Gold

Gold is trading up in EVERY major currency in the world. This comes as a flight to quality during market volatility, and if you ask the gold bugs, it is long overdue.

Around the gold watering hole, investors believe a true bull market in the yellow metal must be a GLOBAL bull market.

Now I read several gold articles and newsletters every week. I hear opinions from way opposite spectrums.

On one side, you have a gold bug that feels the yellow metal has completely decupled from its inverse relationship with the dollar. This type of gold bull believes that the only thing pushing the gold bull market forward is supply and demand fundamentals.

On the other side, you have an individual that believes gold to be the ultimate inflation hedge, and that the only thing that matters is the value of the currency going forward.

It’s a simple notion. If you lived in Zimbabwe, where inflation is running at several thousand percent, you would definitely feel like gold is in a bull market. What if, at the same time, the Yen is going through a period of deflation and the price of gold is declining?

This is why to accurately judge a TRUE local bull market, you have to look at the supply and demand fundamentals.

What the supply and demand fundamentals do is give us a judge of mine production and the supply of gold from central banks. This will affect the price of gold in every currency of the world.

According to GFMS, global mine production in 2006 was 2,471 tonnes. A decade earlier, mine production was 4,127 tonnes. During both these periods, even with the change in tonnage, mine supply made up roughly 60% of total supply. A country like South Africa, which has historically produced a very extensive amount of gold, has a mine production level at a 22-year low.

And for demand, look at the ETFs from 2004. These have greatly increased the demand for gold and in 2006 ETF gold holdings have more than doubled their holdings since 2004.

That’s it for how the global bull market is shaping up. But, what does that mean to you?

Well there are small-cap plays and gold stocks in all of this. In fact, these are the best ways to profit from a bull market like this. I still am pushing Silver too. Best gold stock is GG.