First of all, saying gold's price is fear based indicates some posters have not researched this properly. I am sure you have heard the term peak oil, well it appears we have hit peak gold as Barrick estimates that 76/77 Million ounces were mined in 2009 and that this should fall to 72/73 million ounces over the next three years. So as the price goes up, production declines. Does this makes sense?? Well it does if you understand what has happened to grade in the last few years. In 2005, the average grade of gold mined was 1.7g/t for the top 42 producers. Now, we are mining 1.2g/t. I saw a project by Barrick in Nevada where the cut off was 0.3g/t. As companies deplete their reserves, they continually add to their reserves for their future. When, those new reserves are coming in at an average of 0.7g/t you can see that we are scrambling to find enough gold for the demand side of the equation.

The run up in PoG in the last 10 years from $250 to $1130 is mainly based on fundamentals. The US$ only accounts for $250 and demonstrates how bullish the price of gold has been.

Barrick after looking at all this completly de-hedged their forward gold sales, spending millions of dollars to do this. Barrick understands the fundamentals of gold production and that huge expense will be more than covered as the PoG increases.

If fear of the US governement failling does come into play, then the PoG will be hitting new highs for a long time. However, we do not need this to be very profitable when you consider we have passed the "Peak Gold" period.

Glorieux