Pension funds and general investment funds are moving into commodities and out of equities. So are the asset management arms of banks and brokerage houses, according to Jeffrey Christian, managing director of CPM Group. Most of the liquidity is in precious metals, and gold represents the lion's share.

"Gold is more than naked price appreciation," Steel observes. "You may want to be diversified. With the way the equity markets have performed, with a 5 percent gold position you'll have a very nice cushion."

In 2007, investor demand for gold was 43.7 million ounces, up 11.7 percent from 2006, according to CPM Group's annual gold review, the seventh consecutive year in which investors collectively bought more than 20 million ounces, and far exceeding levels in previous bull markets. This year, Christian forecasts investment demand at 38.1 million ounces, but this number could slip or climb to 45 million, depending on investor attitudes.

"It is investor attitudes toward events that matter more than the events themselves," he observes.

Since 2001, investors have bought an estimated 279.2 million ounces on a net basis worldwide—29.3 million ounces were scooped up by E.T.F.'s as those easy-to-trade securities became more popular and opened gold buying to a wider range of investors.

"The simplicity element is very important for the gold market," Steel notes. "You couldn't buy bullion below the bullion bank level. You'd need a $1 million to enter. E.T.F.'s are deeply liquid. What you see is what you get. Many of the participants today weren't involved in the bullion market at all. By and large, their entrance into E.T.F.'s has been new."

While past commodities booms have busted spectacularly, Steel says he believes the strength being show now will have staying power—primarily because of growing demand in emerging markets. "By nature, these countries are commodity-intensive," he said. "Given the emerging world will advance at an above-par pace for years to come, interest will remain strong."