Recent financial shockwaves to markets in the United States and around the world have caused investors to once again look to gold for protection of their wealth.

While gold has performed well in the past five years, further steep rises in price are almost a mathematical certainty. That is because annual demand for gold sharply exceeds mine supply by a huge margin, roughly 1,500 tons. That’s about 60% more than all the gold mined worldwide each year. And the gap between demand and supply is rapidly widening. To find out why, read on.

Greg McCoach founded AmeriGold in 1999 when he saw a situation where gold and silver were about to explode upward in price. He began helping people understand that owning physical gold was bedrock in one’s portfolio and suitable for a 5% to 10% diversification. At the time gold was just hitting its low of $255 an ounce. Since that time gold has risen in value by over 185%, hitting its most recent high of $730 an ounce in 2006. Greg has been right on. But the best is yet to come!

At its current price of $660 an ounce, Greg is once again inviting investors to take part in one of the most exciting secular bull markets in decades, a market he believes will soon go ballistic.

Gold Is Money

Gold is the only commodity produced for accumulation. Other commodities are produced for consumption.

Take copper, for example, which is dispersed in wires, cables, electronics, and many other applications. Most of it is not readily retrievable. Gold, on the other hand, is not consumed but stockpiled. It is this tendency to hoard gold rather than consume it that makes it a store of value. In other words, gold is money.

Paper money makes a poor store of value because the central banks charged with its management inevitably produce too much of it. History provides many examples of paper currencies that were debased, eroding the wealth of those who chose to hold paper instead of gold. Gold holds its value better because it is not subject to the demands of politics or unforeseeable economic calamities that often motivate paper monetary authorities to choose inflation (creating money out of thin air).

Today, the U.S. dollar as a true store of value is clearly in trouble. See chart of the U.S. Dollar Index below:

History has provided a clear understanding of why gold will soon go ballistic. The graveyard of fiat currencies (money that has been disconnected from gold) is littered with corpses that were once sound currencies linked to the yellow metal. The players are different today, but the outcome will be the same. Gold will triumph. Paper currencies such as the U.S. dollar will fail.

In the past eight years, gold has already proven to be a very successful hedge against both inflation and deflation fears, which is one reason why it is in a secular bull market. Most investors, however, have missed this early move in gold, which has outperformed the Dow hands down for the past five years.

A quote from Jim Sinclair sums up:

I feel the need to repeat what former Fed Chairman Paul Volcker once said: “Until there are put in place policies with a historical ability to reverse the growing deficits in the US budget, US Trade and therefore the US Current Account, the value of the US dollar must continue to decline.” For the same reason, gold is going higher. Anyone who doubts this conclusion simply rails against reality and history.

In the exclusive interview with Greg McCoach that follows, you’ll learn why he believes gold will soon start moving to much higher levels . . . how high he thinks gold will go . . . and what are the best ways to invest.

I had this interview with Greg in August of 2007.

Angel Publishing: The recent selloffs in stock markets around the world has caused great uneasiness and worry for investors. What is your take as to why this is happening?

Greg McCoach: The confidence of investors worldwide has been severely shaken the past several weeks as stocks have succumbed to massive selling pressures. The reason this is happening is because hedge funds and large financial institutions are suddenly needing to raise cash to cover margin calls and mounting losses stemming from problems with U.S. mortgages. In order to raise this cash, financial players caught in the crossfire are selling massive amounts of stocks and bonds.

To make matters worse, investors have begun to sense that there is more of this kind of activity to follow, as the true amount of derivative liability that exists in U.S. mortgages and elsewhere is unknown. The level of uncertainty swirling around among informed investors is greatly increasing, and for good reason.

Angel Publishing: Why are you so confident that gold will continue to move higher in such an environment?

Greg McCoach: I have watched this bull market in gold very closely the past five years. Each incremental move higher for gold is telling a major story.

For starters, supply and demand are completely out of balance. Last year the demand for gold was over 4,000 tons while the supply from all gold mines worldwide was around 2,500 tons. Thus a rising gold price. Even with higher gold prices, however, major gold mines around the world are actually producing less gold. This is due mostly to increased operating costs, long permitting times and diminishing reserves. What used to take six months to permit now takes six years. On top of that, new discoveries of gold have been few and far between.

To make things balance, central banks around the world have been selling gold into this growing supply/demand deficit. The crux of the matter is this . . . just how much gold is left for sale in central bank vaults? With a growing number of central banks looking to buy gold, (Russia, China, India, etc.), the days of those willing to sell their rapidly diminishing gold reserves are numbered. This is the main reason why gold has more than doubled in the last five years.

Second, the increasingly unsustainable debt structure of the U.S. government is causing ripples throughout the financial world. The days of the U.S. dollar as the world reserve currency are numbered. More and more smart money investors are quietly moving away from the greenback. When you consider that two thirds of all central bank holdings are in paper U.S. dollars, you begin to understand the magnitude of the potential problem if a significant move away from the dollar were to occur.

Angel Publishing: But Greg, until recently hasn’t the dollar been strong in international markets and central banks still willing to hoard dollars?

Greg McCoach: Up until two years ago, it was heresy to talk about the dollar in a negative way. That has changed significantly, because the dollar is falling against all major currencies, including gold.

The reason for this is that the dollar is an un-backed, fiat currency—an IOU for nothing! By official government statistics, it has already lost 94% of its value since World War II.

That means that your dollars today are worth what six cents used to buy in the late 1940s.

For the past five or six years, the international exchange rate of the dollar has been in steady decline. The current rating of the U.S. dollar is now at 80, near its all-time low.

See the chart below.

Slowly but surely the past five years, smart money investors have begun to see the writing on the wall for the dollar and have started to exit. The problem is that governments and institutions that have foolishly accumulated hundreds of billions of U.S. dollars are afraid to dump them. The reason for this is simple: sudden selling could trigger a global panic away from dollars. The value of the dollar would drop so quickly that most trying to sell would see their dollars devalued before they could get all the way out.

To avoid this sort of stampede, the large holders of U.S. dollars such as China, Japan and Saudi Arabia are now dumping dollars off the radar screen of the international financial markets through vehicles known as Sovereign Wealth Funds (SWFs).

Through the use of SWFs, governments can off-load dollars by purchasing other non-dollar assets in the U.S. or around the world without any reporting. The problem with this sort of arrangement, however, is that as more and more SWFs are used to dump dollars, the less chance they have of staying off the radar screen.

This kind of activity is suddenly beginning to get the attention of other large dollar holders who are also looking for an exit. Nobody desires to start the stampede, yet everyone is getting very antsy, knowing that only the first people out will be paid anything close to the value of a current dollar.

To keep the whole shaky edifice together (the notion that the dollar is a store of value as good as holding gold and silver), the U.S. has to continually convince others to hold their paper and dump gold. This is the reason why we have heard so many times in the past ten years that central banks around the world have been selling gold. In other words, since paper is as good as gold, you no longer need to hold any physical metals as a store of value. The bottom line, however, is that nothing could be further from the truth.

To complicate matters more, the Fed now finds itself in a real pickle. The ailing U.S. economy needs lower interest rates to avoid major problems in the real-estate and stock markets, but to protect the dollar from free fall collapse a higher rate of return on U.S. paper promises is desperately needed. In other words, the U.S. government is damned if it does and damned if it doesn’t. If the Fed raises rates to protect the dollar, then the real-estate bubble comes unglued and the U.S. stock market will tank. If the Fed lowers rates to protect the economy, it will have to let the dollar fall into oblivion.

In the past, when the dollars-as-good-as-gold scheme was still working, a move to inflate was always supported by more buying on the part of foreigners, because confidence was still high. But if foreigners have now lost that confidence and are no longer willing to accept dollars from one another, let alone from the U.S., this means the future direction of the dollar is no longer in question. It will head much lower, and soon.

So it now appears that the time has finally come when the rest of the world is no longer willing to buy up the paper promises of the U.S. at the current rates of return, or maybe even much higher rates of return. Many people have been warning for decades that we would have consequences for creating money without limits, and it looks like that moment is now upon us.

Angel Publishing: Just how high do you think gold will go, given the circumstances you have outlined?

Greg McCoach: The truth of the matter is that gold may be one of the few choices you have for protecting your overall wealth from the coming currency collapse of the U.S. dollar. Thus the constant disinformation propaganda we see on the part of the government media complex to keep you from understanding that fact.

At some point, the rapid fall of the dollar will cause a massive move into gold. When you understand how small the gold market really is, then you will have no problem understanding just how high the price of gold will go when the worldwide ocean of fiat currency suddenly chases after it.

I wouldn’t be surprised to see gold trading near $1,000 an ounce before the end of the year. Going into 2008 and beyond, gold will be priced comfortably in four-digit territory.

Angel Publishing: How long do you think this bull market in gold will last?

Greg McCoach: I don’t pretend to have a crystal ball, but my take is that we may still have another five or ten years before the bull is through. You cue to get out will be the exact moment when Time Magazine declares on their front cover that “Gold is King.” At that point, I would be selling at a hundred miles an hour.

Angel Publishing: Many investors know you from your successful newsletter on junior mining stocks, The Mining Speculator. Tell us why, in addition to owning junior mining stocks, you have always been a strong supporter of buying and holding physical precious metals.

Greg McCoach: The reason is simple: As good as the mining stocks have been to us the past seven years, they are not gold or silver. A mining stock is a piece of paper that needs to be traded on an exchange. It does not represent gold or silver. With the recent corrections in stock markets around the world, mining shares were hit just as hard.

To protect your wealth, physical purchases of gold and silver represent the ultimate savings account and should make up at least 10% of your liquid net worth.

The best items to purchase are physical gold, silver, platinum or palladium bars and bullion coins. Do not get swindled into buying numismatic or collector gold and silver coins, as these items in my opinion are a complete rip-off. Investors should stay with the items that have only a 5% transaction cost above current spot prices. Collector gold and silver can be marked up 100%, 200% or more. When unsuspecting investors go to sell these items they find out just how badly they have been taken.

Reputable dealers can be hard to find, so let the buyer beware. I founded AmeriGold.com as a safe place for investors to buy and sell bullion items.

Another consideration when purchasing physical metals is to determine what items make sense for your investment goals. I often tell clients that a Canadian citizen should buy the bullion coins minted by the Canadian government, and U.S. citizens should purchase the bullion coins from the U.S. Treasury. Bullion bar should be purchased only from well known fabricators such as Credit Suisse, Pamp, Englehard or Johnson Mathey.

Angel Publishing: How should investors get in touch with AmeriGold if they need more information?

Greg McCoach: They can reach us at 800-574-0047 or www.amerigold.com .

These are excerpts from my exclusive interview with Greg McCoach, founder of AmeriGold.com and editor of The Mining Speculator.

Gold is red hot and getting hotter by the day. If you want to start cashing in on gold’s bull market, then call 800-574-0047.