According to the World Gold Council, annual mine production of gold over the last few years has been close to 2,500 tonnes. About 3,000 tonnes goes into jewelry or industrial/dental production, and around 500 tonnes goes to retail investors and exchange traded gold funds. This translates to an annual demand for gold to be 1000 tonnes in excess over mine production which has come from central bank sales and other disposal.
Central banks and the International Monetary Fund play an important role in the gold price. At the end of 2004 central banks and official organizations held 19 percent of all above-ground gold as official gold reserve. The Washington Agreement on Gold (WAG), which dates from September 1999, limits gold sales by its members (
Although central banks do not generally announce gold purchases in advance, some, such as Russia, have expressed interest in growing their gold reserves again as of late 2005. In early 2006,
In general, gold becomes more desirable in times of:
- When dollars were fully convertible into gold, both were regarded as money. However, most people preferred to carry around paper Banknotes rather than the somewhat heavier and less divisible gold coins. If people feared their bank would fail, a bank might have been the result.
Low or negative real interest rates
- If the return on bonds, equities and real estate is not adequately compensating for risk and inflation then the demand for gold and other alternative investments such as commodities increases.
War, invasion, looting, crisis
- In times of national crisis, people fear that their assets may be seized and that the currency may become worthless. They see gold as a solid asset which will always buy food or transportation. Thus in times of great uncertainty, particularly when war is feared, the demand for gold rises
Source : Wikepedia
Source : Wikepedia