Has the world lost its lust for gold? Unlike most investments, gold pays no dividends. But that has been no brake on a startling run, which for more than a decade has proved the goldbugs right and Buffett wrong - not to mention Gordon Brown, who sold a big chunk of Britain's gold reserves at the bottom of the market in 2002. The financial crisis was gold's making. Banks went bust, equity markets crashed and, with interest rates at rock bottom, governments embarked on the biggest money-printing exercise in history in an attempt to reflate the global economy. Quantitative easing runs into trillions of pounds. As Paul Kavanagh of Killik Capital points out, the upshot was nigh on perfect conditions for gold, which thrives in an "environment of negative real interest rates - when inflation is higher than interest rates. These are favourable conditions for gold as there is less competition for investors" capital from interest rates and inflation erodes the value of 'paper money" while theoretically maintaining the value of gold." In such an environment, gold shone. From a low of $255 an ounce in April 2001, the price rocketed to just over $1,900 by September 2011. Investors piled in, making the most of those exchange traded funds that track the gold price, not least the world's biggest - the SPDR Gold Trust (USA). Such funds brought another advantage. Buyers did not have to pay to store the stuff. Now, though, the gold price is at a two-year low, a 20 per cent fall from its peak technically indicating a bear market. The reasons are myriad, but go to the heart of why gold is a looking-glass investment: investors are selling partly because gold is no longer responding to the usual buy signals, such as sabre-rattling from North Korea or bad news from the eurozone or US. As Goldman Sachs put it: "Over the past month, events in Cyprus have triggered a resurgence in euro area risk aversion, while US economic data has started to disappoint. Remarkably gold prices are unchanged... conviction in holding gold is quickly waning. The investment bank was ahead of the curve, writing a note in December entitled "Gold cycle set to turn on improving US recovery." Indeed, for a while that looked a relatively straightforward investment story, with the jump in stock markets this year appearing to signal that investors preferred riskier shares to low-yielding government bonds or no-yielding gold. As things have turned out, the reasons for the gold sell-off are more complicated than that, with the price plunge exacerbated by the leverage in some funds that forced holders to sell to meet margin calls. For starters, investors were spooked by talk that one condition for bailing out Cyprus would be forcing the cash-strapped eurozone tiddler to sell all its gold holdings. Cyprus only has 14 tonnes. But what about the read-across to rocky old Portugal, which has the world's 14th biggest holding of 382 tonnes? Gloomy growth figures from China didn't help. Not only does slower growth reduce the threat of inflation (so reducing gold's appeal) but the country, alongside India, accounts for more than half the demand for physical gold. Even a buoyant Indian wedding season, now under way, may not compensate. But two other factors look more pertinent. First, last week's minutes from the US Federal Reserve dropped a hint that it may rein back on QE earlier than expected. And, second, the massive stimulus programme by Japan's new central bank governor, Haruhiko Kuroda, looks to be having a different effect to the one goldbugs anticipated. Instead of the $1 trillion programme reviving the "yen-carry trade," where investors borrow yen cheaply and invest the money overseas in higher yielding assets, Japanese investors have been bringing money home to bet on Japanese stocks and property. Worse, they've been selling gold to do it. How all this plays out is anyone's guess. Gold bulls still have a pretty good case that global economic recovery is fragile at best, with other asset classes capable of providing even nastier shocks. Indeed, Marcus Grubb, managing director, investment, at the World Gold Council, says: "We believe that despite the current turbulence, the long-term fundamentals of the gold market remain intact. Physical gold demand in India, China and Dubai is incredible because of the price fall. But maybe investors are beginning to come around to the view of Buffett, who calculated in March 2011 that all the world's gold "would roughly make a cube 67 feet on a side," worth around $7 trillion. "For $7 trillion," he noted, "you could have all the farmland in the United States, you could have about seven Exxon Mobils and you could have a trillion dollars of walking-around money. And if you offered me the choice of looking at some 67 foot cube of gold... and you know touching it and fondling it occasionally... Call me crazy, but I'll take the farmland and the Exxon Mobils. Even if the numbers have changed, you might need to be a goldbug to disagree.