If you’ve been following the financial news, you’ll have seen that Gold is a hot and controversial topic at the moment. On February 17th, the sparkling metal dropped to a dramatic 5-week low. Some analysts are convinced that gold is now set on a downwards spiral for 2015 but others are feeling more optimistic. Here are the facts you need to know about this precious commodity.

Traditionally, investing in gold has an attractive proposition for several reasons. As well as being a favorite among investors, it is viewed as the ultimate safe-haven amid times of economic volatility, and is frequently used as a hedge against the U.S. dollar. So the current Greek debt crisis and the war in Ukraine would certainly point to Gold’s price rising.

So why is that not happening? We have to factor in too that the economy is being fueled by positive news such as cheaper oil. Plus the market is now anticipating the absence of Chinese demand during their long Lunar New Year holiday. However, that’s not to say that the price is doomed.

The common belief is that holding gold is a wise move when it comes to insuring oneself against inflation. The idea is that if you hold an asset that has a history of holding its value over the long term, even in times of hyper-inflation, you will have something stable to fall back on. Holding gold is, however, more than just about protecting yourself from inflation, it is also about protecting yourself from the unknown and history shows that the price of gold has a tendency to increase in times of uncertainty.

Many will recall the record highs that gold achieved during the inflation spikes of the 1970s, but gold’s incredible bull-run which ran between 2002 and 2007 occurred against a backdrop of very low inflation, so it is evident that other economic drivers can dictate. Ironically, history shows us that in fact it is even possible for the deflation that analysts are now concerned about to drive gold up.

This is partly due to the fact that the onset of deflation usually equates with interest rates staying lower for a longer period of time. In turn, this keeps the opportunity cost of holding gold very low while at the same time, increasing the chances of future inflation. It is also to some extent because deflation in a high-debt environment can create substantial economic and financial strain. If you take the Eurozone as an example, a sharp increase in the real cost of debt servicing could end up being catastrophic for some of the weaker economies. Looking at the broader implications of a drawn-out period of deflation, it is possible that it could bolster the price of gold.

So, are you with the bulls or the bears? Stay tuned for updates. And whatever the direction of the asset, make sure you trade the trend!