Gold fever is back. There’s no doubt about that. The metal’s latest ride above and beyond US$1,000 per ounce was the first jump of such magnitude since the 1980s. The demand for gold jewelry is growing in India and China, and is mirrored by rising gold prices. Perhaps more importantly, scorned investors are looking to gold for stability and a hedge against inflation and market volatility.

Gold fever is back. There’s no doubt about that. The metal’s latest ride above and beyond US$500 an ounce was the first such jump since the 1980s. Since breaking US$500 in 2005, gold has surged to US$600 in 2006, US$800 in 2007 and finally peaked above US$1,000 in March 2008, before dropping in late April and now (May 2008) hovering around US$900.

What’s going on? For starters, as the middle class grows in budding economic powerhouses such as India and China, so does demand for gold jewelry. And since jewelry makes up as much as 80 per cent of the world’s produced gold, its perceived scarcity drives up gold prices. Advances in computers and communications have also driven up the demand for gold thanks to its importance as a conductor. Of course, while some top up their gold holdings, others look to unload their unwanted gold and make a tidy profit. So it always goes.

Perhaps more importantly, gold has traditionally been, and continues to be, a hedge against inflation. Even through the worst economic crises, gold has historically held its value. After last year’s global credit crunch, gold’s stability is once again attractive to investors looking for financial insurance of sorts, the idea being that physical gold holdings will be there for you no matter how volatile the stock market is. Recent weakness of the U.S. greenback has also contributed to the investment rush into gold.

What does all this mean for you? That depends on what you’re looking for. Analysts the world over are reaching an eerie consensus on gold investing. If you’re looking to protect your capital against inflation, deflation, stock market bears, and currency weaknesses, buy gold coins. If, on the other hand, you’re looking to maximize returns on your investment, consider moving into higher-risk investments such as gold stocks and derivatives. After all, the higher the risk, the higher the reward.