We all know that gold is precious. We also have learnt, however, that there is not necessarily a correlation between everything that we regard as being precious and what lies at the centre or at the heart of our real interests. In this sense, gold is unique not simply because of the never-ending demand for gold to make jewellery but also because it is the commodity most closely related to a variety of issues that we face every minute in our lives, especially where economic incentives and reasoning are involved. In addition to the long period when gold was used as an offi cial means of transaction, even after the collapse of the Bretton Woods international monetary system cut the link between gold and money in 1971, gold continues to be used as part of most countries’ reserve holdings. In fact, gold is the only commodity held as reserves by monetary authorities. Moreover, gold’s role as a fi nancial asset has become increasingly signifi cant as the present system of fl oating exchange rates struggles to fi nd fi rm ground in markets and currencies of increasing volatility (Kile, 1991). Bernstein (2000) alludes to the fact that the concept of gold as a certain and risk-free asset has been dormant in humans’ behaviour from ancient times, when he states that:
. . . from poor King Midas who was overwhelmed by it to the Aly Kahn who gave away his weight in gold every year, from the dank mines of South Africa to the antiseptic cellars at Fort Knox, from the gorgeous artworks of the Scythians to the Corichancha of the Incas, from the street markets of Bengal to the fi nancial markets in the City of London, gold refl ects the universal quest for eternal life – the ultimate certainty and escape from risk.