17 Reasons Why Gold Will Continue To Rise - Part 3

12. Large Short Positions.

Despite dramatic de-hedging by the gold producers, whose original excessive hedging was ostensibly the reason for the proliferation of gold derivatives, the notional value of OTC gold derivatives still remains elevated. This suggests either a major legitimate bet against the secular trend of the gold price or ongoing nefarious activity (i.e. price suppression by the usual suspects).

The existence of large concentrated short positions on the Comex held by a few bullion banks makes it reasonable to assume that it is the latter. If the longs were to ever call for delivery, the shorts’ position would be extremely problematic due to the increasing physical shortage of gold.

13. Increasing Recognition That Gold Price Has Been Seriously Suppressed.

More and more members of the financial establishment have been forced to concede that gold has been subjected to constant price management by western governments, their central banks and their bullion bank surrogates. The increasingly egregious activities in this area are forcing any thoughtful person to acknowledge what is occurring. The work of the Gold Anti-Trust Action Committee (GATA), which has been remarkably accurate over the past ten years, is finally receiving belated acknowledgment following years of being studiously ignored.

The extent of the suppression has been so great that it virtually guarantees a far greater upward explosion in the gold price than would otherwise have occurred.

14. Suppression Causing Extreme Undervaluation Of Gold.

Measured by any number of metrics (gold price in relation to the staggering amount of money and credit that has been created over the past several decades, gold’s extreme undervaluation relative to platinum, the gold producers’ pathetic returns on capital at the current price, etc.), gold is far behind where we believe it should be.

If gold had merely kept up with the reported rate of U.S. inflation since its peak price in 1980, it would presently be trading in excess of $2,300 per ounce.

15. The Relatively Small Size Of The Gold Market.

In the past, gold’s small market footprint has actually been a negative because it more easily facilitated the price suppression activity. This is about to change, however, as gold becomes the asset of choice for more and moreinvestors for all the aforementioned reasons.

All the gold mined since the beginning of time is worth less than $6 trillion currently and the total capitalization of all the world’s gold stocks barely exceeds that of Walmart. This pales in comparison to the amount of paper money that could seek refuge in the world’s eternal money.

16. Gold Is In An Established Powerful Bull Market.

Gold is in the tenth year of a powerful bull market since it double bottomed at just over $250 per ounce in early 2001. It is most definitely a stealth bull market as the sentiment remains remarkably subdued, a fact illustrated by an extensive worldwide poll conducted by Commodities Online in the spring of 2010 that revealed that 93% of the respondents expected the gold price to fall.

Gold has been climbing a classic “wall of worry”, a climb made steeper by the stout resistance of the anti-gold cartel and the constant negative propaganda emanating from its mainstream apologists.

17. Gold Has Endured.

Gold is indestructible, possesses a high value-to-weight ratio (which makes it easy to store and transport), is not anyone’s liability, can be easily hidden (which has been a considerable attribute in the past) and, most importantly, has provided protection against the destruction of wealth for centuries.

Conclusion: The fundamentals for gold are impeccable, the long term technical picture is exceptional and gold remains very inexpensive when compared to almost every other alternative.