Gold in essence is actually just a piece of metal that falls into the same categorisation that aluminium, copper, zinc, iron, uranium, plutonium fall into on the periodic table known widely referred to as 'heavy metals' due to their high density and for the most part these heavy metals are formed naturally in nature. However, the reason behind the value of gold is due to its limited quantities in nature which makes it more valuable than metals that are more abundant.
Therefore the entire precious metals industry is driven by these very facts and similar, but not alike to other commodities; gold is also bought and sold in order for companies to make margins. However, based on the fact that the price of gold is never the same and coupled with the fact that gold prices are basically determined by the LBMA or otherwise known as the London Bullion Market Association who in turn set gold prices (spot gold prices) twice each day based on the responses from the market that is contending with the economy.
Basically, investors and fund managers swear by gold's store value and the only time when gold prices fall is when the economy is gaining momentum and the capital markets are more attractive due to the higher returns that they provide. During this time the prices of gold usually drops due to the lower rate of demand from gold buyers and gold refiners for the precious metal, and usually this scenario (when economic conditions are positive) also drags the prices of silver down.
However, when the opposite transpires (when economic conditions are negative, investors' confidence is low, interest rates are low and rates of returns are questionable), most investors tend to pull out from their investments and buy gold or silver instead of keeping paper money due to fears of inflation and currency devaluations which is typically what happens when there is an economic turmoil within a given region.
These investors keep their wealth in the form of gold bullion or silver or even ETFs (Exchange Traded Funds – Gold) until the economies return back to normal. During times of turmoil the sudden increase in demand causes the value of gold to move on an upward tangent and some investors wait for market resistance before unloading their gold (market resistance is when investors refuse to buy a commodity after it exceeds a certain benchmark), however some investors are into the habit of gambling and often wait for the resistance to collapse and the value to increase even further.
This is basically what happened during the 2007 – 2008 'global financial meltdown' when gold prices hurtled towards the 2,000 USD an ounce mark before falling back to 1,800, then 1,700 and so forth until where it is currently.