The poet John Milton wrote: "Time will run back and fetch the age of gold." In the 19th and early 20th centuries gold played a key role in international monetary transactions. The gold standard was used to back currencies, the international value of currency was determined by its fixed relationship to gold and the precious metal was used to settle international accounts.
In the film Goldfinger, Colonel Smithers explained the monetary role of gold to James Bond succinctly: "Gold and currencies backed by gold are the foundation of international credit.… We can only tell what the true strength of the pound is … by knowing the amount of [gold] we have behind our currency."
The system operated more or less continuously until the early 1970s, when progressively the world moved to the era of floating currencies with no link to dollars or gold.
The 500 per cent increase in the gold price since April 2001 has prompted gold bugs to speculate about a new age of gold. Having earlier sold off their holding, some central banks are now re-building their gold reserves.
A weak US dollar and the questionable prospects of other major currencies, such as the euro and yen, have driven central bank demand for gold as de facto currency.
With a large portion of their reserves invested in currencies of developed nations which were losing value, the central banks sought to switch to gold as well as other real assets.
The revival of interest in gold is also underpinned by debate about a return to the gold standard. Advocates as varied as the libertarian US presidential candidate Ron Paul and the Islamic Liberation Party (Hizb ut-Tahrir) have argued that the gold standard is a solution to the deep problems of the global economy.
The gold standard, it is argued, would foster economic stability and prosperity, primarily by creating price stability, fixed exchange rates and placing limits on government deficit spending as well as trade imbalances. It would also limit credit-driven boom and bust cycles.
Opponents of the gold standard say it would limit the flexibility of governments and central banks in managing economies, restricting the ability to adjust money supply, government budgets and exchange rates. Opponents also point to the inflexibility of the gold standard which may have contributed to the severity and length of the Great Depression.
A return to the gold standard would also confer a natural financial advantage to countries that produce gold, such as the US, China, Russia, Australia and South Africa, although geo-political considerations and global competition make it unlikely.
There are also limits to supply. In all human history, only about 140,000 to 170,000 metric tonnes of gold have ever been extracted. Annual production is about 2,400 tons.
The world's existing stock of gold is equivalent to about two Olympic swimming pools. The value of this amount of gold is more than $6trn, roughly 10 per cent of everything that the world produces in a single year and a tiny fraction of global wealth.
Limited central bank holdings of gold constrain a return to the gold standard. The US, German and French central banks have gold stockpiles valued at 250 to 300 per cent of their reserves of foreign currencies. China, India, Russia, Brazil and South Korea hold between 0.5 and 10 per cent of their foreign reserves in gold.
If the central banks of China, India, Russia, Brazil and South Korea sought to increase their gold holdings to a mere 15 per cent of foreign reserves, they would need to purchase more than 10,000 tons of gold. The US, the world's largest gold holder, holds a little over 8,000 tons.
The state, through its monopoly over the printing presses, has almost total control of money and the economy. Money is now a matter of pure trust. Politicians and policy makers are unlikely to willingly cede the power that a paper money system provides.
As the metal's price rose, a Tuscan spa offered wealthy clients a treatment which entails the entire body being covered in 24-carat gold. Costing €420 (£355), the treatment, proponents claim, provides unverified benefits such as delaying the visible effects of age and boosting skin hydration and skin elasticity.
Having switched from traditional financial investments to gold to preserve their wealth, investors will be hoping for the health benefits of the gold treatment rather than another possible ending.
In Goldfinger, the character Jill Masterson, played by Jill Eaton, is murdered by being painted head-to-toe in gold paint – one of movie history's classic scenes.
Satyajit Das is a former banker and the author of "Extreme Money" and "Traders, Guns & Money"Reuse content