The global financial crisis in 2008, followed by the concerns about growth in developed countries, especially among European nations, led to investors going for risk aversion.
Amar Singh Deo, head, Commodities and Currencies Research, Aditya Birla Money, says: "Currencies, once considered a safe avenue, took a major hit.
Equity markets lost a lot of their value and investor confidence was shaken.
During this time gold seemed the safest bet from a long term perspective."
Simultaneously, the dollar took a major hit, which benefited gold owing to its inverse relationship with the greenback.
"Further, the price of gold has also been driven by huge liquidity infused into the system by many governments, including the US, UK and Japan to combat the downturn," says Naveen Mathur, associate director, Commodities & Currencies, Angel Broking.