Detail investors now have to pay $1,606 or £1,000 to buy a single ounce of gold but the debate about whether these record peak prices are part of a sustainable revaluation or a bubble about to burst rages on.
Many skeptics have been calling the top of this market all the way up but there are rather fewer of them willing to go on the record today. Fears about the falling purchasing power of paper money—or 'fiat currency'—and the rising risk of eurozone debt defaults have had a more powerful effect on market sentiment.
Marcus Grubb, managing director of investment at the World Gold Council said: "The current worldwide macro-economic scenario of competing inflationary and deflationary forces combined with sovereign debt contagion in Europe and the federal debt ceiling impasse in the United States continues to be a positive one for gold."
But Patrick Connolly of independent financial advisers AWD Chase de Vere claimed there are disturbing lessons from history for investors tempted to join the bandwagon now. He said: "Between July 20, 1976, and January 21, 1980, the price of gold rose by a staggering 688pc, an annualized return of about 80pc, this rise being due to strong oil prices, high levels of inflation and geopolitical issues. This compares with a return of about 17pc per annum for the current bull run. . .It is possible that we are now in a 'gold bubble' and those investing face the risk of losing far more on the downside than they could potentially gain on the upside."
Against all that, Adrian Ash of BullionVault.com said: "You typically need to buy insurance before disaster strikes, but gold has just kept on paying, right since Bear Stearns' subprime hedge funds first blew up four years ago this week. . .Early buyers simply saw what's now plain to everyone—that a debt bubble was building, and a debt bubble so large that the only policy solution is either default or devalue."
