New Investment Demand Outstrips Production Increase

That the start of a Bloomberg article that looks at reasons why gold may continue to advance over the longr term.

Exchange-traded products backed by bullion added 41.7 metric tons in the week to May 14, the most in 14 months, data from UBS AG show. China, Australia and the 15 other largest mining nations averaged weekly output of 41.6 tons last year, researcher GFMS Ltd. estimates....

Supply from mines, which peaked in 2001, fell in five of the last eight years, data from London-based GFMS show. Companies are digging deeper to extract dwindling reserves, with mines in South Africa extending as far as 2.35 miles (3.8 kilometers) down.

Investment, including bars and coins, almost doubled to 1,901 tons last year, exceeding jewelry demand for the first time in three decades, according to GFMS. Jewelry will jump 19 percent to 2,100 tons this year and industrial use 8 percent to 398 tons, Sydney-based Macquarie Group Ltd. says.

The article does mention that economic recovery is the biggest risk factor for gold. It also has this fact about gold/greenback concurrency: "The metal added 18 percent in 2005 when the U.S. Dollar Index, a measure against six counterparts, advanced 13 percent."