You just gotta love these guys on the Financial News who try to dis gold in the face of nothing but upside indicators. One TV Anchor asked the guest expert, is there a scenario whereby we could wake up one morning and gold would be down a lot.Answer: (Please allow me to paraphrase a bit) If there is a scenario out there no one knows what it is. But you could wake up one morning and find that gold is off a couple hundred dollars. I just don't know why.The expert went on to say, I have never participated in the gold run, I don't intend to buy gold now but I again no one can say why gold could go down from here.Another expert piped in and said, I'll tell you when gold could go down. When currencies regain strength and countried get their debt situation under control. More pure genius!Expert one added the comment that everyone is in gold now and that explains today's high gold demand. But in a previous article, I exposed that really, hardly anyone is in gold. If everyone were in gold everyone in just the U.S. would hold nearly 10,000 tonnes of gold, more than the entire U.S. reported reserves. The latest firgures I could find showed that the top ten countries' reserves totalled 23,600 tonnes as of September 2009. We know many reserves have increased since then but for arguments sake, not enough to affect an illustration I am about to make.If every citizen in China owned one ounce of gold, (1.2 billion or so) they would hold some, 40,000 tonnes by themselves. India with a population of about a billion people would own 35,000 tonnes, Europe about 15,000 tonnes the U.S. 10,000 tonnes.Already we are looking at 100,000 tonnes of gold, more than 4 times what is held by the top 10 central banks of the world combined. I don't think everyone has bought gold. In fact, the gold rush is still young. If we just consider history, and the fact that gold was once the inflation adjusted equivalent of $2400 in today's dollars, we see gold still has potential to double.All of this said, I have to agree with the TV expert today. I don't know why gold would go down. I look at the dollar and say the dollar could grow stronger against major currencies and that would drive gold down. But wait, the dollar has grown stronger against major currencies, not long ago the Euro was worth $1.35. Today it is worth less than $1.20 and gold has hit a record high.I look at the national debt and say, we could lower that and eliminate fear of default and gold would crash. Ooops! National debt is already scheduled to rise in 2011, by another $1.6 trillion dollars. Forget that one.How about inflation and gold? There is absolutely no risk of inflation right? Nah . . . that can't be right. If we have another $1.6 trillion of debt scheduled for 2011, that means more money will artificially be pumped into economy.Ok. What about deflation? Seems like a tough call until you realize that paper assets all get crushed in deflation along with real estate. Gold looks like the only safe haven in that environment as well.Well I will keep thinking and when I figure out why gold supply and demand fundamentals will drive the price of a gold coin down instead of up, I will let you know. Meanwhile, if the entire world wants just one more 1oz. gold coin to add a measure of protection to their own savings and retirement accounts, the estimated above ground supply of gold (205,000 tonnes) would have to double overnight.
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