Gold is riding high at $1200/oz on the back of high profile purchases by the central banks in India and Russia. The gold reserves as proportion of total forex reserves is less than 5% for both countries – so no big deal. But there is a theory making rounds that this may be the beginning of the end for US dollar as the world’s reserve currency. That probably is an exaggeration. But as long as volatility remains in the currency markets central banks have no option but to resort to safe investments– right now that is gold.

Despite this bullish trend, gold is not a good investment for individuals. Gold generates no income, has no intrinsic value and carries storage costs. Investments in Gold ETFs attract higher taxes than stocks or bonds. And once the economy is back on track there is a danger that gold prices will fall. It is probably safe to leave gold investments for central banks.