Why own gold - one of the most contentious asset classes in the financial market spectrum? To some, gold has an awe of mystic and almost revered status. Yet to other investors it has no earnings power, no yield and therefore no obvious way to value it.

But the case for owning gold is really a simple straight forward case of economics and to understand that case we need to look at two key points. One, gold's history and two, its supply/demand dynamics.

On the historical side, gold has functioned as the world's monetary anchor for most of the last 200 or 300 years. Indeed, all the way from 1800 up until 1971.

By that I mean the money supply of countries was linked, anchored, to the amount of gold that was in circulation. As such, the ability of governments to create money, to print money, was severely restricted and severely limited and as such, there was little or indeed no inflation over that period.

Indeed, from 1800 to 1945 £1 bought the same basket of goods at the beginning as it bought at the end of that time period. The same in America. The same in most countries in Europe. Gold anchored the world's monetary systems. Gold anchored inflation such that there was none over that time period.

Since 1971, since we came off Bretton Woods, the loosely anchored gold monetary system from 1945 to 1971, governments have been able to create money and create as much of it as they need or desire to create.

As such, inflation has taken on different dynamics. Since 1971 UK inflation has increased 11 times. £1 of goods in 1971 now costs £11. In the US it's 5.5 times over that 40-year period. In Japan it is three times. In Italy, 15 times and so on.

As such, the creation of money has led to the creation of inflation. The absence of gold as a monetary anchor has allowed countries to create as much money as they so desire and therefore, create the amount of inflation they so need.

So it's the history that neatly demonstrates the second point, that the case for owning gold is a simple case of supply and demand dynamics and the supply and demand of gold relative to the supply and demand of currencies. Because gold is a precious metal, its supply is limited. It's often hoarded. It doesn't grow rapidly year-on-year. Yet in a fiat currency world, governments can create as much money as they so desire. So whilst they're trying to wring inflation out of the system from the early '80s and the early '90s onwards, monetary policy is tight, the supply of the currency is tight, gold doesn't do well.

Whilst they start creating lots of money in response to financial crises, from 2000 onwards gold starts to perform because the supply of the fiat currency money goes up and the supply of the gold is pretty constant. It's simple economics. It's simple supply and demand and if you expect governments to continue creating money, you want to keep on owning gold.

That was the Longview. You can download this programme from the iTunes store, from Cantos' website or from our website longvieweconomics.com. Do get in touch through the website if you have any questions. We hope you enjoyed watching. Look forward to seeing you next month. Goodbye.