Montreal, Canada

Some investors are romantic about the holdings in their portfolio. Even amid a big slide in the price or a major change in underlying fundamentals, they refuse to abort the position. It seems individuals sometimes have this emotional attachment to an investment – whether it's oil, stocks, bonds, currencies or real estate.

Nowhere is this dedication to an investment more apparent than for Gold-Bugs.

I admit I'm not romantic about any investment. Investors should never fall in love with any investment. Provided the primary trend is bullish and the fundamentals are intact, I'm long and strong. That's how I feel about gold, and, to a lesser extent, silver.

Even as I try to convince myself of reasons for selling gold – up fourfold since 1999, booming exchange-traded-fund (ETF) demand, central bank purchases (possibly contrarian) and a stronger U.S. dollar recently – I constantly find myself drawn to the yellow metal. Increasingly, my reasons for owning gold continue to grow and reasons to sell therefore overwhelmed.

Of all the reasons why I remain bullish, the explosive price tag of the global credit crisis is by far the most compelling argument for owning gold.

The majority of investors fail to appreciate this point and still don't understand the relationship between fiat money and gold; the next crisis will probably be a currency collapse or series of monetary-related crashes in the industrialized economies. This won't happen tomorrow but it's fair to speculate that ongoing monster-sized fiscal imbalances will lead to a horrible day of financial reckoning making 2008-2009 look like a cocktail party in comparison.

Governments will be paying for this profligate spending for years to come and in many ways have boxed themselves into a corner because a sovereign debt crisis is the endgame for those nations borrowing the most – including the United States and the United Kingdom. And the only way to survive a deflation in credit is to print more money, which will hopefully grow inflation and render outstanding debts to creditors easier to repay.

The global exchange rate system is also a cause for concern since it's dysfunctional and getting worse by the day. Currencies devalue or revalue all the time and, for the most part, prefer the former in order to remain export competitive. A volatile exchange rate causes all sorts of difficulties for business planning, earnings and, ultimately, is highly inflationary.

Supply and demand dictate the most important variable for owning or not owning a commodity.

More than any other reason if you fail to understand the supply and demand situation for a commodity, then the odds are you'll lose on that bet. I don't care about market rumors, hedge funds, the dollar's short-term trend – in the end, if there's a supply imbalance for a commodity, then that's my first reason for going long or owning the physical commodity or ETF.

According to the World Gold Council, supply is keeping up with demand for gold. Yet that trend might change as some producers struggle to find new reserves.

For example, South African gold production has collapsed over the last ten years as pervasive strikes and labor discontent cripple output. South Africa relented to China as the world's number one gold-producing nation in 2008.

Fabrication demand has tanked a cumulative 27% since 2007. Despite a plunge in fabrication demand – mainly in India, Russia and Turkey – since gold hit $750 an ounce, ETFs are absorbing the remaining supply. So are hedge funds. The two biggest hedge fund titans in the world – John Paulson and George Soros – are among those institutions with substantial gold holdings.

ETFs and institutional gold demand has increased from 253 tons in 2007 to almost 600 tons as of December 31, 2009. At the same time, retail demand for gold has increased from minus 14 tons in 2007 to 236 tons through 2009.

The bottom line is that although fabrication demand has fallen off a cliff since around $750 gold back in late 2008, ETFs and hedge funds are making up for the lost demand. Indeed, ETFs and hedge are absorbing excess supplies.

Also, another wildcard for gold remains emerging market central bank purchases. The International Monetary Fund (IMF) still holds about 200 tons of gold – some of its hoard was sold to India in October at $1,050 an ounce. Other regional banks in the Indian sub-continent made smaller purchases, too. I reckon we'll see more central banks increase their gold purchases over the next several years amid a deluge of dollars and Treasury bonds already suffocating their coffers.

The big trend over the last few years is major gold producing companies boosting their reserves through strategic acquisitions – mainly targeting mid-sized operators. Instead of spending capital to find existing reserves, many companies are expanding above-ground supplies through acquisitions, a trend that should accelerate amid low interest rate financing and high gold prices. Rising supply is imminent but should not detract from the long-term demand picture, mainly from institutions and eventually, Chinese consumers.

Gold still has a long way to rally. My projections call for $2,500 to $3,500 an ounce over the next five years, or sooner. Unfortunately, that price peak, which will mark a "bubble" for gold, will also coincide with a massive and unprecedented global financial crash, probably currency-inflicted. At that point, I'll be advising investors to sell gold while everyone else is in panic-buying mode.