Gold (Chemical Symbol-Au) is primarily a monetary asset and partly a commodity.
Gold is the world's oldest international currency.
Gold is an important element of global monetary reserves.
With regard to the investment value, more than two-thirds of gold total accumulated holdings is with central banks' reserves, private players, and held in the form of jewellery.
Less than one-third of gold's total accumulated holdings are used as “commodity” for jewellery in the western markets and industry.
Demand and Supply
World investment amounted to 1614 MT in 2012, broadly flat year-on-year, but the approximate value of this demand reached a new record of almost $87 billion.
Major drivers of this strong investment included further monetary loosening in the developed world, continued sovereign debt crisis, rising longer-term inflation fears and in key markets, negative real interest rates coupled with limited attractive risk-free investment alternatives to gold.
In 2012, the gold mine production increased by 12 MT to 2848 MT and the combined demand for bars & coins dropped from 1515 MT to 1256 MT.
London is the world’s biggest clearing house.
Mumbai is under India's liberalised gold regime.
New York is the home of gold futures trading.
Zurich is a physical turntable.
Istanbul, Dubai, Singapore, and Hong Kong are doorways to important consuming regions.
Tokyo, where TOCOM sets the mood of Japan.
India, world’s largest market for gold jewellery and a key driver of the global gold demand.
The domestic drivers of gold demand are largely independent of outside forces. Indian households hold the largest stock of gold in the world.
Two thirds of the Indian demand for gold comes from the rural parts of the country.
In 2012, gold's role as an inflation hedge bolstered its appeal in India. India imported around 850 metric tonne (MT) of gold in 2012.
Factors Influencing the Market
Above ground supply of gold from central bank's sale, reclaimed scrap, and official gold loans.
Hedging interest of producers/miners.
World macroeconomic factors such as the US Dollar, interest rate and economic events.
Commodity-specific events such as the construction of new production facilities or processes, unexpected mine or plant closures, or industry restructuring.
In India, gold demand is also determined to a large extent by its price level and volatility.