Gold soars to record price as investors seek safe haven

The price of gold hit fresh all-time highs yesterday, reaching a peak of $1,609 an ounce. It has doubled in two years, and, allowing for inflation it is also thought to be at its highest level since the 1500s, apart from a brief spike in the early 1980s. Few appear willing to bet against it exceeding even the 1980s record value of around $2,400 at current prices.

As faith in the paper currencies of the world, and in particular the euro, has evaporated, the ancient attractions of gold have brightened. Condemned by the economist John Maynard Keynes as a "barbarous relic" destined to be worthless except for marginal demand for jewellery, gold has, once again, emerged as a de facto currency in its own right, the most reliable store of value for many worried about the twin dangers of recession and inflation.

The reasons for its popularity are not difficult to discern. Investors are nervous about the future of the world economy and are seeking safe havens for their funds. In a relatively narrow spectrum of assets currently regarded by institutional and private players as safe are gold and silver, the Swiss franc and US Treasury bills. These are all regarded as holding their value long-term better than the alternatives. Markets are nervous that the European financial system will collapse under the weight of the eurozone's sovereign debt crises, and the danger of them spreading from small economies such as Greece and Ireland to Italy and Spain – nations that would be "too big to save".