At the Rand refinery in South Africa, the phone has not stopped ringing this week.

Panicking German dealers and banks have been desperate to get their hands on krugerrands, the world's most popular gold coin.

"We have some extraordinary sales to German customers," says Deborah Thomson, the Rand treasurer. The refinery, which usually sells 2,000 coins to each customer at a time, says that last week it received an order from one German bank for 30,000 coins. Another bank requested 15,000 coins.

Frank Ziegler, head of precious metals at BayernLB, one of Germany's largest wholesale suppliers of gold, says: "People are buying krugerrands like crazy." The frenzy pushed gold prices to a nominal high of $1,248.95 a troy ounce yesterday while the euro price surged through €1,000 an ounce for the first time. Adjusted for inflation, however, gold prices are still a long way from their all-time high above $2,300 an ounce in 1980.

Although coins account for a small part of the market, they are one of the best indicators of investor sentiment towards the precious metal. And right now gold is in massive demand from investors who see it as the ultimate safe haven at a time of market turmoil and as one of the best hedges against a possible resurgence of inflation.

Other important factors are supporting prices: institutional investors are pouring billions into bullion-backed exchange traded funds; central banks have reversed 20 years of selling gold (and some, including the Chinese central bank, are buying it); and mine gold supply growth has stagnated.

David Fuller's view This move is certainly logical - Germans have good reasons for fearing inflation and declining purchasing power. However, the world of investment is known for its fashion trends.

The contrary indicators are flashing: gold has become a front-page news item; sentiment is at a bullish extreme; everyone is talking about gold; most of our emails in the last few weeks concern gold.

My best-case scenario is that we see one more short-term spike to the upside before gold commences its next medium-term correction within this secular bull market. (See also last Thursday's and Friday's comments on gold.)