Gold has continued to trade upward, setting record-high prices into the low $1,400 per ounce in December 2010. When gold is appreciating in real terms and not just against one particular currency, gold is generally considered to be officially in a bull market. Not only has gold fared particularly well in the wake of the European sovereign debt crisis, but widespread uncertainty to do with both the US Dollar and the Japanese Yen proves that the extended run for gold prices is supported on more than one front.

Gold has traditionally been viewed as a hedge against inflation. Some market analysts are predicting that inflation, or even hyperinflation, will become a problem once the economy recovers and governments are forced to repay the enormous amounts of debt currently being issued; however, in the short term there seems to be more evidence that the world is in a period of deflation. Wages and prices have both dropped as a period of overcapacity and excess inventory is being endured. Since a deflationary cycle is one of the least desirable macroeconomic events for a given economy, governments have been borrowing unprecedented amounts of money in an attempt to “re-inflate” their economies as the process of deleveraging progresses. The problem is that the use of quantitative easing to fund governmental expenditures causes investors’ faith in the fiat currency to wane. Gold has become a safe-haven for investors who are losing trust in paper money because of the massive liabilities attached to those currencies.