Friday night's headlines were straightforward: "Gold surges to top $800 on safe-haven buying." And most of the analysis followed a familiar pattern:

• The price of gold has declined as a result of liquidity selling
• Once everyone sells the gold, the market will stabilize
• The price will rally as investors seek a safe haven in the face of monster money-printing by the U.S. government

It's a convenient story, and one that makes some prima-facie sense. But like any Monday morning quarterbacking (including my own), there's rarely a way to actually know exactly why something goes up and down. Except, of course, for supply and demand. It's always about supply and demand.

Which is why I was planning on writing about gold this week even before we saw the metal pop almost 6% Friday, to close at $801.60 (NY Spot), and before we saw the big gold miners like Barrick have monster days, with that company closing up 31%. Pops like that are enough to make anyone sit up and take notice, despite our general concerns about buying miners vs. metals.

Hence my plan to cover gold. The third week in November, you see, is when the World Gold Council releases the supply-and-demand numbers that carry us through the end of the year. And the astonishing thing isn't so much the numbers, but that they seem to have gone largely unnoticed by the press in describing the rally. Let's take a look at the charts.

There are a few points to note here. First, this measures demand in tonnes, not in dollars. We'll get to dollars in a second.

But the big thing to note here is that the 2008 number is an estimate that we've created by applying last year's Q3-to-Q4 trends to 2008. From Q3 to Q4 2007, gold demand dropped an unexpected 15% on a tonnage basis. The chart above suggests that, even if gold demand falls again, total tonnage demand for 2008 will equal 2007. If Q4'08 demand instead remains steady heading into the end of the year, total 2008 demand will be the biggest in the last five years.

Regardless, however, the strong continued demand, particularly from the investment community, is even more dramatic in dollar terms.

In dollar terms, gold is experiencing tremendous demand growth. There's no rocket science here: The average price of gold in 2007 was just under $700. The average price of gold in 3Q 2008 was $871, down from the first-quarter average of $924. All that means is that that same physical demand is coming at a time of rising prices (or a weak dollar, depending on your perspective).

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