Bullish fundamentals for gold

Last week we reported on SNL’s latest gold mining report.  If you haven’t read it, we urge you to here.  The following quote from Hebba Investments provides insight in to how important a respected analyst thinks it is too…

“There is much more to be gleaned from this report, but for gold and mining investors, it is absolutely critical to understand what we think are the major conclusions discussed in the report:

  • Discoveries of gold resources and reserves have been falling and are not keeping up with gold production
  • The trend of falling gold discoveries has accelerated over the last decade and the replacement rate is around 50% of the production rate
  • The time it takes to bring a discovery to production has increased substantially to close to twenty years

As the supply and production picture only worsens despite the rising gold price, we believe prudent investors should recognize a significant opportunity to make money by buying and holding gold (and their paper equivalent the gold ETFs (GLD, CEF, PHYS)) - though we stress that physical gold and paper gold are two VERY different investments and investors should only invest in the ETFs after creating a comfortable physical gold position.

This is not a complicated trade and everything which we've said so far has nothing to do with the many other catalysts that we write about on a regular basis (such as the US fiscal position, the battle between bondholders and the Fedincrease in central bank purchases of gold, or the deteriorating world order). In fact, even the supposed improvement in the US economic picture (the main reason investment banks forecast a falling gold price) would still have no effect on this much more important fundamental issue.”

We strongly suggest you read the 3 links included in this quote as well.