Gold has been used throughout history as money and has been a relative standard for currency equivalents specific to economies of regions or countries, until recent time. Gold has been in a downturn for more than two years now, resulting in the lowest investor sentiment in many years. Hardcore gold bugs find no explanation in the big picture financial numbers of government deficits and money creation, which should be supportive to gold. However, the author has an explanation for why gold has been down, why the price is about to reverse itself, and why it will surge in the future.
First, the author forecasts that the production of mining gold will pullback significantly in the near future. Gold producers don't operate in a vacuum. If the price of their product falls by 30% over a two-year period, they will need to make some adjustments. And those adjustments, more often than not, result in lower production, delayed mine development plans, and cuts in exploration budgets. The response is industry-wide, and even low-cost producers are not immune. The drop in metals prices means some mines cannot operate profitably, and if the losses exceed the cost of closure, these mines will be shut down. Therefore, the supply shortage of gold can impact the rise of gold price in future.
Second, another factor that affects the gold price surging in the future is the high demand of gold from Asia. Since 2010, China has been buying gold and not buying US treasuries. In 2013, China imported over 1,000 tons of gold through Hong Kong alone, and it's likely that as much gold came through other sources. Moreover, India was expected to import 900 tons of gold in 2013, but it may have fallen short because the Indian government has been taxing and restricting imports in a foolish attempt to support its weakening currency. Smugglers are having a field day with the hundred-dollar-per-ounce premiums. With the high demand of gold from Asia in the next recent years, the gold price may surge in...