• Gold is primarily a monetary asset and partly a commodity.
• More than two thirds of gold's total accumulated holdings account as 'value for investment' with central bank reserves, private players and high-carat Jewellery.
• Less than one third of gold's total accumulated holdings is as a 'commodity' for Jewellery in Western markets and usage in industry.
• The Gold market is highly liquid and gold held by central banks, other major institutions and retail Jewellery keep coming back to the market.
• Due to large stocks of Gold as against its demand, it is argued that the core driver of the real price of gold is stock equilibrium rather than flow equilibrium.
• Economic forces that determine the price of gold are different from, and in many cases opposed to the forces that influence most financial assets.
• South Africa is the world's largest gold producer with 394 tons in 2001, followed by US and Australia.
• India is the world's largest gold consumer with an annual demand of 800 tons.

• London as the great clearing house
• New York as the home of futures trading
• Zurich as a physical turntable
• Istanbul, Dubai, Singapore and Hong Kong as doorways to important consuming regions
• Tokyo where TOCOM sets the mood of Japan
• Mumbai under India's liberalized gold regime

• Gold is valued in India as a savings and investment vehicle and is the second preferred investment after bank deposits.
• India is the world's largest consumer of gold in jewellery as investment.
• In July 1997 the RBI authorized the commercial banks to import gold for sale or loan to jewellers and exporters. At present, 13 banks are active in the import of gold.
• This reduced the disparity between international and domestic prices of gold from 57 percent during 1986 to 1991 to 8.5 percent in 2001.
• The gold hoarding tendency is well ingrained in Indian society.
• Domestic consumption is dictated by monsoon, harvest and marriage season. Indian jewellery offtake is sensitive to price increases and even more so to volatility.
• In the cities gold is facing competition from the stock market and a wide range of consumer goods.
• Facilities for refining, assaying, making them into standard bars in India, as compared to the rest of the world, are insignificant, both qualitatively and quantitatively.

Market Moving Factors

• Above ground supply from sales by central banks, reclaimed scrap and official gold loans
• Producer / miner hedging interest
• World macro-economic factors - US Dollar, Interest rate
• Comparative returns on stock markets
• Domestic demand based on monsoon and agricultural output

Frequency Dist. of Gold London Fixing Volatility from 1995 till date