1) Supply and demand fundamentals: Global mine production of new gold decreased by more than 5% (the largest decrease in more than 60 years), while gold demand rose by more than 7%.
2) Huge increases in debt: Over the past five years, the level of trade and government debt has soared. The debt now exceeds the accumulated debt of the previous 220 years of American history.
3) Growing uncertainty about the dollar: Uncertainty in the financial markets about the future of the dollar is growing. The current weakness of the dollar may simply be a reflection of trade flows or, more likely, a systemic loss of confidence.
4) A gold bull spreading to other currencies: Over the summer of 2005, an important bullish signal was given when gold broke through resistance in euros at the 350 figure.
5) Rising retail investment: The real swing factor in gold-oriented interest has come from the man on the street (from Dubai to Shanghai to Mumbai).
6) Increasing investor interest in gold ownership: When investors become interested in owning gold and reallocate even a small, 10% portion of their portfolio to it, the global supply cannot meet the incremental demand.
7) Price and expenditure shocks: Price and expenditure shocks continue to impact the already fragile U.S. economy. Hurricanes Katrina and Rita, plus the energy situation created a very dim outlook for the dollar.