Gold major use is as a reserve although also used for production of materials. An additional role as serving as purchasing power is yet another role gold takes on.

The major exchange for gold although located in London is traded in us dollars with transactions taking place 24 hours a day over different time zones.

Gold is known as what’s called a neutral as it is not tied to any country in particular so the price of gold is not under the influence of government. Gold is an important mover of the forex market.

As a reserve the price of gold is tightly tied to the behavior of other non related investment alternatives like bonds, equities and currencies. The price of gold tends to appreciate time of political or monetary instability and low liquidity. Other events such as natural disasters can also affect the price of gold.

The price of gold has been rising due to the weak dollar and the unstable situation in the equity markets. However, its real price, adjusted for inflation, is much lower today than it was in the early 1980s.

In a strong upward trend since April of 2003 when gold was trading at $330 an ounce it is now as recently as December 2009 gold trading at $1,150 which is more than three fold.

Many traders buy and sell gold in the currency market purely as speculative plays trying to make profits from small and large fluctuations in price. This does not mean trading gold is easy, because gold is mostly used as a reserve it is subject to many psychological and monetary factors.

Investing with a short time horizon leaves open the possibilities for very large account gains however at the same it you have to be aware of your risks and be prepared.

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