At the end of June, I wrote that we might be at an important turning point with regard to central bankers' attitude toward gold. Today, the metal hit a record high on news that many European central banks have all but ceased gold sales. This suggests that officials believe the price will continue to rise and, more importantly, it removes an important source of supply from the market. Is this simply another milestone in gold's ineluctable ascent?

The Central Bank Gold Agreement (CBGA), signed in 1999 and renewed last year, is a framework for coordinating gold sales by central banks of the eurozone, Switzerland, and Sweden (don't look for a free market in this commodity). In the agreement's most recent year, which ended yesterday, the signatory banks sold just 6.2 tonnes -- compared to an annual average of 388 tonnes over the past decade.

The German hawks' hedge
Germany, which holds the second-largest gold reserves behind the United States, announced that it would not sell any gold in the current agreement year beyond the 6.5 tonnes it is flogging ... to its own Finance Ministry. Perhaps the deficit hawks at the German Bundesbank and the Finance Ministry want to keep a hedge in place in case they fail to coerce the rest of the eurozone into accepting swinging austerity.

(The private sector also gave the market the thumbs-up today, with the world's No. 1 gold producer, Barrick Gold (NYSE: ABX), saying the metal could "easily" break its recent record high to rise above $1,500 "in the next year.")

How much do central bankers know?
Do central bankers know more about the price of gold than investors? Many conspiracy theorists would have you believe this, but I don't think officials are all-seeing. In fact, they are as prone to being influenced by the commodity's current strength as the next person. They haven't always been on the right side of the market, either: Witness the U.K. Treasury's May 1999 announcement that it would sell half of Britain's gold reserves, which sent gold to a 23-year low (near $250!). Still, central banks control a big chunk of the gold supply and that means their views -- right or wrong -- have a material impact on prices.

The gold conundrum
As far as I'm concerned, gold poses a conundrum. On the one hand, it appears to be acting as an effective hedge against monetary debasement, and almost everything I observe leads me to believe that prices will go higher still in the medium term. However, without any notion of intrinsic value to anchor on, it is difficult for me to encourage investors to continue accumulating gold at this time. If you do wish to own some gold exposure, I think any of these three gold ETFs are fine vehicles: SPDR Gold Shares (NYSE: GLD), ETFS Physical Swiss Gold Shares (NYSE: SGOL), and iShares Gold Trust (NYSE: IAU).

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Alex Dumortier does not own any shares in the companies or ETFs mentioned. True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.