What forces drive this enormous demand?

My opinion is not very important, but it guides me in choosing to lighten up or buy more gold. I believe that gold has continued its upward trend line, and not suffered a correction. This means that continued upward or demand pressures are not slowing down, but steady or trending to increase. So, price can only go up, because amounts produced are small, compared to what exists in currency form already. The market is not selling more than it is buying, much the reverse. Buying is hitting quantity levels never before seen in world history.

Fears of inflation certainly lead the way in this increased demand. Much of this fear is rational, stocks are at record high levels, and people like to trim down some profits, in case of retrenching prices. Where to go with the funds? When inflation is feared, and there are enough reports you don't need my adding fuel to these fires, money market vehicles are not a great alternative, and land, well it is speculative and not nearly as liquid. Plus you have to pay taxes to hold it. So GOLD is the answer to many long-term planners parking question, and short-term players also will join in for the profits. The problem essentially is that gold best fills the store of value function that fiat, or paper money, cannot in inflationary times. The real question is what period has been inflation free in the last 150 years? So, metal will protect you best from inflation while offering liquidity and store of value.

IRA allowable currencies are increasing in price steadily since conception of this program in 2006. The increases in prices may not be as dramatic as in 2006, but we can be assured that stocks are not the only option for the future. When good gains are realized as since 2006, we can expect that the floor in future years will be this 700 range. Also, that in under two years, I am calling for under 1 year, the floor will be the "new" production cost, over 800/oz. Yes, next April 15, in 2008, I call gold at 850.

The reason is that 20% is realizable in 08, where 07 saw tremendous selling pressures after April. If you look at the millions of metric tonnes that sold, you will see that demand is far above record levels.

The forces are banking related, but imagine a theatre owner having a good year, and purchasing gold. Then think of a farmer, a builder, and a salesman all deciding a little more gold would be nice about the same time. Add several oil sheiks with too many Sheckels and not enough gold, and you see that demand outweighs supply and production and all the futures contracts together. The margin of increased demand is all that is really in question, is it 15 or 30% higher? The 15% is built in and the extra may take a year, but in five years people will be asking another 50% higher, that puts gold at 1200 in five years.

That is reasonable, as people will need more than 25% for the risk of holding metals. Many people cannot hold metals well, their lifestyles are not given to hard asset management. So, it means that those who do take the risk and manage the coin, will see a return above average. This suits many investors outlooks. When retiring, the metal will again be sold, until then it will rise. And by then, demand could easily double.

That all leaves increasing industrial and jewelry demand unaddressed, rest assured they are growing. So, unless synthetic gold is produced from lead, the future really does look bright for gold. I would not say the same for oil, as demand could swing down for the next ten years in most developed countries, exercising options from coal to ethanol. But gold is expensive to produce, and production costs are rising 20% a year. I think that translates to 18-25% a year appreciation on gold for the coming years, as investors seek to compare possible alternatives. Keep in mind many investments require additional cash, like land or buildings or businesses, while gold requires only safe storage.