If your neighbour starts hoarding Chinese pandas, American buffaloes and Canadian maples in the cellar, do not be alarmed. Demand for gold coins and bullion bars has soared. The yellow metal's allure as a safe haven in troubled times has sparked a rush into physical gold not seen since the 1979 oil crisis. Investors are right to hedge their bets in the current financial turmoil. But gold's appeal could prove illusory.

After the onset of the credit crisis last year, gold proved an attractive bet. When it touched a record intra-day high of $1,030 an ounce in March, the drivers behind the bull run were a depreciating dollar and the risk that aggressive easing of US monetary policy would lead to a sharp rise in American inflation.