The recent gold price rally is the first stage of a multi-year bull market that will drive the gold price to at least $2,000 an ounce by 2015. A mixture of economic factors and innovations in how institutions can purchase the metal have moved prices. But the biggest driver of gold prices is yet to come.

First, a recap of the factors that have taken gold prices to present levels. The economic causes centre on monetary policy and the risk of inflation. Some industrial countries are striving to devalue their currencies and will use monetary policy to support the goal. Japan has spent $24bn on unsterilised intervention trying to weaken the yen. The policy succeeded, albeit briefly. In 2003-04, Japan spent more than $350bn on intervention and could easily do so again. This policy would increase dollar liquidity while nurturing more monetary growth in Japan itself. The Federal Reserve has also been dropping ever bigger hints that it will embark on a policy of further quantitative easing. A significant policy move will trigger immediate selling of the dollar, and could set the stage for competitive devaluations elsewhere.

The gold price has also benefited from the introduction of exchange-traded funds five years ago. These funds allow investors to purchase gold bullion as effortlessly as a share of stock. In the second quarter of 2010, investors purchased more than 274 tonnes of gold through ETFs. Their holdings exceed 2,000 tonnes, and are the sixth-largest in the world after the official stocks at the International Monetary Fund as well as the central banks of the US, Germany, France, and Italy. At current growth rates, these ETFs could rank in third place by the end of 2012. After a long period of selling gold, central banks are also re-emerging as buyers. China revealed last year that it had purchased 450 tonnes of gold. India bought 200 tonnes last October. Russia has bought 71 tonnes of gold this year, while there have been small purchases by Mauritius, Thailand, Bangladesh, and Sri Lanka. South Korea announced last week that it might use some of its $290bn of foreign exchange reserves to buy gold. During the previous two decades, central banks sold nearly 4,500 tonnes.