Why is the gold price rallying?

The rally in the gold price to $360 per ounce in January has startled many market players because the dominant theme in debates about the economic outlook today is the growing risk of deflation. The problem for investors attempting to analyse the gold price is that the gold market is completely different from any other market. The dominant owners of gold are central banks, not private investors. They have been reducing their holdings at an erratic rate for many years but do not always fully d