A new record for gold above $ 1,456 per ounce helped along by continued worries about the national debt, concerns are likely to continue to help the yellow metal

A further downgrade to Portugal's credit rating helped boost gold prices to an all time record on Tuesday of $1,456.85 as investors continued to worry about debt problems in the euro zone.

And, if Nicholas Brooks, head of Research and Investment strategy at ETF Securities, is to be believed it is exactly these concerns that are likely to have a growing role to play in the gold market.

Brooks said the growing demand for gold as an alternative currency, which has built up steadily since the financial crisis of 2008 is one of the key factors underlying the current strength in the gold price and, is one that is likely to continue.

"Going back to the first euro crisis in early 2010 there were very substantial inflows into gold of all kinds with gold ETPs seeing very substantial in flows during that period."

He said , both conservative long-term investors as well as the man on the street are looking more and more closely at gold as an investment

But ,added "It doesn't mean that they are selling all their paper currencies or assets," he says, but rather that they are "putting a larger proportion of their assets in gold."

The main reason for this he says, has been the tendency of governments to continue running extremely large debt burdens. And, the concern is always, he says, that these governments will be tempted to inflate their way out of the problems such deficits cause.

And, when this factor is added to the shift in attitude by Central Banks who have once more become net buyers of gold and the continued demand for gold from areas like China and India and the structural picture for the yellow metal looks sound.

Brooks does caution however, that there could be some shorter-term, more tactical factors that could alter gold's performance in the near term.

"Generally, when interest rates are rising - certainly if they are rising at a rapid pace - gold underperforms and now with inflation rising in many economies across the world there is a rising belief that the ECB, possibly eventually the Federal Reserve, Bank of England may start to raise rates and that may take some of the steam out of the gold market rally."

But, he adds, the ability of Central Banks to raise interest rates will be somewhat hobbled by the banking and real estate issues that remain prevalent in many of these regions. He also says that there is a strong possibility that the very large debt burdens tied to the necks of many of these countries are likely to be a drag on growth.

Thus, he says, "The interest rate headwind to the gold price is likely to be somewhat temporary and also ultimately not prove to be all that strong."

He adds, "As long as the environment remains risky, as long as the peripheral European sovereign risk remains an issue, as long as the Middle East remains in turmoil, there is always going to be a demand for an asset like gold."

"The key risk to the gold flows this year would be a substantial and sustained rise in global interest rates but again my own view is based on the need for fiscal tightening that is unlikely - ultimately if they look out through the year investors will probably continue to take a bar-bell approach to investing hedging out sovereign risk through gold and other instruments, hedging out Middle East risks through oil and other instruments like that and remain long risky assets until there are signs that global is slowing. So ultimately the trends that we have seen in the first quarter of this year are likely to continue through 2011."

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