VIEW FROM THE GROUND FLOOR: With the world in somewhat of a chaotic state at the moment, the precious metal is regarded as a safe haven for investors
The fact that the yen is at a six-year high against the dollar really doesn't have anything to do with the hordes of crazed football fans milling around Japan this month, although I'm sure they're doing their best to boost the economy by spending as much as possible on sushi, beer and tasteful souvenirs.
The Japanese currency's 8 per cent appreciation against the greenback this quarter has more to do with a shift in investors' perceptions about the US than anything else and fund managers have been eyeing Asia again following a long period of being underweight in the region.
US assets don't have the almost invincible allure of old, and fund managers are now having to work a lot harder to earn their returns. Which is why they're pouring over the Asian and European research papers again.
From the point of view of the Japanese authorities, however, the yen's appreciation is a little double-edged - it makes the downgrading of Japan by the ratings agencies look somewhat churlish (Moody's lowered its rating from AA3 to A2 last Friday and the Japanese are very unhappy about it) but it also makes Japanese exports more expensive. Clearly that worries manufacturers who are still trying to haul the country out of its 10-year slump. Japan's difficulties are different to many other capitalist societies - for many years the country's policies were based on ever-increasing growth in an ever-expanding economy. When that came to an abrupt halt the systems weren't in place to react to a different environment. For all of us who think that economies can recover very quickly from a downturn, Japan is a chastening lesson.
Since it's really the dollar that's weakening we can see that the whole basis for investment and market moves over the past number of years needs to be re-thought. The euro has also made ground against the dollar, it's at its strongest in more than a year. The question for many people is whether dollar weakness will continue in the medium to longer term. Given that US Treasury secretary Paul O'Neill has never made the kind of "strong dollar" policy statements of his predecessors, it's increasingly likely that it can.
The US is looking for growth that can be achieved by upping exports and that's made easier by a weaker dollar. As always with currencies, it's how quickly movements take place that's the key and it seems to many in the markets that O'Neill would favour what he describes as an "orderly" decline in the US currency.
Traders have taken this to heart - not only has the dollar depreciated against the yen and the euro but gold is now centre stage again, closing at around $327 (€348) an ounce last week - up from lows of about $260 a few of years ago. Back in 1999, of course, gold was the poor relation of the markets - nobody wanted to invest in something that couldn't be downloaded from somewhere in nanoseconds, even if it did gleam gently under a soft light.
But all that glistened certainly turned out not to have the staying power of the precious metal and if you'd jettisoned the TMT stocks and bought gold instead it would have been a spectacularly profitable venture! Still, timing (as I've said before) is everything and even I, the most cynical person on the planet about technology mania, wouldn't have thrown in my all with lumps of bullion instead of dinky little mobile phones.
Anyway, gold is de rigeur again, partly because the world is in a somewhat chaotic state. Nobody is truly convinced of economic recovery in any of the major markets and investors are edgy about the high-level conflicts in both the Middle East and Pakistan and India. Surprisingly (or maybe not) much of the demand for gold is coming from Asia, where interest rates have been close to zero for ages and everyone has been so burned by the stock market that they simply don't have the energy to trade equities any more. At least with a lump of gold you don't have to read tracts of company research and try and come to terms with highly-dubious accounting practices. You simply shove it into a drawer and polish it up from time to time. And, of course, you can always wear it.
Still, loading up with gold isn't exactly putting much into the economy as a whole. Perhaps those investors who showered money into a myriad of sure-thing investments over the past few years don't care about economies any more, all that matters is simply hanging on to what you've got.
Which is what we're all trying to do in the euro zone, even though nearly 70 per cent of us think that, post-euro, prices have gone up. The difficulty is deciding how much of the rise is due to normal inflation and how much is due to simply being ripped off.
The Germans in particular are of the view that the demise of the deutschmark and arrival of the euro has given carte blanche to every cafe owner, hotelier and supermarket to rachet up prices. And I'm sure that they have. Clearly no price has been rounded down since January. That simply doesn't happen. And so items like newspapers, which used to be €1.27, are now €1.30. Thing is, it's actually easier to find €1.30 in your purse - the one and two cent coins are so tiny and fiddly that a 10 and 20 cent piece are simpler to hand over. There are other ways we pay more too. If you journey across the eastlink bridge the toll is €1.05. But you're never quite sure whether or not the eastlink baskets accept bronze coins, so you throw in €1.10 because you can't bear the thought of queuing up behind 10 trucks for the sake of five cents.
There's no doubt but that the local Chinese and Indian takeaways have dramatically increased their prices since the beginning of the year, while frothy cups of latte in trendy coffee bars are probably the most expensive non-alcoholic beverage around. So it seems that we're right to be annoyed.
Yet euro-zone inflation generally has slowed to around 2 per cent and, with a strengthening euro (as well as a decline in oil prices), the chances are that it should stay around that level, which would mean stable prices. But it doesn't stop many of us from feeling that the things we spend most money on have gone up the most too. At least the gold rings have also increased in value, though - which is a small crumb of comfort.
