The financial meltdown has gold bugs buzzing with delight. Often slightly eccentric, gold investors have long warned that the end is nigh. Today, however, their fears are being discussed at dinner tables across the world. As markets have tumbled over the past fortnight, the price of gold has rallied by about a fifth to almost $900 per ounce. Over the medium term, however, there are many reasons to limit the number of bars one buries in the garden.

Certainly gold looks like a one-way bet for now. Panic is in the air. Due to its relative rarity and indestructibility, gold is a perceived safe haven in times of crisis. Inflows are pouring into gold-backed exchange traded funds and the ultimate doom-sayers are hoarding the physical metal itself. More importantly, gold as a monetary asset is benefiting from a weak dollar and high inflation. In addition, in spite of gold prices tripling over the decade, global production is lower today than it was in 2000 due to long lead-times, rising input costs and the difficulty of finding big, high-grade deposits.