As good as gold

BBC2 Working Lunch's Adam Shaw tracks gold prices

By Adam Shaw BBC2's Working Lunch

Gold has attracted speculators and investors for at least hundreds of years and probably more.

As an investment it has a number of attractions.

There is a limited supply of the stuff - so it has some inherent rarity value.

The price of gold is easily obtained so anywhere you are in the world you can always check what your gold is worth.

Whereas currencies have to be exchanged when you go abroad, gold is an international asset - you can sell it in India and Ireland just as easily as Britain and Brazil.

And while it's heavy, it is portable.

If you want to flee a country you can fill your bags with gold and fly away.

Try doing that with your semi-detached house.

And all of that is without even mentioning the fact that gold is one of the few investments you can wear out for dinner.

For those reasons gold has been a popular and useful investment, especially for refugee communities who have had a history of moving countries.

On the downside

The problem here is that although it has all these wonderful benefits - it's also got some bad drawbacks.

First of all, it's pretty useless. Quite literally - it's pretty but it's useless. It sits there, earns you zero interest and you have probably got to pay someone to store the stuff.

But the biggest problem of all has been the price.

Kevin Crisp: "I think from this point onward gold can start a gradual march higher."

Recently it's been increasing and has recently hit a two-year high.

Which is very good. But in the recent history of gold prices this is still just a little blip.

A bad investment?

Over the long term gold has been a bad investment.

In 1987 gold cost $500 an ounce.

Today, even with the recent price rise, it is just over $300 an ounce.

Why has the price risen recently?

Kevin Crisp, the precious metals strategist at Dresdner Kleinwort Wasserstein, says: "It's not a single event that has been driving the gold market since the beginning of this year.

"It is a combination of global political and economic events; the poor performance of the U.S. equity market and uncertainty in the Middle East."

But there have also been internal market factors.

Particularly the actions of the gold mining companies, which have opened themselves up to increased price risk.

What about the long term

Where is the long term price going?

Kevin says: "I think there is no doubt that the perceptions of those who are involved in gold is that the outlook is a lot more positive than it was.

"I think from this point onward gold can start a gradual march higher. I certainly see gold prices of $320 to $330 by the end of this year and I think they are sustainable."

The gold price is now around $309 an ounce.