The gold price last week hit a record high. Passing the previous peak set in the uncertainty of the Covid pandemic in 2020, gold reached $2,531 per troy ounce (the unit used to weigh precious metals).

Gold has always been viewed as a safe haven, so we know that if its price is rising there must be cause for concern somewhere in the world. Its present run is being driven by geopolitical uncertainty and concerns about inflation, fiscal deficits and falling interest rates.

It could rally even further ahead of the US presidential election in November. Analysts at the US bank JP Morgan think it could reach $2,600 in the first quarter of next year.

Central banks, notably the US and China, have been buying gold — they tend to like it because it is a liquid asset (meaning it’s easy to buy and sell) and has no credit risk.

So should we be doing the same?

Traditionally gold has been touted as an “insurance policy” in an investment portfolio; something in which to have about 5 to 10 per cent of your money for when the going gets tough. There are two main ways to invest: through a fund that tracks the price of gold, or by buying physical gold bullion and storing it somewhere safe.

But the gold price is dictated by sentiment, rising and falling with investor demand, and this means that it can be incredibly volatile. Which is a strange characteristic for an insurance policy. You could argue that a cryptocurrency such as bitcoin could perform the same role in your portfolio. It is, after all, an asset whose price rises and falls with sentiment and is not linked to global stock markets.

Gold’s main trump card over bitcoin is that it does exist in the physical world, so you can trade with it when the apocalypse comes. However, this is a trickier argument to make if you are buying through a fund rather than storing gold bars.

But clearly some investors are still attracted to gold as a ballast for their portfolio. On Meltdown Monday — August 5 — when global stock markets had a wobble, the Royal Mint reported a 336 per cent increase in bullion trading.

What’s the attraction? Gold can rally at times of uncertainty — other recent peaks have happened in 2022 when Russia invaded Ukraine and in December 2023 amid concerns about interest rate cuts. There is also consistent demand for it. India and China are among the biggest buyers of gold for jewellery, although demand has faltered as the price has risen. It is also easy to buy and sell at any time.

Some argue that gold is a good hedge for inflation, but I’m not so sure. It pays no income, so you are relying on its price to rise in real terms if you want to make any gains, and there are no guarantees. Over time, the stock market has proved to be a more reliable generator of inflation-proofed returns.

What seems most problematic to me, though, is its volatility and unpredictability.

So where else can investors put a portion of their money if they are looking for a safe haven in their portfolio?

• What are bonds and how do they work?

Bonds are one option. These are a type of IOU issued by companies — you lend your money to the business and it pays a regular income (known as a coupon) to you for an agreed period, plus your initial capital back at the end. Bonds tend to move in the opposite direction to stock markets (although not always) so can be a good diversifier for your portfolio.

Accessing them through a fund is easiest and will spread your risk across dozens, if not hundreds, of different bonds. The iShares Corporate Bond Index fund is a low-cost option that aims to match the performance of the broad UK bond market. If you prefer an active fund, Royal London Corporate Bond is well regarded. It holds bonds from the likes of HSBC, Aviva and M&G.

Gilts could fit the brief. These are bonds that are issued by the UK government, and so are deemed incredibly safe because it is unlikely to default on its debts. Gilts proved a poor choice for investors when interest rates were low and inflation high — in real terms, they lost more than a third of their value over the past three years, according to the wealth manager AJ Bell. But a 30-year gilt now pays about 4.4 per cent, which makes them worthy of consideration. You can buy these individually but, again, a fund may be easier.

Alternatively, with savings rates still hovering around 5 per cent, perhaps cash in the bank is the best bet. Not only are your returns guaranteed, you are protected up to £85,000 if your bank fails and is covered by the Financial Services Compensation Scheme. A savings account is no place to leave your entire retirement fund, but as a short-term safe haven, it could be a worthy option. You can get 4.8 per cent on Cynergy Bank’s easy-access account, or 4.93 per cent from SmartSave if you lock in for a year — expect deals to disappear as interest rates fall, though.

I dabbled with a gold tracker fund about 12 years ago and found it to be the most anxiety-inducing investment I ever made. With no fundamentals driving its price movements, no income paid for your efforts and exchange rate risk thrown into the mix because it is valued in dollars, it just did not feel like a safe haven to me.

So cash is my safety net of choice, for now at least: the returns beat inflation and the interest is guaranteed — that’s my idea of an insurance policy.