Is Gold Supply Shrinking?

I'm reading an article this morning from Mineweb, that's quoting John Embry, a globally known gold analyst.According to Embry, "Falling output, debased dollar and inflation will keep gold high for years."

As have others who have come before, Embry points to the wholesale printing of money to monetize debt and the inevitable inflation and higher interest rates that follow, as a primary reason gold prices are expected to keep rising.It's like a giant game of Leap Frog.

First, you print money to avoid economic collapse.In turn, that inflates the money supply but devalues the dollar.Then to stem the bleeding of dollar value, you raise interest rates but that's a big negative for stocks, real estate and the economy in general, as higher borrowing costs shrink economic activity.Less borrowing by businesses and consumers means less spending from the same.Now the money-printing frog has to once again leap to the fore and the game goes on as the raising interest rate frog now awaits his queue.

This argument alone, has given analysts all around the world a giant platform on which they can make a myriad of gold predictions.$2000 Gold in 12 months.$5,000 Gold to keep pace with hyperinflation.Gold $16,000 as we revalue gold reserves to an amount sufficient to pay off foreign debt.Man as a gold investor all of that is fun to read, right?The reality, however, is that the current financial condition of our markets and our economy should be enough to have us believe that gold will just simply keep on doing what it has for 10 years.CONSISTENTLY OUTPERFORM INVESTMENT ALTERNATIVES!

With increasing frequency, though, we are beginning to hear more about decreasing output from mines as it relates to gold supply and demand.Aaron Regent, President of the world's largest gold mine, Barrick Gold, recently told investors at a conference in London that major gold mining companies are struggling to replace mined-out reserves.He speaks of a "growing below-ground squeeze on gold's pricing."

Claiming production peaked in 2000, Regent calls attention to facts that seem to support his premise.Since year 2000 the gold price has quadrupled.In addition, unprecedented demand from the U.S. Mint for American Eagle Gold Coins has brought us widely publicized shortages of these gold coins.Perhaps now we can see why some gold price predictions just blow the gold charts apart.

So what does this all add up to for gold?No one has a crystal ball, but there's a third frog in the game - the shrinking supply frog.If what we have to look forward to is less dollar value, hyperinflation, rising rates and shrinking gold supply, then at the very least you have to anticipate gold will continue to outperform just about every other investment there is.