Bullion's sharp rise in price

There are quite a few arguments as to why gold is continuing its march up to higher levels.

• Hedge fund managers have bought gold as an explicit bet against central banks' willingness to preserve the value of paper money.
• It has become more practical for investors to hold gold because a historical problem - that the metal provides no income - barely matters any more because interest rates are so low that neither does cash.
• Gold is also acting as a proxy for the Chinese currency. This is because investors want to hold onto the renminbi, in hope that the currency will appreciate. However, the currency is not freely traded. Hence, investors piled in on gold.

The president of the World Bank has advocated the use of gold as an international reference point of market expectations about inflation, deflation and future currency values. However, some believe that gold is not suitable as the price fluctuates widely. Deflation of 75% in the last decade is also not a good characteristic of a suitable currency.