The world economic crisis started in the end of 2007 because of overvalue of assets and banks' inability to pay their debts followed by the housing market downfall and large job losses. Since then many countries have put into place "Economic Aid Packages" to help boost growth which has given mixed results.
The US been the first to suffer from this economic crisis has continued to see the value of the dollar fall compared to other currencies from countries less affected by this crisis. This has triggered the revision of US dollar deposits held in many countries' foreign-exchange reserves. In addition, many countries have been looking for ways to diversify their economies.
China, India and Russia have been buying gold as a means of diversifying their risks and protect the value of their currencies. Many other countries may follow suit which will surely increase the value of Gold.
Let us not forget the private investor. Although there is no exact figures on how much gold is held by the private investor you can see that prices for 1oz gold has increased dramatically these past few years. The price of 1oz gold in Jan 1st, 2008 was 833.70 USD, today (Aug 28th, 2010) the price is at 1241.15 USD. That is a 48.87% increase of value in almost 2 years.
Many know that gold is a good investment during difficult economic times and returns are very good compared to other asset classes. If the value of gold continues to increase will central banks want to hold gold? How about the private investor?
It is difficult to answer both questions but gold has been a commodity sought by many throughout the centuries and it has been proven to be a reliable investment asset in difficult times.
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