The perfect storm of conditions for gold – which have caused prices to skyrocket over the last few years – will not last forever, the UK-based advisory firm AWD Chase de Vere is cautioning.

Indeed, the metal has received extraordinary attention from the investment community and media in recent years, as its price has risen some 67 per cent over the last two years alone (source: goldprice.org).

“The conditions have been fantastic for gold over the last decade, starting with the fallout from the technology boom and leading through a sustained period of global economic uncertainty, wars and threats or terrorist attacks, a lack of confidence in other asset classes and rising demand from the emerging markets, particularly China,” said Patrick Connolly, head of communications at AWD Chase de Vere.

As Connolly points out, gold performs best in times of crisis, and has been sent even higher by recent events in Japan and Europe, with Portugal asking for a bailout. Furthermore, the wider issue of high levels of government debt in advanced economies, combined with loose monetary policies in those countries, have spurred worries of rising inflation.

Connolly concedes the precious metal may yet become more precious, and does not pretend to know at which point the market will turn. However, he points out that with the giddy heights gold has reached, the likelihood of a sharp drop has increased.

“At some point the ‘perfect storm’ for gold will end and when that happens there is a risk that the price of gold could fall significantly. In this scenario it will be those who invested most recently who will suffer the most,” he said, noting that the metal lost 70 per cent of its value between January 1980 and August 1999.

“While it is nearly impossible to confidently predict the direction of markets, when an asset class hits a record high it is usually a better time to sell than to buy,” said Connolly in an investment strategy note.

He added that investors should remember they are likely to have indirect exposure to gold and other natural resources through broad-based equity funds.