The women of Ireland and women all over the world have been selling the 'family gold' in the form of their jewellery to scrap gold merchants in recent months.

This has led to record global gold scrap sales – 1,218 tons last year alone. Meanwhile, high-net-worth individuals, hedge funds, institutions and large banks have been buying gold in recent months. Central banks internationally have become buyers of gold again, with the second quarter of 2009 seeing central banks become net buyers of gold for the first time since 1987.

Arguably the smartest hedge-fund manager in the world – John Paulson – had his hedge fund allocating to gold in a major way in recent months. Paulson and other hedge funds and institutions anticipate more economic challenges in the coming months. This is why the largest banks and largest hedge funds in the world are increasingly entering the gold market.

Gold has risen gradually every year since 2001. It is the only asset class to have risen in dollars, sterling and euros in 2007 and in 2008 and since the start of the global financial and economic crisis. It remains near record nominal highs.

Why is gold a safe haven asset and why has it again outperformed other assets as it did in the deflationary Great Depression and the stagflation of the 1970s?

The short answer is that gold is very rare and is a finite currency, unlike paper and electronic currencies and government bonds. Gold is not bought using loans, mortgages or debt and thus physical bullion is one of the few asset classes to have no counter-party or third-party risk. This is why it has no yield. Unlike companies, banks, states and governments, gold cannot go bankrupt.

Central banks remain concerned about financial, economic and systemic con- tagion. They are worried that the quantitative easing and electronic money creation, on a scale never seen before, could lead to the debasement and devaluation of paper currencies. These currencies are no longer backed by gold since Nixon ended the Bretton Woods Gold Standard in 1971. Central banks are also worried about a systemic and monetary crisis in which a number of countries could go bankrupt.

Those who sell their gold jewellery (often at terrible prices well below the intrinsic value of the precious metal) will likely regret their decision in the coming years. As will those Irish investors, savers and institutions with no allocation to gold whatsoever, as gold is likely to reach its inflation adjusted high of $2,400/oz in the coming years.

Mark O'Byrne is executive director of wealth manager and international bullion dealer, GoldCore