Indeed, gold's fall contrasts with a sudden boom in the price of another alternative currency, Bitcoin (although the price has been hit today by attacks on the website). As Felix Salmon notes in an excellent post on the virtual money, enthusiasts for Bitcoin and gold come from separate social niches so this trend divergence is explicable, even though one might think their fundamental similarities (a restricted supply) might prompt them to be correlated in normal circumstances. Another explanation for the gap is that the Bitcoin bubble, like any other, is a case of investors piling into an illiquid asset that has suddenly made the news (the story was on the front of the FT today).

In a sense, Bitcoin, a currency with no backing at all except faith (see FT Alphaville), is reminiscent of the "undertaking of great advantage but no one to know what it is" that (perhaps apocryphally) marked the peak of the South Sea Bubble. Of course, many might remark that developed world currencies have no metallic backing and so exist on faith as well; however they do have legal tender status and have the (admittedly impaired) implied backing of the tax-raising powers of their governments. Western governments may yet undermine their currencies but they haven't so far; dollars and euros are pretty universally accepted.