Why does the world flock to one precious metal in tough times?

With chaos and fear running rampant in financial markets in recent weeks, many investors have once again stampeded to gold. Shortages of the precious metal are being reported at refineries and mints around the world. Last week, the U.S. Mint announced it was ceasing production for the half-ounce and quarter-ounce American Eagle gold coins for the rest of 2008 because strong demand has depleted its inventory.

In theory, mankind could have picked any precious metal as a security symbol, so why do we seek out gold when everything else is tumbling down?

"It is very irrational from a business standpoint, because we have so much better technology now for transferring wealth," says the slyly named Douglas Silver, chairman of International Royalty Corporation, a company that buys royalties associated with mining properties. "But it's cultural. It's built into our psyche that when things get ugly, gold will store value."

Still, there are some logical reasons behind the value assigned to gold. It's one of the earth's rarest elements-gold makes up about one part per billion of the earth's crust. It is also durable. Gold cannot be destroyed and it won't rust or decay. It's a very good conductor of electricity, and there's a little bit of gold in every computer, cell phone, and airbag, among many other things.

And gold is easily divisible. Unlike, say, real estate or cattle, you can reliably break it up into smaller quantities. (Try giving someone change for a cow.) Most importantly, unlike hard currency, gold cannot lose its value because of government or corporate mismanagement.

"As a physical asset, gold is no one's liability," says Matthew Graydon, head of external relations at the World Gold Council, a mining-industry trade group. "There is no risk that a coupon or a redemption payment will not be made, as for a bond, or that a company will go out of business, as for an equity, or that savings will be lost through a bank that is going out of business."