The daily increase in gold prices came to a halt last month. For more than a year, the price has been skyrocketing, knowing only one direction — up. On April 2010 the market price per ounce of gold was slightly over 1.100 dollars and on September 5^th 2011, it reached 1.900 dollars per ounce.

Gold had an astonishing 70 percent revaluation in less than a year and a half, while most of the financial market was crumbling. The main reason for this price increase was three-fold. Firstly, it points to the Libyan conflict and the aftermath in the Middle East which includes the main oil supplying countries.

Analysts were not expecting these revolutions all around the region and therefore it was harder for them to understand the consequences. Could the revolution spread to more countries? Could the oil supply be endangered? Oil shortage lead to higher prices and from there to higher inflation rates. That is why some people prefer to invest money in assets rather than currencies.

Secondly was the instability of stock markets in both bonds and shares. Greece´s default crisis, the problems with peripheral countries in the European Union, and the sinking of the biggest share markets prompted investors to take the money out of these markets and invest in other assets with less volatility.

Third source of impact came from the weakening of the dollar. As gold is an asset exchanged within markets where the dollar is the main currency of reference, the weakening meant a higher cash per gold ratio and therefore a hit on the price. Since gold reached its peak on September 5, the market has sunk, dragging the price down along with it.

It is now 15 percent lower than the peak, slightly over 1.600 dollars per ounce. Once again there were three reasons; the dollar strengthening, a sale increase by people seeking to obtain cash to cover losses from other assets and the volatility of other markets has finally reached gold.

Still many analysts forecast a better future for gold, stating that this is only a temporary relapse. For instance Paul Blaxham, HSBC chief economist for Australia and New Zealand, stated a few days ago: “Our forecast for gold next year is 2.025 dollars per ounce… but it is difficult to ascertain where to set the lower limit now, because many tendencies currently happening are responses to political decisions.”

This opinion is backed by Ong Yi Ling, an analyst from Phillip Futures who believes: “in the long run, after the prices will have stabilized and they will get back to normal life, refuge values will come back slowly to lower prices. In 2012, still it is possible that gold reaches 2.000 dollars per ounce.”

So the fairytale story that gold is a secure value should be abandoned. It is a refuge value only for times of crisis, but it is not invulnerable in the greater and more permanent run. As all assets have their risks and benefits, it should never been considered a stronghold. Investors can be fortunate at times, but if they had invested last week, they would have withdrawn an investment with gross losses. Nobody is safe in these uncertain times.

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Over the past year, gold prices have shown an upward tendency but still there is no sign of relief in the markets. Recent debt crisis in Europe and the troublesome turn of events in the United States has again brought the attention of global investment community back to gold.

According to the Wall Street Journal, gold prices have rallied 25 percent this year as the risk appetite of investors has declined in the so-called safe havens of investment like treasuries and dollar.

The global economic environment is very uncertain with mounting debt debacles in the Euro zone leading to stringent austerity measure that eventually led to the weakening of Greek, Portuguese, and Irish economies. According to Mitsui Precious Metals analyst, when a metal has four to five distinct reasons to grow in value it would be foolish to not be bullish on it.

In recent weeks, gold has jumped nearly 8 percent, biggest rally since November 2008, for three days. Yellow metal gained $132.50 or 2.4 percent after downgrading of US credit rating by S & P from AAA to AA+.

Gold prices continued to boost when the Federal Reserve promised that it will keep the interest rates near zero till 2013, in a bid to keep the cost of borrowing low. and would consider further steps to help growth.

The drastic drop in Dow Jones Industrial Average of 400 points on Wednesday and over fear of slippery European economies extended the rally in market that moved the gold prices to hit a record high of $1801 a troy ounce beating Tuesday’s mark to take all time record.

Investors are avoiding anything that poses the slightest degree of risk, the sovereign debt crisis that engulfed US and few economies of the Euro zone have intensified their hunt for more secure and stable vehicle for investment.

Paul Christopher, international market strategist at Wells Fargo, said the appetite for gold is getting out of hand for retail investors. As equities tumble and debt woes mount record breaking rally of gold sparked after the US reached last minute deal to raise its debt ceiling and later S&P’s downgrade of US debt shattered the confidence in US treasuries.

Gold has been considered a store of value or an investment vehicle that can be relied on in times of inflation or deflation; in both cases when the value of money, in terms of purchasing power, is shaken.

The sporadic rise in demand for gold in recent days comes by the fear in the markets about faltering economic recovery and rising unemployment, infused the high degree of sense of security for investment in gold.

Gold and US treasuries were seen as the most secure form of investment in the world, and even many central banks are net purchaser of U.S. treasuries for a long time, but historically low interest rates, weak US dollar and infusion of trillions of dollars in the system in U.S. has generated fears of inflation thereby causing a major shift in investors sentiment with respect to U.S. treasuries.

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