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|Includes: GDX, GDXJ, SPDR Gold Trust ETF (GLD), OIL, SLV
Why is gold marching higher against the U.S. dollar, the world's reserve currency?
Why are the currency and stock markets reacting unfavorably to the stated intent to increase the debt of the U.S. by $2.5 Trillion, more debt than was accumulated from 1776 to August, 1987, the first 210 years of the building of the United States, including many, many costly wars and economic crises?
There are many arguments that explain this and many that claim that the rising price of gold is all smoke & mirrors and that gold is going to correct back to much lower prices (i.e. a lower exchange rate with the USD).
But, let's step back and look at it through a different lens for a moment.
Let's look at the rarity of the substance relative to other assets.
It is a very, very rare material and so, to the point that it becomes only slightly more in demand, the acquisition price can swing dramatically.
There are about 150,000 metric tons of gold in the world.
For reference, that world supply - in above-ground jewelry, bullion, coins - is roughly a block the size of a football field stacked only 5 FEET DEEPThe ETF GLD owns about $66 Billion of the stuff; this is only enough to fill a normal sized master bedroom - 10 feet high and roughly 14 feet by 15 feet.
The point is: Gold is a very rare commodity, is highly sought after, and it is very expensive to mine and refine more.  And, it is only being added to worldwide at a rate of about 1.5% per year at an average cost of $580-640 per ounce.
As for paper currency, it is ANYTHING but rareAnd, it is being added to worldwide at an astonishing rate limited only to how much deficit spending any politician finds necessary.  So, when something that is extremely rare is exchanged for something is very common and easy to expand in supply, the exchange rate can become very volatile.
There are about $2 Trillion in actual U.S. currency in circulation todayBut, the issuer of this currency (the USG) owes $14.5 Trillion and just agreed to raise that debt level another $2.5 Trillion.  In addition, the total unfunded future obligations amounts to another $115 Trillion.  That is - are we sitting down? - 46 years of future federal tax revenues at current levels, not allowing for inflation.
Debt is also a form of "currency".  See HERE.  It is a liquid substitute for cash and can be converted into cash fairly quickly (in most cases - at some exchange rate).  People can borrow on future cash earnings by creating debt today and spending it; so, again, in that respect, it is a substitute for cash, i.e. future cash-earned-for-time-workedSo, the more of it there is around, the more debt "currency" there is
As we can see, there is not only a LOT MORE cash being passed around than gold or any other PM and cash is a physical thing that can be created by the issuer country at will and at near zero cost -- apparently with no limit since the "debt limit" is raised every year or so whenever it is reached.

In fact, the USG has raised the debt limit since Obama took office four times from $11.3 Trillion to $16.8 Trillion - an increase of 49% in only 32 months!!!!

For reference, a trillion dollars is a stack of $100 bills larger than the size of one of the twin towers that used to be called the World Trade Center in New York.

So, regardless of the physical size of it, creating new debt is just a bit easier than digging gold ore out of the ground 200 miles out into the frozen tundra in Alaska, 2 miles deep, building pipelines or electrical towers to provide the energy to remove the ore and refining it onsite.

How rare is gold - really?

About 2/3 of the world supply of gold has been mined since 1950See HERESo, world supplies of gold have increased by 100,000 tons from 50,000 tons to 150,000 tons since 1950.
The world population in 1950 was about 2.55 Billion.
World population is expected to be 7.5 Billion people by 2015.
Thus, the world population has also tripled in 65 years.
Gold is not becoming any more commonplace; world supply per capita is the same today as in 1949 -- 0.6-0.65 ounces per person living on the planet.

What is paper currency worth - really?

The problem with measuring the value of paper currency over long periods of time is like watching a glacier move down a hillside.  As they say, "it moves with glacial speed", meaning near zero.  But, it does move considerably and one would think that the slow speed is intentionally designed to make the moves imperceptible. 
The average wage/salary in the United States has increased 25-27 times since 1950.  But, that average wage/salary has declined over that period of time - as measured in buying power.  For reference on the value of a person's work effort measured in USD, in 1949, a new graduate chemical engineer from a top university was paid about $3,500 per year or 100 ounces in gold.    In 2010, that new graduate is now being paid about $90,000, 27X the 1949 rate -- about 50 ounces in gold.  The new graduate at $90,000 per year is worse off than the graduate of 1949 being paid $300 per month.
What about other pay scales?  The minimum wage in 1949 was 40 cents per hour.  Today, it is $7.25, over 18X the 1949 rate.  The extremes of pay for professional athletes and entertainers have increased 40-100 fold.  Let's use 25X as the multiplier for wage/salaries.
As further evidence on the inflation rates of a basket of economic inputs, there are many other assets of constant content & quality that have risen between 17 and 27 times in the last 60 years.  An example is a high quality suit made the same way as in 1949 or a 16 ounce steak in New York's top restaurants, etc. because they contain the same amount of fuel, material, hours of labor, etc to produce them and deliver them to the buyer's handSee "The Gold Suit".  The high-end suit in 1950 cost one ounce of gold.  That suit today costs $1,600 to $3,000 depending on which high end seller you go to....roughly one ounce of gold.
But, these things are not rising in quality or value at all.  What is happening is the value of the paper money is roughly 3.5% of it's 1949 purchasing ability or 1/28th.

Why?  Because paper currency and debt can and does keep pace with any economic phenomenon that exists on earthOne of those economic phenomenon is the desire to have more cash to spend to solve problems - or should we say, changing the nature of those problems and to put those problems off for solving later.  It turns out that there is no magic pill for problems except hard work and struggle and inventiveness, much like the effort necessary to another bar of gold bullion or Vienna Philharmonic coin.  Paper money only needs a constant and growing supply of trees to mulch into paper and colored inks to print it.

The exchange rate between something that can be created freely at no cost and something that can only be created very slowly at great cost should, as time passes, grow geometrically.  It has, from $35 to $1835 and, as long as more paper money or debt is created, the exchange rate will grow.  For more on the likelihood of continued money supply growth and growth of debt, see HERE.

Disclosure: I am long GLD, GDX.

Additional disclosure: Long physical gold.