NEW YORK (CNN/Money) - Confronted with a shaky U.S. dollar, soaring oil prices, sluggish stocks, and the ever-present threat of terrorism, investors have clamored lately for a commodity that's been a favorite pain reliever since the Stone Age: gold.

Earlier this year, the price of an ounce of the yellow stuff surged to its highest level in nearly a quarter-century, driven in part by the fear that impending inflation would weaken the U.S. dollar. When the world's most powerful currency falters, investors sometimes turn to gold to ease the sting.

Gold tumbled from its peak when inflation's fangs turned out not to be very sharp, but quickly started climbing again when the dollar continued to struggle, weighed down by an anemic stock market, an oil-soaked U.S. economy, continuing headaches in Iraq and more.

Since May 10, as the dollar has lost about 4 percent of its value against a basket of other major currencies, the price of an ounce of gold has risen about 10 percent. And the American Stock Exchange's index of unhedged gold-mining stocks, or BUGS (HUI: Research, Estimates), has risen some 30 percent.

Because they're unhedged, gold BUGS typically live and die by gold prices, but the hedged gold-related stocks found in the Philadelphia Stock Exchange's Gold and Silver index (XAU: Research, Estimates) have also gained some 25 percent since May 10.

Some individual gold stocks have done even better in that time, especially small-cap shares such as Gold Reserve (GRZ: Research, Estimates), up 69 percent; Meridian (MDG: Research, Estimates), up 66.5 percent; and El Dorado Gold (EGO: Research, Estimates), up 49 percent.

But mid- and large-cap gold shares have thrived, as well, with Placer Dome (PDG: Research, Estimates) up 46 percent, Freeport McMoran (FCX: Research, Estimates) up 38 percent, Newmont Mining (NEM: Research, Estimates) up 23 percent, Barrick Gold (ABX: Research, Estimates) up 13 percent and Anglogold Ashanti (AU: Research, Estimates) up 15 percent.

What's more, gold and most gold stocks are still down for the year, the U.S. dollar is still falling, and gold still hasn't returned to its earlier highs ... meaning it may still have room to run.

"The run-up in gold is completely justified," said Ron Coll, gold analyst with Jennings Capital in Toronto. "As long as the dollar continues to trend lower, gold will trend higher. That's the theme it will follow through the fall and into next year."

But a weak dollar may not be the only thing driving gold prices. As with every other investment that's enjoyed a hot summer, including oil and U.S. Treasury bonds, some observers smell a whiff of speculation in gold prices and think a correction is due.

Others point out that many people see gold as something to keep them warm at night in the face of impending doom -- after all, following a major disaster, either geopolitical or economic or both, gold will likely still have value, if only to accessorize post-apocalyptic Road Warrior outfits.

"We see gold not as a trade; we don't even look at it as an investment. We look at it as insurance," said Jean-Marie Eveillard, portfolio manager of the First Eagle Gold (SGGDX: Research, Estimates) fund, which has nearly $600 million in gold and gold-related stocks and securities. "It's the ultimate hedge -- it tends to prosper in difficult times."

With that in mind, Eveillard said, First Eagle has put 5 to 7 percent of its separate global fund in gold or gold-related assets. What could go so wrong that they need such insurance?

For one thing, there's always the chance that the dollar's decline could turn into a full-fledged rout, if foreign investors decide they've had enough of supporting America's wild deficit-spending binge. Oil prices could surge ever higher, slowing down the U.S. economy. Terror attacks could turn a slowdown into another full-fledged recession.

Eveillard said these are the kinds of disasters that would have to occur to drive gold much higher. But at $420 an ounce, it's become a fairly expensive insurance policy.

And certainly, from a technical standpoint alone, gold and several gold-related stocks have run far and fast without many breaks and could be in for a short-term correction, according to Katie Townshend, chief market technician at MKM Partners.

But there may be other, more fundamental reasons why gold could stay strong in the longer term, too, even without a major disaster, according to Frank Holmes, CEO and chief investment officer at U.S. Global Funds, which includes the $62-million Gold Shares Fund (USERX: Research, Estimates) in its family of funds:

• The U.S. dollar will almost certainly have to keep falling, according to most analysts, especially if China agrees to revalue its currency, as so many U.S. officials are pressing it to do.
• China has recently opened up a gold-trading market and allowed its consumers to buy gold, adding to the world's demand for the metal.
• A recent lack of spending on new mines, thanks in part to stiffer environmental regulation, has tightened the supply of gold.
• Even if the war in Iraq somehow ends fairly quickly -- which seems unlikely, at this point -- global military spending, oil prices and the threat of terrorism will still remain high, all of which are boons to inflation and to gold.

Like Eveillard of the First Eagle funds, Holmes says investors can't get rich trading gold or gold-related stocks, which rise and fall with the price of bullion. But he also recommends investors put 5-to-10 percent their money in gold and gold-related assets until the trouble for the U.S. dollar blows over -- which could take a while.

"Right now, we have negative real rates of return on Treasury bills and massive deficit spending," Holmes said. "Historically, a currency can't be strong with those two factors."