Given the huge quantity of gold stored above ground compared to the annual production, the price of gold is mainly affected by changes in sentiment which is the demand rather than changes in annual production which is the supply.
According to the World Gold Council, annual mine production of gold over the last few years has been close to 2500 tons about 2000 tons goes into jewelry or industrial dental production, and around 500 tons goes to retail investors and exchange traded gold funds.
Central banks and the international monetary fund play an important role in the gold price.
Although central banks do not generally announce gold purchases in advance, some such as Russia have expressed interest in growing their gold reserves again as of late 2005.
In early 2006, China announced it was looking for ways to improve the returns on its official reserves. Chinese investors began pursuing investment in gold and it has since become a top gold consumer.