Central Bank Reserves

To date, the price of gold has been driven higher not by the average investor, who still owns no gold, but by the world's central banks. As you can see from the following graph, the world's money used to be at least partly backed by gold. Today, the gold backing is less than 10 %.

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Now, as confidence in paper money has failed, the trend has reversed, and central banks are buying gold, which has been the main driver of gold prices over the last 10 years.

Now, specifially, the nations doing the most buying in a race to steady up their currencies with more gold and less dollar backing are the Russians, Chinese and Arab nations. Take a look at how much more gold buying they need to do to come up to par with the West.

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Gold has gone from $250/ounce to $1900/ounce and the East is no where near finished shoring up their currencies. They still have many multiples more buying to do, which should easily push gold into the $10,000+ range within the next 5 -10 years.