Financial markets/ Financial markets : Gold

Overview
The fiscal crisis in the Eurozone has triggered risk-averse behavior among investors. The sub-prime crisis in the US and the global economic crisis began to abate in early 2009 and the world's major economies began to escape the grip of recession in the second half of that year. However, gold prices on the global market received an additional boost in late 2009 from fears of fiscal crisis some Eurozone countries, especially Greece. There were also concerns over a possible real estate bubble in China in first quarter 2010, and over confrontation on the Korean peninsula. These factors helped the price of gold to puncture the 1,200 USD per ounce level in the first five months of 2010.
Physical supply and demand has not played a major role in determining the price of gold. Physical demand for gold comes mainly from the jewelry industry, with some from other industries as well. Physical demand has had diminished impact, however, as the jewelry industry's share of demand has fallen, with demand from other industries remaining fairly constant and investment demand rising significantly.
Gold sales by the International Monetary Fund (IMF) may influence the price somewhat, but it is expected that many national central banks will seek gold holdings in place of a weakening euro. This year, IMF is expected to sell 191.3 tons of gold. That is likely to affect gold prices on the market at the time of the sales. However, demand for gold is likely to increase among central banks choosing to hold treasury reserves in the form of gold. This is particularly the case in Asian countries with trade surpluses and high current account balances. The foreign reserves held by the central banks of many countries have taken a hit from the depreciation of major world currencies, particularly of the euro, likely motivating central banks to reduce holdings of those currencies and giving increased weight to gold reserves. Gold reserves worldwide have already grown 2.63 percent, 780 tons (25.096 million ounces), over last year, mostly through gold purchases by China and India. Over the past year, China has purchased an additional 454 tons of gold, 75.69 percent over the previous year while India purchased an additional 200 tons, 55.90 percent over the previous year. The most recent data, for March 2010, show China's gold reserves standing at 1054.1 tons and India's at 557.7 tons, accounting for 1.6 percent of China's total reserves and 6.9 percent of India's total reserves; They are likely to increase their gold reserves further. Thailand's gold reserves stand at 84 tons, two percent of total reserves, significantly lower than the worldwide total of 10 percent.