With the price of gold continuing to break records, the future of this unique precious metal is looking bright, says Joanne Stapley.

As investors continue to look for a safe haven in the stormy waters of the world's global financial markets, gold's investment attributes shine like a beacon.

Jim Burton, chief executive of the World Gold Council (WGC), said: "It is evident that gold's unique investment attributes as an effective safe haven and as a dollar and inflation hedge have resonated with investors during this time of financial uncertainty."

Investment demand makes around 12 per cent of total gold demand in any one year. So why would investing in gold be an appealing prospect?

As a safe haven - an asset not matched by a liability - gold provides insurance for investors against extreme movements that occur in the value of traditional asset classes in unsettled times.

"Key examples would be the rise in geopolitical risk with the recent violence in Kenya, the assassination of Benazir Bhutto in Pakistan," said Natalie Dempster, investment research manager at the WGC.

"It makes people nervous and inclined to invest in gold. There's no sense of geopolitical tension easing."

Jim Burton, World Gold Council: "It is evident that gold's unique investment attributes as an effective safe haven and as a dollar and inflation hedge have resonated with investors during this time of financial uncertainty."

Even though in the short term its real value can vary, the purchasing power of gold has remained stable over centuries.

Gold is also a hedge against fluctuations of the US dollar. According to Dempster, people have bought gold over previous years because there is no sign of dollar weakness ceasing.

Diverse investment portfolios containing gold can be better able to cope with market uncertainties than those without, protecting the portfolio against fluctuations in the value of any assets that react similarly.

Strong demand for gold jewellery has come about because of the strong economic growth and sustained promotion in the key gold jewellery markets of India, China, and the Middle East.

However, the jewellery market will face some challenges as a result of the record price of gold, according to Philip Olden, head of jewellery at the WGC.

"Price volatility does hit jewellery demand," said Olden. "We've seen that gold jewellery demand has increased over the last five years along with the gold price because, if consumers believe that their previous purchases were reasonable in value, they’re more confident about their purchases. This gives them a stronger reason to buy more."

According to Olden, buyers in the jewellery trade and consumers in some countries get nervous when the price of gold is "bouncing around", so people tend to wait until they think the price has stabilised.

"With record prices now over $900, people wait to see if that price will come down again or not. So in the short term, I think we may see a bit of a lull in the market."

Gold jewellery also has competition for people's spending power, and it's mainly other products that also make people feel good about themselves.

The main competitors, according to Olden, are "spa treatments, restaurants, nice evenings out, small holidays, as well as other fashion items and luxury goods like handbags and shoes, and increasingly also personal electronics".

And with those product categories spending more on marketing than gold jewellery does, the competition is getting tougher.

"Particularly in markets like India and China where a lot of western companies are now entering," explained Olden. "So you start to get international luxury goods companies and all these electronics companies, etc, all entering the market, so it’s getting more and more difficult.

"There tends to be a lot more branding in those sectors. In jewellery, particularly in gold jewellery, there aren't very many brands, and brands tend to be something that are a strong factor in getting consumer confidence and awareness."

Even though jewellery demand is suffering due to people not wanting to spend so much on gold, with strong investment interest, and the gold price looking to stabilise, the future of gold looks positive.