Movement of gold prices have always fascinated traders and observers alike. Research reveals that gold prices are highly correlated with various macroeconomic parameters including inflation and dollar prices. Can they also forecast the prices of gold over a period of time?

Since ages gold has been admired for its luster. The use of gold for jewelry purposes has been traced to the pre-historic era. Since then it has never lost its popularity. Later people discovered its intrinsic value. People started using it as a medium of exchange and this marked a milestone in the history of global monetary system. Gradually, the barter system, for its inherent transactionary problems was replaced by gold. Gold came to be accepted for its embedded material value as a better alternative and thus sowed the seeds of the present currency system. The citizens of the Kingdom of Lydia (western Turkey) claim to be the first users of gold as a currency in 700 BC. In the more recent history, the US Congress adopted a bi-metallic standard (gold and silver) for the new nation's currency in 1792, which was held until 100 years. Gold has become an important metal for investment and hence there is a lot of fluctuation in the prices of gold ever since.

In the last 20 years after 1980 when the gold price was at its peak, gold has been giving a meager return of five percent. However, in the last one year it has given a 20 percent return with price coming up from $255 to $305 per ounce in the international markets. The recent increases in the gold prices can be attributed to various reasons like the worldwide stock markets crash after the dotcom burst; terrorist attacks on WTC, the Japanese banking system in doldrums, and the overall world recession. All of these factors contribute towards shifting the capital from stock market, banking system and other investments towards gold. There has been a gradual decline in the gold production in the last three years, which has again contributed to the increase in price. Although the recent escalations in gold prices are due to these economic forces, these are short-term and what will be the gold prices in future and what will be the cyclical trend in the next few years in the absence of these short-term economic forces is to be analyzed. Paul Van Eden, who is a widely respected financial analyst and has written extensively about the relationship of the US dollar and the price of gold, observes that, "Less than 12 months ago gold was a dirty four-letter word and now it is being talked about in mainstream media."

Gold Prices Demystifying the trends, prices, dollar, system, investment, currency, economic, exchange, analyze, market, shortterm, banking, escalations, correlation, deflation, doldrums, dotcom, analyst, fabrication, financial, global, intrinsic, limited, macroeconomic, observers, bimetallic, Saville, citizens, Steven, terrorist, traders.