One outcome I have believed was possible is for deflation to take over and cause the price of gold to crash but I have kept my bullish views on the precious metals sector for a really good reason. Mining company's have been cutting cost to try to reduce loses or become profitable since the price slipped in 2011. This has caused a lack of new money going towards exploration. This is great news since the demand is so high for the metals and mines have a limited life time. If a mine has a million ounces of gold and its mined up in a lets say a year as an easy number, but they only discover 500,000 ounces that year of in ground supply for future mining potential, that will throw off future supply. So future supply looks like it could be less. That is exactly what is happening right now, as well as high grading, which is mining only the highest grade spots of a mine leaving only grades that are not economical at these prices. Also there are not very many huge deposits being discovered. All of these are reasons why supply will shrink in the future.
What about demand?
I previously was worried about what if a deflationary environment was to come, and that would drop demand. That could be true, as 2008 showed gold dropped (physical metal seemed to be selling at high volumes though). Even if this is the case though, What has me bullish is the middle class in china and India is growing greatly and they are big buyers of gold! This is what Frank Holmes calls the love trade. This is new demand coming to the market as they have more cash to spend in the future! This will help drift the price of gold upwards, and if another harsh bear market was to hit gold, that would hurt future supply from even less funding for exploration, so the future bull market will just be that much greater. The demand will grow and supply for the time being will shrink until the price drifts upwards enough.
Like Rick Rule says, the cure for low prices is low prices. I cant promise this is the bottom in the metals, but if its not, it will make the bull market so much great due to even less supply.
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