Year after year, commentators write the obituary of gold as a monetary and investment asset. Given the financial backdrop, 2001 should have been the year they wrote about gold's comeback.

Several traditional pro-gold developments in world financial markets promised to revive the fortunes of the metal famously branded by John Maynard Keynes in the 1930s as a "barbarous relic".

Historically, gold has flourished in times of political uncertainty. The terrorist attacks on the US and the war in Afghanistan might have been expected to help revive the fortunes of gold.

The threat of rising inflation in the US - among gold's best friends - has also been present in the market this year. Inflation fears were kindled by a rise in the closely-watched US employment cost index around the middle of the year. Towards the end of the year gold might have expected a boost from mounting concerns over emerging markets - which have tended to send anxious investors scurrying into safe investments. Growing concerns about the threat of a fall in the dollar - gold's old adversary as a store of value - should have pushed gold higher. Weak share prices were the final ingredient in what should have been a near perfect recipe for a rising gold price.

Given this backdrop, gold bugs may look back on 2001 with disappointment. Gold did rally - to more than $300 per ounce. But the gains have been fleeting and most analysts expect the downward trend to continue.

"If gold can't stage a come-back now, then when can it?" asks Howard Patten, gold analyst at Barclays.

Part of gold's problem has been relentless selling by central banks. The collapse of the Bretton Woods monetary system in the early 1970s removed the primary rationale for central banks to hold gold. Yet it has only been more recently that they have started to scale back their massive holdings of gold. A disorderly rush by several central banks to offload gold in 1999 led to the Washington Accord, in which 15 European central banks agreed to cap sales of the metal at 400 tonnes a year.

Analysts agree that while the pact is being honoured, central banks are selling as much gold as they can under its terms. This is a constant drag on the price. The sight of central banks forming an orderly queue to sell also does little to inspire other investors to have confidence in the commodity.

"While medieval alchemists failed to turn base metals into gold, modern central bankers are doing a pretty good job of turning gold into a base metal," says Marc Chandler, chief currency strategist at HSBC in New York.

Underlying this trend has been a cultural shift in central banking. Greater emphasis has been placed on the efficient - ie profitable - management of foreign exchange reserves.

For a new generation of central bankers, gold has little appeal. Not only does it not produce a yield, but it has failed in the most fundamental duty of a reserve asset - providing a store of value. A central banker who decided to hang on to gold between 1980 and 2000 would have seen the price per ounce fall from $835 to $280.

But waning central bank enthusiasm has been just one of many problems for gold. The metal has also lost much of its allure to private investors. Mr Patten argues that one reason inflation fears and emerging market turbulence failed to revive the metal is that the financial services industry has devised alternative safe-haven assets. "The index-linked bond is seen by many as a more convenient inflation hedge than gold, and it pays a yield," he says.

Fading interest among mainstream investors is most graphically illustrated by the decline in trading activity. According to figures from the London Bullion Market Association, the average daily volume of gold transfered fell to a new low of 16.1m ounces in July this year, compared with an average of 36.8m in 1997.

"There is no doubt that the amount of gold traded has declined," says Susanne Capano, a spokesperson for the LBMA. "The market is learning to live with these lower volumes but there could be worse to come." This leaves gold campaigners clinging on to the role gold continues to play in emerging economies. "This year, citizens in Turkey and Indonesia who salted away gold have found that it still performs its traditional role as a safe haven," says Rhona O'Connell, manager for market analysis at the World Gold Council. "When crisis struck in Asia in 1998 and interest rates rose to usurious levels, many smaller business were only able to keep afloat by selling gold."

But this argument serves to illustrate gold's migration to the periphery of the financial system. Mr Chandler even argues that platinum jewellery might be a better alternative for emerging market hoarders.

"At least with platinum investors do not have to worry about central bank sales," he says.

Gold bulls also cling to hopes that new industrial uses for the metal will help restore its lustre. They allude to research into a potential use for gold as a catalytic converter in air cleaning systems. It is thought that better marketing could boost spending on gold jewellery - which now represents 80 per cent of demand for the metal.

But these hopes show gold is close to completing its journey from a monetary asset to just another precious metal. "It is unrealistic to think we can ever turn the clocks back to the time when gold was at the core of the financial system," says Kevin Crisp, precious metals strategist at Credit Suisse First Boston.

Far from marking gold's return to the financial mainstream, 2001 has confirmed its relegation to the commodity league.

"There is now little to separate it from aluminium and nickle," says Peter Mangano, director of resources and basic materials at Salomon Smith Barney. "Barring a major political or economic cataclysm this is how it is likely to stay."