Gold posted the biggest weekly decline in three months last Friday and was falling further Monday morning, after touching a six-month high just under $1393 an ounce last week amid rising tensions in the Ukraine.

It has been recovering since the beginning of this year following a 28% tumble in 2013 -- the most since 1981 -- as stocks rallied and inflation remained contained. But by Friday's close the precious metal was off 3.1 percent for the week, ending at $1336 an ounce.

Related: The lessons of gold's collapse

Jim Rickards, portfolio manager at West Shore Funds and author of the forthcoming book, Death of Money, explains the dynamic behind the price moves (disclosure: West Shore Funds does invest in gold).

"One of the reasons gold did so poorly in 2013 was because 500 tons were taken from [the gold ETF] GLD warehouse by authorized dealers and dumped on the market," he tells us in the video above. Rickards says most of that gold went to China, but China is storing it so it is "not going to see the light of day for 300 years."

As a result, Rickards says, the floating supply of gold declined, and less supply and more demand created a  "good technical setup" for higher prices.

Related: Emerging markets catch cold, U.S. and Europe sneeze: Shades of 1997?

Longer-term Rickards is forecasting gold prices at  $7,000 to $9,000 an ounce in the next three to five years. We asked how it could possibly get there, given that gold's all-time-high was just $1920 an ounce and turmoil in Ukraine produced only a short-lived rally.

Check out the video above to find out his answer and why he still advises investors to allocate 10% of their portfolio to gold as "insurance" against catastrophe.

Related: Obama ruled out military engagement with Russia, but did the U.S. just move toward financial war?

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