The retreat has most certainly caused “gold bugs” considerable angst. But they can relax.

This “retreat” is only temporary.

Indeed, gold could easily spike above the $1,500 level this year, says Money Morning Contributing Editor Martin Hutchinson. After all, worldwide monetary policy, global supply-and-demand, and expectations built up from past performances already have combined to ignite the earlier rally that took gold to its record levels just a few short months ago.

Many of those factors remain in place.

And now, three additional catalysts are ready to power gold prices to even greater record levels. Those new catalysts are:

• Inflation.
• Oil prices.
• Fatter wallets in emerging markets.

Inflation and Gold

Global inflation will be a key – if not the key – factor because of gold’s established reputation as an inflation hedge.

Since September, the U.S. Federal Reserve has lowered interest rates seven times – chiefly because of a subprime-mortgage mess that grew into a global financial crisis.

Many foreign central banks have either reduced interest rates in kind, or opted to stand pat, even though inflationary forces in their own markets actually dictated that a rate increase might be a wiser move.

Low worldwide interest rates – arguably an artificial situation, of sorts – has stoked global inflation and caused the greenback to plunge to record lows against other major currencies. And the weak greenback has been a key catalyst behind the escalation of oil prices.

As Money Morning’s Hutchinson has predicted, however, the Fed and other central banks will eventually be forced to start pushing interest rates higher – a stance that even Fed governors are starting to support.

“And during that period, expect speculative demand for gold to intensify and its price to increase steeply,” Hutchinson said. “The longer the period before the Fed is forced to increase interest rates, the higher gold will go.”

“Black Gold” and Gold

There is a very tight correlation between rising oil prices and rising gold prices. While the torrid oil-price advance may moderate at some point – no market goes straight up or down without interruption – the trend in the crude-oil market clearly is toward higher prices, MoneyWeek reported.

And high oil prices tend to support gold prices.

Referring to the “magic relationship” between oil and gold, Moaz Barakat, the managing director of the World Gold Council, said the fluctuations were natural and in accordance with historic price adjustments.

“If you look at the past 100 years, the gold price was always 10 or 12 times that of oil prices,” Barakat told MoneyWeek. “With oil basically around $100 a barrel, gold prices should be at $1,000 or $1,200. That’s the magic relationship between the two.”

[Editor’s Note: Gold investors have made a killing in the past few years, and gold’s meteoric rise is hardly over. Money Morning contributing editor Martin Hutchinson has predicted the precious metal could climb as high as $1,500 in the near future. For additional profit plays on gold - as well as oil, the U.S. dollar, sovereign wealth funds, emerging markets, agriculture, uranium, biotech and much more - check out Money Morning’s just-published global investing guide, The Essential Investors Playbook. It’s Money Morning’s first foray into the investment-book market, but we’re certain you’ll find it worthwhile.]

Asian Wealth

Naturally, as per capita wealth increases in such emerging markets as China, India and Latin America, demand for “American” goods will soar. That holds true both for American “brands,” as well as for so-called “lifestyle goods” – products that foreign consumers identify as being part and parcel of the “American” way of life. Jewelry, gold, gems, other precious metals all will benefit from the growing ability of the newly forming middle classes to spend on wares that aren’t just necessities.

That’s different from past bull markets for gold, which were solely inflation-driven; that is, investors who were seeking to hedge their bets against rising prices caused gold prices to skyrocket.

To be sure, inflation has been a big factor this time around. Gold prices usually move in the opposite direction of the U.S. dollar. With the dollar weak, and interest rates low, an up-tick in inflation could send gold prices higher.

But for gold prices to really zoom, consumer demand will have to act as an adjunct to inflation. And rising demand from increasingly wealthy consumers in China and India may be just the ticket.

Now that the Internet and satellite TV have allowed these aspiring consumers to see what kinds of wares U.S. consumers regularly have, this new group of Asian consumers also want their own houses, cars, appliances, cell phones, computers and jewelry. They are willing to work to get it. And they are all-too-happy to pay the rising asking price.

The upshot: The wealthier this new group of consumers becomes, the more they’ll envy these goods – and the higher the price tags on those products will climb.

This new source of demand could potentially blunt gold’s run toward $1,500. Naturally, demand drives up prices. And, recently, steep prices are to blame for the 11% decline in gold sales during the Hindu holiday of Akshaya Tritiya, where long-term investments such as gold, silver and real estate are religiously merited as purveyors of prosperity.

Like Christmas, Hindus are constantly reminded of Akshaya Tritiya by a bevy of special sales and advertisements from jewelers and real estate companies. 

This is important to note because Hindus were curbing the religious tradition of buying gold, which sheds light on “how much is too much?”