Gold is traded worldwide, and is considered the safest asset in the economy and because of this it attracts investors at a time of economic insecurity, recession, wars and other crisis situations. This comes from history when gold was used to settle business transactions.
It was also used as a pledge of central banks for emitting banknotes; the banks were obliged to maintain gold of the same value as the money issued for circulation. Recently, the Swiss Central Bank had to actually maintain 40% of the value of money in gold, which in turn is one of the reasons that the swiss Franc is considered one of the safest currencies in the world.
The price of gold is influenced by the dynamics of mining production and changes in the reserves of central banks. Central banks and private investors are often used as a reserve asset because it protects against the effects of inflation. Interest in gold will rise at times of unfavourable forecasts for the world economy or at a time of political unrest. China and India are the largest purchases of gold and the economic situation in the two countries has a long term impact on the prices.Trade GC