By James Turk

Why should you be taking a long, hard look at gold? Gold has been in a bull market since 2001. It has risen each year since then, averaging 14% per annum.

A long-term gold chart reveals that gold has actually been in a bull market since the mid-1960's. Its sideways price action since reaching its all-time high of $850 in January 1980 is simply a consolidation of its gains in the previous decades.

The patterns from the long-term chart indicate that gold will continue climbing from here, and that a price over $1,000 looks inevitable, probably within the next 18 months. The fundamental factors driving gold also suggest that its price will climb higher.

Foremost among these fundamental factors is US dollar monetary growth. The Federal Reserve's decision to no longer report M3 money supply numbers will prove to be disastrous for the dollar because disclosure is needed to maintain confidence - the absence of disclosure will reduce the demand for the dollar and ultimately lead to its collapse.

Investment Implications of the Weak Dollar

The reality is that gold is not rising, but rather, the US dollar is falling. It is losing purchasing power. This conclusion is made clear by the rise in commodity prices. The Commodity Research Bureau Index - like gold itself - is in a multi-year uptrend. It takes an increasing amount of dollars to purchase commodities.

Of particular importance is the price of crude oil. While its price has risen in dollar terms, the price of crude oil remains essentially unchanged in gold terms, demonstrating that gold preserves purchasing power.

This analysis of the decline in the dollar's purchasing power is not only relevant to the price of commodities and other tangible assets. It can also be applied to financial assets. The price of the Dow Jones Industrials Average shows that stocks are overvalued, while gold is undervalued.

The logical conclusion is that gold's bull market has a long way to run because the collapse in the US dollar is just beginning.