forces and artificial manipulation contrivances, global investment demand for gold is likely to grow tremendously from today's levels. This secular gold bull is far from over.

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