Have investors missed the gold boat? A quick glance at the steady ascent of gold over the past 10 years, from around $255 an oz in 2001 (when Gordon Brown sold it) to a new high of $1,242 earlier in May, and you might well conclude we're in bubble territory. As Rupert Robinson, chief executive of Schroders Private Bank, points out: "Gold is setting record highs in almost every currency - and that's despite the strong dollar and monetary tightening in India and China, the main end markets for gold."
But viewed against the current backdrop of extreme economic uncertainty and currency instability, gold's enduring appeal as a safe haven is easy to understand. Many commentators believe it has considerably further to go in the coming months and years, pointing out that in inflation-adjusted terms, it's still below its early-1980s high.
According to the latest gold survey update from specialist consultancy GFMS, gold investment exceeded demand from jewellery manufacturers last year for the first time since the 1980s, as the combination of a bleak economic climate and rising gold prices dampened consumer demand for bling in key markets such as India and Turkey.
Investment demand is rising because people are worried about inflation, worried about deflation, and worried about currency instability. The huge sovereign debts hanging over Greece, Spain and Portugal and other countries threaten to undermine the viability of the euro, and investors also fears that significant inflation is set to return as governments print money to try to tackle their debt problems.
Gold's appeal lies in the centuries-old attraction of physical wealth in troubled times, explains Richard Davis, a fund manager in BlackRock's natural resources team. "The fact that gold bullion is a real asset, which does not depend for its value on any company or government, makes it compelling as a 'safe haven' investment," he says.
There's also the issue of supply, or lack of it. Big new gold mines have been thin on the ground over the past decade, while central bank sales have largely stopped, too - and some have now started buying gold to diversify their reserves away from dollars and government bonds.
