Great freedom among Asian, especially Chinese, investors in owning gold is helping drive the price ever higher, while fears about paper currencies is continuing to bolster the yellow metal’s status as a haven of value, according to Cheviot Asset Management, the UK wealth manager.

Private banks and other firms catering to wealthy investors have been keeping a wary eye on gold, which has surged above $1,000 an ounce – now trading around $1,050 on the US Comex exchange – up from about $800 a year ago. Such rapid rises bring the risk of a sudden correction. 

Gold is often touted as a classic risk-diversifier asset with a low or even negative correlation to assets such as equites, but in the short run that has not always proven the case. Even so, as the financial markets became turbulent last year, a number of private banks recommended gold as a portfolio holding.

The factors driving gold higher have been as varied as demand for safe-haven assets, a weakening dollar, rising Asian demand for gold, and lack of supply.

Ned Naylor-Leyland, a precious metals strategist at Cheviot, says the Asian influence on gold prices will likely become more marked, in ways that observers may not readily appreciate.

“It used to be difficult for Chinese citizens to buy gold or silver bullion; now there are myriad bullion dealers in China with the government recommending bullion-ownership on State TV,” he said in a note to clients.

“This shift in cultural behaviour in China has profound implications for investors in our sector. The Chinese authorities appear to be trying to stimulate a shift in thinking domestically, and with precious metals production globally struggling to match demand, this is starting to look like a potent brew for a substantial move higher,” he said.

He also argued that paper or “fiat” money – unlike old-fashioned metals-backed currencies – was entering a difficult period in the wake of the massive inflation of the money supply and growth of public debt in a number of countries. Mr Naylor-Leyland cited a speech in September by former US Federal Reserve chairman Alan Greenspan, in which the former central banker said: "The rise in gold and silver is strictly a monetary phenomenon and is an indication of the very early stage of an endeavour to move away from paper currencies."

Mr Naylor-Leyland also argued that Chinese authorities are increasingly looking to increase control of gold stocks, citing the case of Hong Kong, where the authorities have built a large bullion storage facility at the city’s airport.

"Little understood is the fact that many nations have allowed London and New York to custody their bullion reserves for decades. Once the issue of ownership of gold and silver that has been swapped, leased or loaned, really starts to become visible and newsworthy, the irredeemable currency crisis will be fully exposed,” he added.