the day will come when the price of gold and silver will be determined in physical markets, and not by gamblers in the futures pits. the supply of physical silver and gold is their weakness, and the longer it is held down, the faster the process will accelerate. eric hommelberg reminds us of the fundamentals in this essay.

Confused about the latest sell-off in gold? Confused about the contradicting explanations coming your way through all kinds of financial media? Will this latest correction be proven temporary? Or did we just witnessed the end of the gold bull market? Has deflation arrived as many analysts want you to believe? Or are we heading for a hyper inflationary recession? Was the brutal sell-off the result of a massive coordinated intervention in order to prop up the dollar? Or was it just the speculators running for the hills? You don't know what to believe anymore? You don't know what to do with your gold holdings? Well, strange things did happen in the financial markets during last month indeed thereby generating too much noise blurring the minds of the average gold investor.

It doesn't help much by staring at daily doses noise, all what should be done in turbulent times like these is to filter out that noise by taking a few steps back and take a look at the big picture and wonder what critical drivers launched the gold prices in the first place from a 22 year low of $250 in 2001 to current prices of $800+ in 2008. You might wonder if a 7 year bull market would be enough to wipe out the excesses created by the 22 year bear market which took the gold price down from $850 towards $250, you might wonder if a few years of increased exploration spending would be sufficient in order to announce enough new world class gold discoveries being brought into production in order to replace the gold ounces being produced these days, you might wonder if the dollar can appreciate from here on the back of an ever increasing US spending attitude (financing of two ongoing wars and bail out of failing banks too big too fail), you might wonder if demand for gold will be decreasing despite the ever growing investment appetite (physical shortages are becoming evident)..

Well, I can go on for a while here but my point is that looking at gold's critical drivers one could clearly see the way for gold is up, not down. The gold bears will have a difficult time explaining gold exceeding $1500 before the end of this decade since their misleading arguments of increased gold supply, reduced demand and deflation didn't work for the last 6 years, it won't work for the next years either. They sound like a broken record indeed and yes, one day they might be right, most probably early next decade or so.

http://news.goldseek.com/EricHommelb...