There’s some irony in being happy about a bull run in a gold prices forecast, because it usually means a lot of other people are going to be miserable. This is because gold (Au) as an investment is a safe harbor. It is a refuge for investors abandoning their regular portfolio when the markets are in turmoil.

Unlike other valuable commodities like oil, production and mining issues do not have a big impact on the price of the metal. Instead, its global price is more dependent on the stock markets, the price of the dollar and central bank policies. Not to mention changes in the jewelry market in key nations.

India accounts for 27% of the global Au consumption for jewelry, industrial applications and teeth. China and the US are the second and third largest markets. Obviously, any shift in consumer demand or policy in the jewelry market in these three countries impacts the global market. But the main drivers for change are the stock markets.

When the economy is down and investors get jittery about the value of stocks, bonds, mutual funds and real estate, the money flows out of the markets and straight into the yellow metal. So when the Dow takes a sustained beating, the metal goes on a bull run. It’s no coincidence that Au has been chalking up record annual average prices for 11 years now, since 2001.

Investors started hoarding the precious metal after economies all over the world went into shock due to 9/11 and the dot com crash. The slide continued unabated all the way into the housing bust in 2007, followed by the Great Recession in 2008 and 2009. The peak came 10 years after 9/11, when the Au price hit $1,920.70 on Sept 6, 2011.

The economy has since recovered, jobs data is optimistic and the Dow is closing in fast on 14,000. The gold prices forecast is not going to be as bright as it was in the past decade. Even so, analysts estimate that the annual average price is unlikely to slip below $1,400 this year or any time soon.

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