Why is gold skyrocketing?

After languishing for decades, gold prices recently topped $1100 per ounce for the first time in history. Even so, the yellow metal isn't losing any of its luster: Last week, India's central bank announced that it was buying 200 tons of the precious ore for nearly $7 billion. The mystery: Though gold prices usually rise in the midst of market and political turmoil, the seemingly resurgent global economy hasn't slowed the momentum. What's going on?

(Watch: "Time to invest in gold?")

Reckless US federal spending keeps driving gold higher: With massive deficits looming for at least a decade to come, "gold increasingly [appears] to investors to be a more reliable store of value" than U.S. government bonds, says George Will in the Washington Post. America's profligacy raises the odds that inflation will soar at some point, or that the dollar will further collapse. No wonder gold remains the logical choice.

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"Gambling with the dollar"

Average consumers have caught the gold bug: Note the strong retail sales for gold jewelry, coins, and bullion, says gold analyst Suki Cooper as quoted in the New York Times: "Gold's appeal has broadened." This "structural shift" in gold investment — from central banks and large investors to individuals — helps explain the dramatic price leaps.

"Inside the global frenzy for gold"

It's getting harder to find gold to mine: "We're already at 'peak gold'," says Barrick Gold president Aaron Regent to as quoted in the Telegraph. "Production peaked around 2000 and it has been in decline ever since." With fewer economically viable gold deposits left to tap, global demand will exceed the supply.

"Barrick shuts hedge book as world gold supply runs out"

Gold investors are fooling themselves: Will the price of gold reach "$1,500 or $2,000, like many gold bugs say?" asks Nouriel Roubini in Hard Assets Investor. Only two scenarios would make that likely: 1) A real global increase in inflation, but, in fact, most of the world is seeing "actual deflation"; 2) An Armageddon-level depression, "but that risk has been severely reduced." In short, gold optimists are deluded.

"Roubini: People deluding themselves with gold at $2k are talking nonsense"