"U can't touch $1,000 says the Hammer. But everyone's got their deal price..."

"INVESTORS will drive the next leg of this bull market in gold," said Philip Klapwijk, chairman of GFMS, at the London-based research consultancy's Gold Survey launch in Canary Wharf on Tuesday, "setting a new high above $1,000 in 2009 and with a real possibility of $1,100 per ounce."

Anyone pitching for $1,100 in short order, however, might have their work cut out for them. And all thanks to MC Hammer.

"We have seen people in Europe Buying Gold in quantities more typical of the Middle East and Asia...particularly in Germany and Switzerland," Klapwijk went on. Because "Inflation is the inevitable consequence of today's rapid money-supply growth and quantitative easing." All told, reckons GFMS, the monetary response to the financial crisis will prove "extremely powerful medicine for Gold Investment."

So far, so bullish. But why no new high, therefore, in the gold price already this year? Philip Klapwijk attributes gold's failure at $1,000 back in February to the "astounding" flow of scrap metal coming from cash-strapped consumers worldwide. And GFMS's raw numbers would suggest he's right.

Scrap supplies previously lagged both gold-mining output and central-bank sales by a wide margin each year. But recycled tonnage actually overtook new jewelry demand worldwide at the start of 2009 according to GFMS's analysis. That was after rising 27% in full-year 2008 to more than 1,200 tonnes.

Gold mining output, for comparison, came in at barely 2,500 tonnes, down yet again year-on-year despite the on-going rise in prices.

Come Q1 2009 and scrap supply surged further still, reaching above a massive 500 tonnes according to GFMS's research. New jewelry demand, in contrast, halved to just 420 tonnes, as traditional importers - such as former world No.2 Turkey - became gold exporters in a shocking about-turn.

One attendee at the GFMS presentation even thought they under-played it, putting the flow of scrap metal far higher - and dwarfing world mining output - at perhaps 1,000 tonnes during the first quarter alone. Absurd as that sounds, world No.1 importer India took in next-to-no new gold at all between Jan. and March as the Bombay Bullion Association has reported.

That's an event not seen since the Great Depression of the 1930s according to gold-market historian Timothy Green, also chipping into the Q&A at Tuesday's GFMS presentation.

Most crucially for the new dynamic of gold demand-and-supply, the industrialized West has seen high-margin operations led by Cash4Gold - whose advert during this year's Superbowl hardly needs spoofing, featuring as it did MC Hammer and former Tonight Show sidekick Ed MacMahon spoofing themselves - make selling gold much easier for cash-strapped consumers.

"I can get cash for this gold medallion of me wearing a gold medallion!" gasped the Hammer in Cash4Gold's typically gag-laden Superbowl slot. The airtime alone reputedly cost $3 million, so based on the scrap market's average mark-up of 40% - if not the 60% to 80% mark-ups reported in this "consumer crusade" against America's No.1 - you'd have to guess they brought in a chunk of change...as did everyone else touting for scrap metal as the Christmas heating bills came due between Jan. and March.

Hence the "roadblock", or so Klapwijk reckons, on gold breaking above $1,000 an ounce in late February. But we're not so sure here at BullionVault.

First, Cash4Gold's parent company, Albar Precious Metals, reports 775% growth for the last three years. So why the sudden impact on gold prices - an impact regularly dismissed in 2008 in favor of de-leveraged by crisis-hit hedge funds fleeing the futures and options market? More crucially, back in Feb. this year, gold still broke new all-time highs vs. the Euro, Sterling, Swiss Franc, Indian Rupee, Turkish Lira and pretty much everything else bar the Dollar and Yen. Which would suggest the failure at $1,000 was more currency-capped than supply-driven.

More critically still for gold-market analysts, how can we draw a line between "investment" and "jewelry" for those two billion Asians still without Main Street banks in which to keep their savings?

Either way, gold investors might still want to beware the Hammer. Because the only cap on Middle Eastern gold sales after the Jan. 1980 top, as Timothy Green recalled from his experience in Kuwait and Dubai, was the inability of jewelers to raise enough cash each day to buy all the scrap gold offered daily. Whereas Cash4Gold, the leading US scrap buyer, also runs its own refineries as well as collecting scrap metal by post and touting for metal online and on TV.

Looking ahead, an estimated 82,000 tonnes of gold exists as privately-owned jewelry worldwide, some 52% of the total above-ground supply. The vast bulk of recent tonnage has been added by emerging-market consumers, most often in the form of lumpy "investment jewelry" that carries little added-value from fabrication, but which can still lose 10-15% in dealing fees when it's sold to raise cash. So how much of the 2008 and early-09 supply represented forced sales by truly cash-strapped gold hoarders - and how much represented "easy scrap" sales? You know, the really ugly old-fashioned stuff inherited from maiden aunts that the owners never much cared for, similar to that "rabbit gold" buried by generations of Frenchmen fearing (yet another) German invasion but now dishoarded by their grandchildren each year.

In the same way the earth yields up "easy gold" to open-cast mines, before forcing miners to start digging...and digging...down as far as four and even five kilometers below the surface in South Africa, the world's former No.1 gold-mining nation...perhaps the emerging markets are now racing through their "easy scrap" gold. Or perhaps the decision to sell has already been tough, "spurred by losing your job, losing money in the stock market, bad luck, or just needing some extra cash for holiday spending," as Cash4Gold laments on its website.

On the other side of the trade, meantime, GFMS now expects "concentrated buying" on any price dip to $800-850 per ounce. Down there, the consultancy says, pent-up demand will surge while scrap sales fall sharply, just as we've seen right throughout this bull market to date, with Indian jewelry demand triggered at ever-higher dips in the price.

And as Philip Klapwijk noted in London on Tuesday, if it weren't for a surprise jump in gold-jewelry demand during the plunge to $700 an ounce and below in Oct. 2008, "it's undoubtable that gold would have fallen further...down to $650 or lower."

Everyone's got their "deal price" in short - that level at which they're either a buyer or seller, depending on where they last bought or sold. And also depending, of course, on their outlook for inflation from here.