Gold prices jumped more than 4% as investors scrambled for safe havens amid the latest shares meltdown.
The precious metal jumped 38.5 US dollars to 925 dollars (£545) an ounce on commodity markets as panicky investors switched funds from shares and even bank accounts to try and protect their funds. There has also been heavy demand for rock-solid Government-guaranteed Treasury stocks.
It came as London's FTSE 100 Index fell as much as 10% on another tumultuous day for the stock market. The blue chip index has lost nearly 20% this week, and 38% since the start of the year.
Paul Mumford, senior fund manager at Cavendish Asset Management, said clients were switching cash from shares and even clearing out bank accounts as they scoured the market place for supposedly safer investments.
He said: "People at the moment are being a bit cautious about leaving their money in a bank and having it in shares, and fleeing into something they feel is a much safer area to be."
Mr Mumford added: "The problem with gold is it's a volatile commodity. It's all very well when the demand is there, but you stand to lose or make much more in the gold market."
In another reflection of gold's immediate attractiveness, gold mining projects firm Randgold Resources was one of the London stock market's handful of winners. Its shares were up 3%.
Mr Mumford added that a lot of money was being put into short-dated Government bonds, or gilts, which have a ready market and mature within a matter of months. Investors are guaranteed a rate of interest as well as their capital being repaid at the end of the term.
Mr Mumford said: "A lot of money has been going into the short end of the gilt market. I know the Treasury Bond for maturity in March 2009 has had quite big demand. People have been going into these areas purely as a matter of safety."
The flight to Government safety has seen two-year gilt yields - which measures the ratio of interest payment to price - plunge below 3.45% in early trade to hit their lowest level since mid-2003. Surging demand has driven up gilt prices, lowering the interest yields.
