It happened on Thursday – at about 2pm London time, just as the Gulf was closing for the weekend and the day's trading was getting going in New York: the price of gold fell out of bed.

Specifically, the price fell $50 in the space of about three minutes. One commentator, Peter Grandich from an American firm, Agoracom, said at the time that in 25 years' watching the gold market he had never seen such a price move in such a short space of time.

So what happened? The short answer is that no one quite knows. But the widespread assumption is that someone had to raise some liquidity in a very short space of time. Gold – the ultimate store of value and the safe haven of choice for generations of investors – had just got caught up in the credit crunch. The fact is, world financial events are so extreme, and accompanying price moves so volatile, that no one can predict short term movements with any confidence. For weeks now we have been observing stress on a scale never seen before in the modern age.

The sudden drop in gold on Thursday was quite possibly down to a big hedge fund having to raise cash so as to avoid insolvency, although we might never know. There have been so many seismic financial events of late that when the history of these times gets written, one sudden movement in gold will barely warrant a mention.

The Western financial crisis, once concentrated in subprime housing assets complex credit derivatives is now turning into what looks like a global recession with frightening speed. Believe it or not, the focus on solvency has now moved from individual institutions to whole countries threatening to go bust.

Eastern Europe was the flash point last week; next week it might be the Pacific Rim. No one is really sure.

So, shouldn't we all be looking for the safest possible haven for our money – somewhere to protect our capital? And isn't gold the obvious choice?

I, personally, think it should be. I've stated here before that I believe the yellow metal has a permanent place in any well-diversified investment portfolio. And if there is one moment to be "over-weight" gold it is now.

But this is not just a "fear" thing. There remain some good analytical reasons for buying bullion in any one of its various forms. Consider the views of Merrill Lynch's commodity expert Francisco Blanch. He told the bank's clients last that he believes the price of this precious metal is going to $1,500 an ounce in three specific steps:

"With the outburst of the credit crisis last August, we entered into the first step where gold started to reflect the rising risk premia. The second stage will primarily be about dollar weakness. Finally, as global currency markets stabilise, the third stage in the appreciation of gold will be driven by a recovery in energy prices, in our view."

Blanch notes that gold was trading at $650 when the credit crisis first hit in July last year. The price subsequently shot above $1,000 when Bear Stearns collapsed in March, only to trend lower and sideways in the months since. But the analyst's point is that the price has held up remarkably well despite the appreciation of the US dollar and the falling oil price. With risk-aversion still extreme and banks still scrambling to find liquidity, there is no reason why this state of affairs should change in the short term, leading Blanch to his second stage:

"In our view, gold will develop a stronger trading link to the currency world as risk premia on money stabilise. Then, as the United States has taken on too much debt relative to its output, the dollar will likely weaken to reflect the excess level of consumption relative to domestic output.

In particular, if the US fails to keep foreign capital interested in financing its twin deficits, the dollar could spiral down, providing strong support to commodity prices. The weaker dollar could then help gold break through $1200/oz."

The Merrill man reckons there is a real chance the US dollar will lose its reserve currency status – or at least see this severely damage. The simple fact is that the US has taken on too much debt and the global consequences of that can only be good for gold. Longer term, Blanch actually sees a fresh boom in energy prices – a view that stems from the fact that the current moves to bailout the financial system in New York and London will eventually prove to be inflationary.

He states: "Four of the five largest holders of oil and gas reserves in the world have closed their doors to investment since 2000, severely curbing global energy supply growth prospects over the next ten years. Thus, whenever global economic activity starts to recover, a lot more dollars chasing again the same barrels likely will lead to higher oil prices.

More importantly, with the ongoing upward shift in the cost of money, oil investors could well require a much higher IRR than 10%.

"Thus, a combination of higher inflation and higher cost of money could push oil prices structurally above $150/bbl as economic activity recovers.

Accompanying this is an assumption that gold will maintain its long-term association with commodities prices in general. Indeed, the analyst argues that gold is currently cheap compared with oil, even after the recent sell off in the price of crude. Hence the forecast of gold at $1,500 once emerging markets regain their poise.

That is not a sensationalist claim, in my view. The forecast amounts to an expectation that related prices will return to their long-term mean. Investors should never forget that the long-term trend is their very best friend.

- Paul Murphy is Associate Editor of the Financial Times