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INVESTORS REGARD gold as a safe-haven asset in uncertain financial times. They hope the precious metal can hold its value when most other financial assets - shares, currencies and property - may not. Earlier this month, gold breached the $1,000 per ounce price level – a key psychological threshold - and last week it set a record high against the dollar. The soaring gold price has mirrored the recent decline in the dollar as international concerns grow about the health of the US economy and questions are raised about the dollar’s future as the world’s major reserve currency.

In the US, a combination of near zero interest rates, expanding deficits and a rising national debt has lowered international confidence in the American economy. Fears that rising future inflation will erode the dollar’s value have increased investor concerns about the currency among some of the very large holders of dollar assets, including China. Its foreign reserves are mainly invested in US treasury bonds and amount to $800 billion. In any rapid decline of the dollar, China would be the biggest loser.