Gold is attracting some new attention

(Kitco News) - If you have any questions about where gold is going, you must first look at where it has been.

Despite everything that is being thrown at the marketthe U.S. dollar index holding above 100 points, the S&P 500 rallying out of bear market territory, two-year bond yields above 4.5% and money market funds above 5%gold continues to hold onto firm support within a solid, bullish trend line.

Some analysts have said that in the current market conditions, gold prices should be significantly lower, trading in at the $1,800 level. Instead, the market is less than 6% away from hitting a new all-time high. So what makes this environment so different? We have noted this several times in the last seven months: central bank gold demand has fundamentally changed the marketplace dynamic. Because of their insatiable appetite, central banks are not only net buyers of gold but record buyers. This demand is not going anywhere anytime soon.

We just have to look at the People's Bank of China, which reported this week that they bought roughly 16 tonnes of gold last month. This is the seventh consecutive month China's central bank has bought gold. Since November, it has increased its gold reserves by 144 tonnes.