Ron, you're right, there's nothing magical about the gold market today. I think alot of folks have been traumatized by what amounts to severe bear market and look elsewhere for the cause.
For example, I've read suggestions about a divirgence between the "paper" gold market and the physical gold market. If so, I suggest we buy on the COMEX, demand delivery, and then sell at a premium to the public. (Is this illegal?) Point is: such an anamoly couldn't persist.
The most we can say is that producers will produce less gold this year than the total amount that will be bought. Explanation: already existing supply will fill the gap.
Obvious, but worth repeating that...
for every buyer, a seller. The only thing that can cause the price of anything to tank is when sellers are willing to sell more units at the current price than buyers are willing to buy. The market must then provide a lower price so that enough buyers are generated to match the number of units willing to be sold.
The argument that CB lending or selling is behind the lower gold price is very likely. Gold tends to be hoarded for a rainy day, and therefore investors that hold the above ground supply tend not to sell on bad news (because to these people it doesn't matter, gold is a store fo value, not a speculation).
The current market is the result of someone selling (a cb or short seller borrowing from a cb) at a price well below the price gold must gravitate to longer term.
I say that even though the annual production deficit doesn't prove that gold will rise longer term. Afterall, after having our fill of years of above ground gold, the supply demand curves might change substantially (because more folks would have gold, maybe demand less, and there would be more folks available to sell, more gold to re-circulate after the cb's dumped theirs etc.).
Longer term supply demand dynamic actually depends on lots of factors, especially pop. growth, growth of other real assets, and mots important whether gold is viewed as commodity or money.
Suffice it to say though that we can expect a much a higher price viewing it from ANY angle.
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