Because of its value problem, the yellow metal, gold, is giving sleepless nights to its prospective buyers. Both buyers and sellers are equally confused about the right price of selling or buying this precious metal. The gold prices are about 30% high as compared to the prices of last year. The industrial analysts think that the gold price may rise in the festive season as the demand is increasing, and production is low in the international market.

Only time would tell if gold prices would increase or decrease. For any investor, the current situation is gloomy; so, one should be vigilant by keeping in my mind the historic demand of gold before doing any business in it. Before debating about if it makes sense to buy or sell gold in the current market, we need to know some facts that determine the gold price and also the views of the analysts.

Gold prices depend on the demand-supply scale. While demands come from production, supply is driven from how much gold is extracted by mining and how much it is scraped. Reference price of gold is taken from London Bullion Market.

There are lot of other factors which settle down the retail price of gold. Gold is also traded in the form of exchange traded funds, and there are certain bodies which offer gold futures and contracts.

India is the largest gold buying nation of the world due to its highest demand of jewellery. The prices of gold are increasing tremendously in India because of high demand. Buyers in India have accepted the base level, and they are sure that price will rise, or it will be hovering around the current price. This has removed the downside risk in their minds.

It is also predicted that in the final quarter of 2009 the demand of western jewellery will also be increased. It is also believed that the central bank selling and I.M.F selling of 4.3 tonnes in the next year will increase the demand of gold.

Eastern central bank is buying 2-3 tonnes in a week. This trend favours the price hike of gold.

According to some analysts, the technical picture is critical overall, but they are also encouraging short-term traders to bring the price down in the coming weeks. This will help buyers to buy gold at a lower price. People who have gold should hold it.

Currently, the gold investment demand is sidelined, but the chances are that the prices will rise in the near future.

Some jewelers and also weak holders, who were quiet and were afraid of shakeout, are now getting courage to come back to the international market for supplies. Industrial demand is increasing all the time and we can see progress in the recovery of global economy; so, it is expected that prices will rise now and through 2010.

As of now, the prices may rise, gold may shine brightly or lose its luster, but no one can deny its reputation as a safe-haven asset. The importance of yellow metal cannot be challenged in the long run, at least as of now.