In many ways, the price determinants of gold differ from those that influence most other financial assets. The glitter of gold in the recent past was driven by uncertainty in gulf region and now the continued depreciation of US dollar against the euro and yen. The dollar has floated near four-year lows against these currencies. The weak dollar has been the dominant cause of the yellow metals' rise and is having a positive impact on the demand from industrial users. It encourages investors to increase long positions because the price for buyers in non-dollar areas is witnessing a fall. Gold is an elegant alternative to the dollar. It has an inverse relationship with the dollar and the stock market.

A weaker dollar stimulates buying of dollar-dominated gold by making it cheaper for foreigners, while falling stock prices raise gold's safe haven status.Yet, most factors affecting the price of the yellow metal have remained bullish, or in some cases become even more so. During 2002, the yellow metal gained about 25.4%. This is the highest year-on-year increase in gold prices in the past 20 years. It outpaced the stock market, bond market and every major industrialized currency in the world. During the fiscal, the bullion has appreciated almost 6%. In fact, its fundamentals continue to improve almost on a daily basis. The main reason is that it's no longer in the interest of the central bankers in the world.

The waning stock markets, falling interest rates and global tensions and deregulation of the Chinese gold market have created a favorable environment for the yellow metal. Besides, the recent developments on US front, like the budget surplus has turned into an enormous deficit, and there is a debt problem at all levelsfrom consumers to corporates and the government in particular. In short, the emerging global environment is characterized by the significant risks to the value of money on account of the deflation threat, which is helping gold get its glitter back.

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