Like sprockets selection.......Having survived 79/81, 85/87, 93,...

Like sprockets selection.......

Having survived 79/81, 85/87, 93, and this one so far (plus a student of the Poseidon boom thanks to Trevor Sykes), this thing is only starting to get silly IMO.

Base metals may do need to let off some steam soon however gold is in a special asset class all of its own.

It is no longer the important store of wealth it once was to the world, but it still has meaning to the rising middle classes of the the growth economies-China, India,Brazil and Russia.

In perspective as an asset class, its comparative position is minute when compared to other commodities (copper/nickel/iron ore, even zinc!), energy values or currencies. Its position will not vary much if it were to even quadruple in price.

If global investors are comfortable with it as an asset class, which appears to be the case, cannot see any reason to hold it back. It is jumping through emotive barriers with ease-$500, $600, $700...... That is a sign of serious demand that has outgrown simple hedge fund activities by Nth American houses such as Goldmans and JP Morgan.

Producer hedge books have been whittled away at a rate of knots. See for example recent activities by the likes of Barrack. This reduction in hedge books has reduced the ability of the Nth American houses to play positions-everyone has gone 'spot'!

And will this new found vigour generate new production? Yes-but not overnight, or even years for that matter. Projects such as Boddington takes a few years to come onstream. Our sharemarket is currently getting excited about a potential 50,000 ounce producer-in years gone by, (the last gold boom in the 80s), you needed north of 100,000 new ounces to get on the radar.

As for discoveries-the Australian average lead time from discovery to production in the past 30 years is five years (twelve years elsewhere!). It is not getting any quicker given native title constraints, environmental factors and so on. But guess what-we haven't had any decent discoveries for zonks anyway! (Here or overseas).

South African production continues to plummet and once those deep reefs close they do not reopen-water/blockages/capital costs/AIDS!

Add in the US currency concerns and the traditional arguments in favour of gold you can see this market getting a lot sillier yet!

In 1980 it hit US$800-whats that in todays dollars? US$4,000 or there abouts? hehehe.

Enjoy one and all........

Cheers,TAS