Demand for physical gold is soaring so much that it is almost impossible to get hold of right now. And gold production is lower than in 2000. Andrew says all this means it will soon be gold’s time to shine…

More from Investor’s Daily Edge:

Gold dropped from $915 to $859 on Friday. That’s not supposed to happen while the market is crashing. What’s going on?

It’s not that gold has lost its luster. But institutional investors were forced to sell gold on Friday to meet margin calls.

If equity and hard assets continue to lose value anywhere near the rate of last week, margin liquidation will continue. And gold could go down even more.

But make no mistake about it. With the market crashing and dozens of governments printing money like there’s no tomorrow, investors want to be in gold.

Before the sell-off on Friday, the price of gold was up more than 20 percent following Lehman’s collapse.

The demand for physical gold this month has surged to what one trader calls “unprecedented” levels. The US Mint has doubled its gold-coin production but it hasn’t been enough.

Gold dealers have had to turn away customers wanting to buy coins and bars.

But it’s the physical demand (for jewelry) that ultimately decides the price of gold. Jewelry demand accounts for 60 percent of total gold demand and it’s down so far this year.

Will it pick up? The world’s biggest gold consumer is India and Diwali – the festival of lights –begins October 28th. Gold sales usually surge with the approach of this festival.

Then there’s this: Gold production today is lower than it was in 2000.

Gold is rarer than ever. The markets are going to hell. It’s gold’s time.

Source: Has Gold Lost its Luster?

The tiny silver rally in London didn’t last long, and the lights really got turned out the moment that the traders on the Comex got going. There was certainly more stop-loss selling yesterday…and maybe even some new shorting…which we’ll find out about later this morning.

Of course, the continuing softness in all other commodities…and the dollar rally…did nothing to help things for either gold or silver. They just got sold off with everything else.

Open interest in gold and silver went in different directions once again on Wednesday. Gold o.i. rose 2,244 contracts, but silver went the other way…down a fairly substantial 2,663 contracts. From looking at the charts for both metals, we are fast approaching the critical 200-day moving averages, which are now a chip shot away, considering what happened yesterday. The RSI and MACDs for both metals are quickly approaching hugely oversold. Is there room to go lower? Certainly…but not much. Just check out the 3-year chart for gold, which is here.

The silver chart is here.

You will note that these declines look suspiciously familiar to the declines in 2006 when the bottom was reached the moment that both gold and silver touched their respective 200-day moving averages in mid-June of that year.

I note from Dennis Gartman’s commentary very early yesterday morning (before the Comex carnage began) that he expects central bank selling to block any recovery in the price. I wouldn’t bet money on that, but here’s what he had to say nevertheless…”We do not expect this rally to last long, and suspect that there shall be material selling in spot gold between $875-881. We look for the legacy central banks to ramp up their gold sales on this strength, for they’ve got gold to sell en masse if they wish to meet the total they are allowed to sell under the Washington Agreement.”

This too, as they say, shall pass. I had a little money in my account yesterday and I put it to work. If this isn’t the bottom, it’s only a few days off…so take heart.

Today’s commentary comes (once again) from James Turk over at goldmoney.com. His latest offering is entitled “A 4-Month Review”. Considering what’s going on right now with the prices of all natural resources…including our two favourite metals…this is required reading. Click here.

Joint intervention in gold sales to prevent a steep rise in the price of gold (in the 1970s), however, was not undertaken. That was a mistake. – Former Federal Reserve Chairman Paul Volcker (writing in his memoirs)

It was bad news across the board again on Thursday. But that didn’t matter. The Dow is back over 13,000 and the S&P is above 1,400…so happy days are here again. Everything is fine. Fridays are always interesting…and I expect this one to be no different.

Have a great weekend, and all of us at Casey’s Daily Resource Plus will see you here tomorrow.