Gold futures fell for a third day yesterday. They were driven down by sliding crude-oil prices and a strengthening dollar.

For gold bugs, the yellow metal now sells at a depressingly low $808.20 an ounce on the Nymex. There’s worse news on the horizon. Jon Nadler, senior analyst at Kitco Bullion Dealers, says gold “appears poised to retest the $775 zone.”

Gold bug Ed Bugos isn’t sweating it. He says central banks and their inflationary policies will see to it that gold will surge again. Ed has ten very solid reasons why we’re about to see the last of cheap gold.

This from Whiskey and Gunpowder:

So what would it take to see the same love in gold that we saw in tech stocks in 1999, the housing market in 2003-05 or oil recently? The answer is simple: More of the same…

You will see it in gold when all the usual anti-gold arguments fall flat on their faces… when people no longer believe that the “modern-day” central bank has a handle on inflation and interest rates; that inflation is “caused” by oil, growth or a shortage of goods; or that prices will one day come down.

You will see it when people realize that the bubble in commodities is really a destruction of confidence in the medium of exchange. Yes, this can get overdone, like anything else in the market. But unlike a specific bubble, it will repeat itself generally, against some other asset, commodity or maybe all goods.

Why?

Simply because the central bank and government is afraid to address the root cause.

All that the central banks have to do is abandon the boom by letting the market determine the proper interest rate level. This is the only lasting solution to the current inflationary quagmire.

They won’t do it. The short-term costs are too high, and rise with each new asset bubble.

No, the bull market in gold is not over.

The best is yet to come.

Top 10 Reasons to End Cheap Gold

I can understand why investors are selling their large-cap gold stocks. They aren’t making any money - at $900 gold! And they’re trading at 20-50 times earnings. Still, while the rising cost of producing gold is trouble for gold stocks, it is also one of the most bullish factors underpinning gold values.

Effectively, $700 gold would be as catastrophic for the industry today as $300 gold was in 1999.

With jewelry demand alone, the supply side is already tighter than it is in oil.

As I went through my 18-point model, I was looking for reasons to buy gold that have not been widely discounted, aside from the big one above - i.e., in which the masses wake up and fall in love with gold:

1. Cost inflation slowing down development pipeline, hence future production growth

2. Political risks in frontier countries also shrinking available supplies

3. Faltering global economy persuading central bankers to abandon tightening plans

4. Soaring government deficits

5. Saber rattling between Iran and Israel and other geopolitical tensions heating up

6. Another GLD ETF just listed on Hong Kong Exchange

7. Some countries already experiencing crackup and heightened gold demand

8. Shrinking official gold supply

9. Seasonal trends turning bullish again into the new year

10. Large producer Anglo has yet to cover all its hedges.

Source: Bulls and Bears Still Fighting Over Trend