Late in the evening of November 11, The Daily Telegraph reported that Barrick Gold (ABX) has shut its hedge book because the world gold supply is running out. Barrick Gold's president, Aaron Regent, told the periodical that global output has been shrinking at a pace for nearly 1 million ounces a year since the start of the decade.

At RBC's annual gold conference in London, Regent noted that "There is a strong case to be made that we are already at 'peak gold.'" Regent believes that production peaked around 2000 and has dropped ever since, he adds that Barrick Gold believes the decline will continue because "It is increasingly difficult to find ore."

The allure of gold in an uncertain market has driven its price up precipitously in the past few years, to the point that many are speculating $1,000 an ounce is within reach. Is this the right time for you to move some of your investment into the metal?

According to John Hathaway of Toqueville Asset Management's Gold Fund, as interviewed by Barron's, gold still has a lot of upside. For investors looking for alternatives during the liquidity squeeze and nervous over the Fed rate cuts and its potential inflationary effect, gold offers an interesting opportunity. He believes that, if consumer confidence in the market continues to wane, gold could certainly reach $1,000 an ounce. He also makes the interesting observation that in 1980 the ratio of all gold ever mined to the sum value of all stocks and bonds was around 20%. The same ratio today is around 3%. Scarcity, therefore, works to support gold prices. Increasing environmental regulations, questionable governments and the growing costs of mining all suggest the metal will remain scarce for the foreseeable future.

Will we have enough gold to meet demand in the near future? In 2001, gold dropped well below $300. As a result, exploration budgets plummeted in 2002. The results of that decline are being felt now -- according to GFMS Ltd., 2006 global demand for gold was pegged at 3,380 metric tons, while worldwide production fell 3% to 2,471 tons.

In 2006, the metal hit a high of $730 a troy oz. and, so, not surprisingly, 2007 exploration investment now tops $3 billion, according to the Metals Economic Group. Given the lag between exploration and production, this increase won't impact supplies for some time.

Also, as mines in stable countries play out, companies are forced toward exploration in higher-risk countries. This, along with climbing energy costs, has resulted in an increase in production cost for gold worldwide of $45 per ounce, according to GFMS Ltd. Consolidation of exploration companies has also had a dampening effect on gold exploration.