Gold is a very old story

Gold has been revered by man since antiquity. It has lured people to scour the ends of the earth, from the Arctic tundra to the scorching deserts. "Gold is the child of Zeus. Neither moth nor rust devour it but the mind of man is devoured by it," the Greek poet Pindar once wrote. Who could disagree?

The reason people are drawn to gold is not purely aesthetic. Throughout history, gold is proven to be a stable storage of wealth.

Take gold jewellery, for instance. Many ordinary consumers, in the so-called lower value segments of the market, consider this as a convenient form of investment.

First, it can easily be purchased. Second, everyone is familiar with it. Third, it's a lot cheaper to buy than real estate. Fourth, it's a form of wealth that can easily be transported. Of course, it's not as heavy as gold bullion, so when travelling, the owner literally wears his wealth between countries. And as time passes, the value of gold grows - so does the owner's investment. At least, that's the thought.

That's why for Che, an average wage earner in Dubai, spending about Dh20,000 on gold in one year seems a sound move.

She believes that by the time she retires, the value of the items she purchased will make them far more expensive. Thus, she can sell them for a much higher price or hand them over to her daughter. "My daughter's financial future is already secure then," she says.

But it has to be a long-term strategy. Gold's price per ounce has soared from $20.67 in 1910 to over $900 this year. Analysts have predicted that the price could top $1,000 an ounce. It's virtually there now.

Driver

Although the main driver of gold price is the weakness of the US dollar, the supply shortage plays a major role as well.

From a layman's point of view, gold - like water in the desert town - is a scarce commodity. No one can breed or reproduce it. What's been harvested from the Earth's crust can no longer be replaced. So whatever is unexplored by miners is all that's left.

Already, production of gold is falling worldwide. And as people's disposable income grows and the population expands, the scarcer it will get.

History shows that the value of gold has always been going up over time, except (strangely enough) when it wasn't - there are always going to be dips. When it dropped, it always went back up considerably. These days, with inflation back on the scene devaluing cash, gold seems to have become a sensible use of household funds. The numbers tell that story.

While the day-to-day risk is the same, rightly or wrongly the continued appreciation of gold's price gives the man in the street a sense of security in his investment.