The gold price at the moment is behaving like Sisyphus' rock. Sisyphus in Greek legend was doomed to push a big rock up to the top of a mountain, but every time he almost reached the summit, the rock would come tumbling down again and he would have to start over - for eternity! With gold the summit seems to be somewhere around $1,000 and every time we reach this level the price tends to fall back sharply.  However, unlike for Sisyphus, it does not fall back right to the bottom each time, but to a slightly higher plateau from which the upward push recommences.

But with gold we don't think $1,000 is really the summit - it is a false peak. Each time we seem to get there the gold price certainly seems to retreat. But, it is in reality moving up in steps, and at some stage seems likely to break through the $1,000 for more than a day or so, and if a number of highly respected analysts are right, $1,000 will then become the new floor - at least for as long as global economic turmoil persists.  And there's certainly no end in sight to this yet.

A significant part of the investment community is, for the most part, optimistic in outlook and is desperate not to miss the bottom in global markets. They are used to the credo that, over time, markets will always rise, but are used to markets which rise, for the most part, over relatively short periods. This recession though may be much longer lasting than virtually anyone will have seen in their lifetimes and although we may well be at or near the market bottom, we are probably still a long way away from any true market recovery. But there still could be another meltdown on say further major financial institution collapses (which is more likely than not), nationalisations, country defaults etc. as Central Banks now have little room to manoeuvre with interest rates at or near zero.

Gold offers a major degree of insurance here. And with the only real option now open to Central Banks being to print money - or completely reverse the cutting of interest rates policies (and after all the only way left is up!) which would definitely put markets into a new downward spiral - at some stage recession and deflation are going to have to be replaced by inflation. And inflation is very positive for gold.

Further, one of the principal arguments against investing in gold in the past is that it does not pay interest - but now neither does virtually any other investment which removes this contra-argument from the equation.

But no gold price increase will be steady. Occasional bouts of profit taking, and seeds of hope elsewhere may see outflows from gold holdings - particularly now ETFs have made gold trading so easy. But something strange is happening here too. It looks like a good proportion of gold held in ETFs is there for the long term with big investors now convinced that it makes sense for a decent percentage of their holdings to be in gold as an insurance policy. And this is unlikely to be a volatile holding until we can be sure the financial crisis is well and truly behind us - and this may not be for some years yet.

There will be short term impacts - both positive and negative for gold which will see this almost-Sisyphusian progression in gold price advance likely to continue. At the moment scrap sales and a virtually complete fall-off in Indian purchases are countering lower gold production and the virtual halt in Central Bank sales. But at some stage, as perhaps a little more comfort with the higher gold price level may return to the Indian market and it will become a buyer again, scrap sales will diminish, ETFs will likely continue to attract money as economies stay flat or decline, global gold production is unlikely to recover and thus the $1,000 mountaintop will be achieved and sustained. It may still take a few more upwards pushes and downwards drops, though, to achieve this, but then the true peak may appear in gold's sights once more.  Some say $2,000 plus, but that could yet be some way off and the path will likely remain very volatile and fraught with some major fall-offs on the way there.