While you're at Harrod's anyway, why don't you pick up a pound of gold?

A remarkable piece of news came out of London last week. Harrods, one of Europe’s best-known department stores, has begun selling gold bullion.

This unprecedented move by the famous retailer reflects the rapidly growing appetite for investment-grade gold, which has been enjoying a bull run even as the world is bogged down in a global recession. Used as a hedge against currency weakness, especially the dollar, gold has been trading at record highs. Many analysts think this is no temporary spike, but a long-term surge that will continue as the word monetary system is pulled down by the mismanaged and collapsing dollar. (To be sure, there are those who question whether gold is a sound investment, even in inflationary times.)

Swiss-based financial newsletter Daily Bell puts it bluntly:

“We are in a bull market cycle for money metals because fiat money is all but dead, including most importantly the American dollar.”

Simone Wapler, the editor of MoneyWeek agrees:

“Gold is being re-monetized. All the world’s paper monies are losing value – and credibility. There’s a race to the bottom as they try to devalue their currencies.”

Until quite recently, money was backed by gold. That changed after World War II, when Western powers set up a monetary system with the dollar at its center. The dollar was partially backed by the metal until 1971 when President Richard Nixon took it off the gold standard altogether. At that point, the dollar became pure paper money.

But there was a major problem with the change. Politicians will always print more money than they should. How else to pay for the promises that got them elected? This excessive printing is known as currency debasement and it ultimately leads to inflation.