Where does the future of gold lie?

Golds rise to new intraday highs led to an interesting clash of titans this week. After Jim Rogers - the investor who predicted the start of the commodities rally almost a decade ago - said that Nouriel Roubini is wrong about the threat of bubbles in gold; Roubini the famed doom seer of the global financial crisis snapped back at Rogers terming his forecast of at least $2,000 an ounce an "utter nonsense."
Yet, the headlines are just too catchy too be ignored. "Explosive rise in the price of gold fuels interest" wrote a leading international commodity broker," - "India shows bull market for gold intact" wrote Forbes - "Trust in Gold.......the metals bull run is just getting started," read an earlier opinion post.
And there are scores of arguments that point towards the long-term potential for golds uptrend as well: a persistent pessimism over economic outlook that makes gold a safe haven, Chinas new-year purchases due by January/February and wedding season in the Muslim world.
Amid this backdrop, the news of Indian central banks purchase of 200 tons of gold and the US Feds decision to keep interest rates at zero percent triggered this weeks sharp rise. But does this mean the rally in gold would continue forever? Well, forecasting the future may be a fools conceit, but the answer to that appears to be
o.
After being historically correlated with the US CPI and the developed countries Credit Default Swaps, the commodity decoupled its self with both between December 2008 and January 2009. The only fundamental correlation intact is the one between gold and the US dollar, which has, in fact, strengthened according to a Credit Suisse report last month.
So the idea that bull market in gold still has legs may sound logical on the basis of weakening US dollar, which may weaken further if the upcoming US employment and inflation numbers turn out to be disappointing.
But here is the thing: currently, China and Japan, which together control 43 percent of foreign exchange reserves, have only 2 percent of their reserves in gold, while Russia holds 4 percent of its reserves in gold. This contrasts with Europe and the US where 70 percent and 79 percent of reserves are in gold, respectively.
What does this mean? Well for those, who bought the metal long before the market heated, it might be OK to hold on to the position and wait for that perfect strength, according to different chartists.
But for those, who are thinking to join the rally now, think again. Unless of course you are extremely, extremely, pessimistic about the global economic outlook and expect Japan and China to decide to hold 10 percent of their reserves in gold, which according to Credit Suisse analysts means they would have to buy roughly around at least 6,000 tons of gold at current prices - i.e. 2.8 times the annual gold mine supply.
If thats the case then what makes one think that US and EU would come selling all that gold? Besides those who are extremely pessimistic about the global economy, and there are many of them who talk of big final bubble, should be accumulating real assets as agricultural lands and energy fields instead of gold. You can eat gold, can you?
As for the chartists view; it appears that Rogers and Roubini aren the only ones disagreeing with each other as views of technical analysts seem to vary as well. Among bullish ones, some cite $1192 as the top, some $1322 and some $1700~2000 per ounce. The bearish ones, however, argue that by same time next year gold will be in the coffin with forecasts ranging between $300 to $700 dollars. In short, it is almost as tricky as flipping a coin.