The "real" Price of Gold?

Gold may have a lot of upside price potential, even with the major run-up it's had in recent years. It is about 30% below its all-time high price, if you adjust for inflation, and demand is likely to increase. A lot.

Gold prices historically have risen in times of fear and of inflation. And then there is good-old supply-and-demand.

There is already fear. The world's major economies are struggling, obviously.

There could well be inflation. The loose fiscal and monetary policies governments are using to fight-off recession and depression usually result in inflation.

And then there are China and Japan... China has just 1.6% of its currency reserves in gold, and Japan just 2.5%. The USA has 70% and Germany, another major developed economy, has 66%. In a world where the value of currencies is dubious at best right now, gold is probably going to be coveted.

What could this mean? Well, if China and Japan were to increase gold reserves to just 10% (nowhere near the 70% of the USA), the increase in demand for gold would be 3.5 times annual mine production. That would drive prices up, both for the gold itself and, presumably, for the stocks of gold mining companies.