You'd have to be Rip Van Winkle to have missed the news of the fresh highs scored by gold recently. And just as Van Winkle is quintessentially American, for a long time, so too were gold's price records; gold measured in dollars scored 16 record-high days out of November's 18 trading sessions prior to the U.S. Thanksgiving holiday.

The run-up in the yellow metal's value has been pooh-poohed by some observers as being more symptomatic of a dollar bear market than of gold's innate bullishness. After all, new highs weren't being notched by gold denominated in euro, in sterling or in yen—that is, until last week.

Other reserve currencies belatedly boarded the gold bandwagon last week. By the time the turkey was served in the U.S., gold was 4-for-5 in hitting new highs against the reserves. Only the yen resisted, refusing to yield its July 2008 record:

Gold Price Performance*

(Through 25-Nov-09)

*Prices represent daily average offers in interbank trading.

Throughout most of November, it looked as if gold's February records against the European currencies might hold. But oddly enough, it was the Swissie—the reserve currency that held its ground better than the rest over the past decade—that yielded first, allowing gold to notch a new high on Nov. 18. New records then followed almost daily. The euro and pound sterling gave in on Nov. 24, while gold's yen-based price got within a whisker (that is, within 109 yen, or $1.23) of last year's record.

Gold Priced In Reserve Currencies

Gold's Buoyancy Explained

The yen's strength represented a lot of safe haven and carry-trade buying, a reversal of the greenback's more typical fortunes. The franc's weakening, however, was largely attributed to central bank buying of dollars meant to staunch the export hemorrhage wrought by the Swiss currency's appreciation. Adding to gold's buoyancy was talk of Indian central bank interest in adding to last month's metal purchase, as well as other central banks (namely those of Sri Lanka and Mauritius) adding the metal to diversify their reserves.

And the metal isn't just rising in the so-called "major" currencies, either. At a 32.9 percent increase over the past year, gold's appreciation in Indian rupees has almost matched its increase in dollar terms. Even more dramatic was gold's rise in the currency of Turkey, another high-demand market. In lira, gold advanced 35.5 percent over the last 12 months.

Gold's recent price action bespeaks its utility as an uncertainty hedge. Investor and central bank jitters about the dollar, coupled with the prospect of inflation on the horizon, have pushed metal prices higher.

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