"Do you have any concerns that there has been more gold and silver sold than actually exists? I have hear estimates that with gold it's been oversold by a factor of 45."

Eoin Treacy's view The World Gold Council estimates that a total of 165,000 tonnes of gold have been mined as of 2009. This equates to 5,306,400,000 troy ounces (1kg=32.16 troy ounces). Open interest on Comex futures, across all maturities is 619,276 contracts which is equivalent to a call on 61,927,600 troy ounces. All the gold in the world is not available for delivery on futures contracts, but neither does anyone expect all futures contracts to be delivered upon because most of this exposure is synthetic, hedges or for investment purposes. Gold conspiracy theorists tend to focus on the former and naysayers on the latter and the truth probably lies somewhere in between.

Personally, I am more concerned with the fact that most investors do not read prospectuses. The number of instruments offering some degree of access to the gold market has ballooned in the last decade. Some hold physical gold, some hold futures contracts, some are more akin to a floating rate note whose principal is tied to the gold price, some offer leverage to the gold price and this is achieved in a variety of different ways. While all of these instruments have their place given the differences in investor preferences and behaviour, I suspect many investors do not have a thorough understanding of the instruments they are investing in; many of which simulate the movements of the gold price rather than physically taking part in the market.

The liquidity of such instruments is also a concern and can become a significant obstacle to performance. This issue could be downright dangerous to one's financial health in the event of a disorderly mass exit from the fund / ETF or ETN concerned.

This article from Mineweb yesterday citing increased demand for more secure storage space for gold bullion indicates that investors are increasingly hoarding the metal for its value as a hedge against depreciating fiat currencies. For the foreseeable future this process is likely to continue and will potentially accelerate. It is removing supply from the market and helping to support prices. When the market eventually tops out this supply will flood the market as positions are exited and will depress prices. There is no sign of that happening now.

Gold continues to trend steadily higher and hit a new high today. A clear downward dynamic would be required to check the short-term advance while a sustained move below the 200-day MA, currently in the region of $1200, would be needed to question the medium-term uptrend.

Silver broke upwards to a new 30-year high today and a clear downward dynamic, sustained for more than a day or two, would be required to check momentum beyond a brief pause.

Palladium found support in the region of the 200-day MA from May and has since rallied to test the 2008 and April highs. A break of the short-term progression of higher reaction lows, with a fall below at least $525 would be required to question potential for a successful upward break.

Platinum also found support in the region of the 200-day MA but languished mostly above $1500 for months before rallying three weeks ago. A decline below $1600 would now be needed to question potential for further upside.

The NYSE Arca Goldbugs Index of unhedged gold shares has been trending steadily towards the upper side of its yearlong range for the last couple of months and broke emphatically upwards today. A break of the rivetingly consistent ten-week progression of higher reaction lows, currently near 490, would be required to question scope for further upside.