It's been a disaster that's left investors with virtually nowhere to run.

The global financial meltdown has rattled cages in every investment market. Even gold, traditionally viewed as a crisis-proof hedge, was not able to escape the fallout of the global finance industry's orgy of irresponsibly managed risk.

But as it turns out, the global economic crisis may actually help boost gold prices in the end by stifling new production. Here's what I mean. . .

Aurum Delirium

In early 2008, a sudden drop in consumer spending associated with the global recession caused gold demand for jewelry and industry to contract. These sectors are important to gold's supply/demand fundamentals, as they account for about 80% of total world gold demand.

Declining demand for jewelry and industry stalled a seven-year gold bull market in March 2008 — just as prices topped $1,000 an ounce for the first time. Subsequently, gold prices were pushed as far back as $700 an ounce seven months later.

But the gold market has since changed.

Falling demand from the jewelry and industrial sectors has been buoyed by a booming increase in gold investment demand.

Last quarter, overall gold demand for investment increased 46%, while investments in gold ETFs and similar products increased a stunning 1,315%, as investors sought shelter from a declining U.S. dollar.

Mounting investment demand bolstered gold prices over the summer. Last month, gold set a new record high for the average monthly price of $996.59 an ounce. That's about 3% higher than the previous record set in March 2008.

Investment demand is expected to continue to increase again by as much as 60% this year. And while this growing demand will continue to be met in part with recycled material and official sector sales, the bulk of the gold will have to come from mine production, or producer de-hedging. But there's a problem. . .

Gold miners are producing less and less gold every year.

In fact, total world gold production has steadily decreased about 7% since 2003. Take a look:

And the outlook for new gold production is also declining.

The End of the Exploration Boom?

Between 2002 and 2007, exploration budgets of small-cap gold miners — the most active explorers — increased by an average of about 55%. But in 2008, exploration budgets of junior gold companies were quickly slashed as tumbling prices virtually erased access to new capital.