The precious metal is at record highs but will the music stop?
Like paranoid 1950s lawmakers who saw a communist under every bed, investors of my generation have developed a twitch about asset bubbles.
Can you blame us?
First we saw the dotcom shares puffed to extraordinary heights on hot air. Then house prices tripled in a decade. And as commodities soared we were told to stockpile wheat in the loft and oil in the basement, only to find them crashing, with tortilla rioters giving us the Mexican wave and oil dropping from $147 a barrel in Summer 2008 to $30 by Christmas.
Now it's gold that is reaching new highs every day -- $1,068 an ounce is the latest peak as I type. Who wouldn't be bubble-phobic?
Gold's special status
Of course, an asset hitting a new peak price doesn't necessarily mean bubble conditions. There may be a solid economic case behind the price rise.
Gold is hard to value in conventional terms, though, since its value isn't much linked to consumption, in contrast to say oil or copper.
The price of gold is more influenced by perceptions about, well, the future price of gold. Because holding gold yields no income, you only buy it as an investment if you think its value is likely to rise. Ironically given its supposed status as 'the ultimate store of value', gold is one of the most speculative chips on the table.
That doesn't mean you can't make great profits trading gold, as anyone who bought bullion from Gordon Brown for $275 an ounce in 1999 will testify. But the critical thing is to cash out before the game ends. You don't want to be the last mug holding gold, as happened to unlucky punters who loaded up when gold last peaked in 1980.
The new gold rush
Is gold close to topping out? I see ominous signs.
Last week a CNBC puff piece drew my attention to Ounces2Pounds, a US company that has brought its Anne Summers / gold bootsale concept to Britain.
The host invites guests to come along with unwanted gold. Ounces2Pounds sends an expert over who values and buys it, and the host gets commission and some expenses for her troubles. A quick Google finds another company, YourGoldParty, doing the same thing.
I don't have a problem with people getting rid of unwanted metal over a drink -- it's surely better for their finances than buying tat as more often happens at these get-togethers -- though I've no idea if the prices are competitive. (On its website, Ounces2Gold claims in London it pays on average a third more for gold than pawnshops).
The key point is these companies haven't emerged in isolation. There's a rush of outfits looking to turn unwanted gold into cash, with the likes of Gold Traders and CashMyGold doing it through the post.
With gold at record highs, it makes sense to melt down surplus jewellery.
But the heightened awareness of such services reminds me of news stories about church roofs being stripped of lead during the commodity boom, or the famous one-bedroom cupboard in Knightsbridge that marked the top of the late 1980s property bubble. It smells of weird behaviour caused by a market distortion.
So is gold in a bubble?
Asset bubbles tend to start with some rationale explanation that eventually gets stretched beyond breaking point.
The Internet did change the world, but that didn't make flawed dotcoms worth a bean, let alone billions. We're not making land any more, but that didn't mean first-time buyers could afford to pay any price for a home.
The gold rally/bubble also has credible-sounding explanations, though they've constantly changed over the past 18 months.
First we were told gold was rising because of increased demand from India and China. With such demand looking soft in the recession, fears of an economic meltdown was cited as supporting the price. After government stimulus measures saw off that threat, gold's supposedly classic status as a hedge against inflation was trotted out -- despite the fact the gold price slumped in real terms for two decades.
Now we're being told it's the demise of the US dollar as the world's reserve currency that justifies higher prices.
Only this week, a report by The Independent alleging that countries including China and the key Gulf States were secretly planning to ditch the dollar for oil trades has been cited as keeping gold above the $1,000 mark.
But gold bugs must realise it's simply not in the interests of countries like Saudi Arabia and China to do in the dollar. These states hold a vast stockpile of dollar assets as a result of deliberate policy. They are no more likely to talk down the dollar than you are to tell an estate agent that your house is over-valued.
The status of the dollar will diminish eventually, but that's a very long-term story that can't explain the short-term surge in gold.
All golden things must come to an end
Certainly dollar weakness is playing some role, if only because gold is priced in dollars. If dollars are worth less, you need more greenbacks to buy your dollar-denominated gold.
But ultimately, gold appears to be going up because investors want more of it, whether they're buying gold via the ETFs that now own more gold than Switzerland, or via a vending machine.
As is probably clear, I'm sceptical gold is a good long-term investment at this price. Bubbles can run for years and who knows where gold will peak, but my suspicion is that when the US starts raising interest rates, the gold price will melt.
More from Owain Bennallack:
Owain is partial to the new Wispa Gold chocolate bar, but he doesn't hold the precious metal directly.