Still bearish on Gold? Most were calling a top in the $700's. Now that we're consolidating in the $800's the Gold bears are giving their "gold-is-no-longer-an-inflation-hedge" shtick yet again. Obviously you've never had to pay the dowry of your future daughter-in-law. My father-in-law, while in Nepal, provided the dowry for his son's wife which comprised a number of gold jewelry items. Had he been in that situation now he'd be paying 3.5 times the price he paid then. While gold might be considered a hedge from inflation in some cultures, in others (India, Nepal, China, etc.) it represents tradition, reverence, commitment, and, above all, wealth.
The bottom line is supply and demand. More than half of the world's population are in the Asian nations. Regardless of price the demand for gold in China alone rose 24% in the third quarter. Gold jewelry demand rose 24%, while investment gold demand on China's mainland rose a whopping 43% in the third quarter. Meanwhile, with Indian household incomes on the rise "the World Gold Council (WGC) says gold sales in India will rise by 10%-15% this year alone. India's gold imports between January and August were up 86.5% from a year ago."
With that being said, increasing the production of a mining company is a "tedious process of identifying a target gold deposit, exploring it, developing it and building the infrastructure to mine it. And this runs in parallel with the constant pressure of procuring, permitting, funding and then producing the gold profitably. This entire process for a gold mine large enough for the markets to notice can take ten years or more and cost hundreds of millions of dollars."
So, with a growing gold-loving population that increasingly puts pressure on demand, and a slowing production output that isn't keeping pace with said demand, what's the logical conclusion? Higher prices of course. But who's to say how much higher we can expect the price of gold to go really. Adjusted for inflation we're only at a level of about 1/2 of what the price was back in 1980. And it's sure to be a bumpy ride no matter which direction the price of gold decides to take. It may not be too late to stockpile those Krugerrands or step into the futures ring.