This Perfect Storm - Could send gold to $5,000 an ounce

When money supply and deficit spending grow and when real interest rates fall below zero, the perfect storm for gold begins.

With no growth in money supply in the US or in Europe, with sustained long-term deficit spending and with governments trying to fight deflation, gold stands its ground. With the debasement of the Euro and interest rates in Europe flat, gold's attraction to the savvy investor is elevated.
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Buying gold is one of the best ways to preserve wealth and purchasing power. Gold has the power to change lives today as it did in centuries past. Gold protects wealth against inflationary and deflationary times. Gold is consistent, it gives the holder power.

The price of gold is driven globally while the dollar is largely dependent on the monetary policies of the US. As the dollar depreciates, the price of gold increases.

The dollar is falling. Central banks in emerging nations are buying gold. Monetary policies are leading to higher inflation. Who is chasing this momentum? Individuals and institutional investors who refuse to be on the sidelines, that's who. Those who realize that even financial advisers are now including gold as part of asset allocation.

If even a small share of all the investors of the world started allocating gold into their portfolios, that gold movement would cause the continual rise of the price of gold worldwide.

Actual storage space for physical gold has become so scarce, that some retail investors were recently told to move their hoard out of HSBC's Manhattan vaults so that the bank could better service institutions, according to The Wall Street Journal.

Unlike buying stocks or bonds, you have the option of purchasing and possessing physical gold in either gold bullion or gold coins. Gold purists insist that the only way to take full advantage of gold's special benefits is to buy physical gold.

The price of gold is a result of the physical supply versus the physical demand. The controlling players are those buyers and sellers, at any particular time, who are the biggest. The largest differ substantially in their actions.

The traditional gold market no longer exists. It is morphing into an investment market.

The importance of understanding the new gold market factors is vital. With the steady flow of investors who are turning to gold, the upward trend of gold is here. The US Treasury, on June 9, 2010, reported "The US has a worse budget deficit than the Eurozone… By 2015 the net public debt will rise to an estimated $14 trillion, with a ratio to GDP of 73%."

So,"…when almost everything went wrong for investors, the gold market went very right" says Chris Mayer for The Daily Reckoning.

Is it too late to buy gold? No. It is the ultimate form of money. Gold has a track record, it's, well, golden.