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The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.


Fisher Investments

) -- An important point right up front: By no means are we making a directional call on gold. It may go higher yet, it may not. But the fact is, whether it climbs or collapses is something we see mostly as interesting trivia. Here's why.

If an investor were assessing the stock or bond markets, it's highly likely they'd look beyond recent price performance. Or at least, in our view, they should. Past performance in markets -- whether stock, bonds or commodities -- is not at all indicative of future results. But the similarities don't stop there -- ultimately, the key drivers for both equities and commodities (like most anything in a capitalist economy) are supply and demand.

In our view, better understanding future market direction requires analyzing supply drivers (like factors impacting future issuances and buybacks) and demand drivers (economic, political and sentiment). This is all done in an attempt to explain why stocks and/or bonds might perform one way or another in the foreseeable future.

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So what fundamentally underpins gold? Like stocks, the supply of gold isn't something that tends to radically change overnight. As a member of the periodic table, gold is an element, and one without much industrial use. Thus, the total amount of gold out of the ground -- possessed by investors, businesses, governments, etc. -- doesn't materially decline. So while equity supply can expand or shrink through mergers, acquisitions, bankruptcies, stock buybacks, IPOs and the like, total gold supply -- the hard asset (to distinguish from ETFs, futures contracts, etc.) -- in human possession uniformly rises at a pace equal to the amount extracted from the earth.

While gold supply typically goes in one direction (up), demand can and does fluctuate -- sometimes wildly. What's driven gold higher in recent years is incremental demand shifts outweighing supply gains. Thus, a key question is what underpins gold demand?

Aspects of gold demand have fundamentally changed in recent years, to the betterment of gold prices. As mentioned, gold's industrial uses are fairly limited. But demand for jewelry has risen associated with the fast development of Emerging Markets economies and the increasing disposable income of an emerging middle class. While it seems likely this new middle class continues growing, that may or may not translate into continued gold jewelry demand. After all, if prices rise far enough, fast enough, they could erode demand. And when there's eventually a recession in Emerging Markets (not likely this year, in our view), demand could easily ebb.

The other source of demand that's changed a lot in recent years is investment demand through the proliferation of ETFs and companies marketing gold that have sprung up since the early 2000s. But investment demand can also be fleeting. And unlike stocks, there aren't a lot of fundamental forces to analyze to try to anticipate changes -- in our view, a material portion of demand hinges on some common misperceptions about gold: the idea it's an inflation hedge, isn't volatile and is a stable "store of value" (a much-debated term). Then there is the behavioral element of performance or "heat" chasing that should be considered.

In making a bet on gold (up or down), you're effectively betting on gold valuations changing, largely based on investor sentiment. Not profits. Not a supply squeeze. Investing categories can expand -- even for a long time -- on such a driver as sentiment. But it is still speculation on something that can, and historically has, turned on a dime. That's why in our view, gold's movements should be seen as trivia, not necessarily enticement. Consider the golden whistle blown.

This article constitutes the views, opinions, analyses and commentary of Fisher Investments as of August 2011 and should not be regarded as personal investment advice. No assurances are made Fisher Investments will continue to hold these views, which may change at any time without notice. In addition, no assurances are made regarding the accuracy of any forecast made herein. Past performance is no guarantee of future results. A risk of loss is involved with investments in stock markets.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.