Swiss private bank Julius Baer still reckons gold is a smart long term investment even though some investors have had their fingers burned by the fall in the yellow metal’s spot market price of over £1,000 per an ounce in March to just above the $755 mark now.

The global economy will remain volatile and there is the risk of inflation at a time of massive injections of money into the system by central banks seeking to avoid a depression. Such a backdrop has usually been a boon for gold, the bank says.

Beyond the safe-haven reasons for buying gold, its underlying price will be directed by supply and demand, Julius Baer says. “Following the latest correction, bullion is now below its high and valuation is back at a level where the precious metal is attractive for investors,” it said in a note.

“Whilst demand has increased considerably in recent years, production has been in decline since peaking in 2001, and production capacities are constrained,” it said, citing rising costs of finding new supplies and the time-lags in developing new mines.

The global financial turmoil has reminded investors of the traditional attractions of gold, with advocates of the metal’s investment charms arguing that it typically does not move in parallel with equities. However, there can still be a strong positive correlation between gold prices and equities in the short run. Last summer, equities and gold prices fell similarly as investors sold the metal to meet cash commitments.