For gold bugs, the recent sky high prices for the precious metal have been a long time coming: nearly 30 years in fact.

After cracking its record high of $1,048.20 earlier this week, gold has extended on those gains, and many gold enthusiasts believe the best times are yet to come for the precious metal.

Gold traded up $12.40 to $1056.80 a troy ounce in midday trading Thursday. Gold mining stocks, such as Harmony Gold Mining (HMY), have benefited from the run-up.

Never mind that some important fundamentals, namely demand for industrial and jewelry use, remain low in a struggling worldwide economy.

“When you look at gold trading right now, it’s almost taken on a life of its own,” said Phil Flynn, vice president and commodities analyst with PFGBEST. “Some traders don’t know why they are buying gold at this point.”

For most traders, gold’s surge upward has been directly tied to the downward spiral of the dollar. The U.S. Dollar Index, which tracks the dollar against a basket of major currencies, has fallen 13.7% from the early March lows, while gold has gained 11.1% in the same period.

The dollar has weakened primarily on investor concerns that the U.S. government has taken on too much debt – a record $1.4 trillion in the 2009 fiscal year alone, the non-partisan Congressional Budget Office said Wednesday.  Combining this year’s deficits with the previous years, the national debt now stands at more than $11.9 trillion.

For some investors, those enormous deficits are reason enough to put some money into hard assets like gold and other precious metals.

“The market is coming to a realization that both parties are unable to restrain spending, and that’s going to only lead to a weak U.S. dollar in our future,” said Charles Goyette, author of an upcoming book “The Dollar Meltdown.”

The specter of inflation also concerns some investors, leading them into hard assets.

While inflation has been essentially a non-issue since the commodities collapse in the summer 2008, many traders worry that extremely low interest rates will eventually lead to inflation.

“You’re starting to see a realization among traders that if hyperinflation is coming because the government keeps printing money, that’s only going to help its cause,” said Michael Gurka, Empower Global Funds Strategist, in an interview on FOX Business.

Those issues – a potentially hyperinflation-like environment and weakness in the dollar – have been more than enough to offset the more tangible and quite bearish aspects of gold. According to a World Gold Council’s second quarter report on the gold market, jewelry consumption is down 22% from a year ago while industrial demand is down 21% from a year ago.

“Gold’s underlying fundamentals paint a weak picture,” said Barclays Capital precious metals analyst Suki Cooper in a note to investors Thursday. “However the strength of investment demand has been more than sufficient to offset this.”

Despite hitting psychological records, gold hasn’t nearly been the hottest ticket this year. Since the early March lows, equities have solidly outperformed gold – the Dow Jones Industrial Average is up nearly 40% from March, while gold is up just over 13%. In hard assets, silver futures have jumped more than 35% from March.

It’s also important to remember that gold remains, on an inflation adjusted level, well below the highs it hit in the early 1980s. People who bought gold at that time will have to wait for $2,000-an-ounce gold before they make any money back on their investment.

But for many who believe that stocks are now overbought in the wake of a struggling economy, buying into gold at these levels, even knowing that gold may eventually fall in value, still seems attractive.

“People have no problem holding onto this because it’s a certainty in this tough environment,” Gurka said.  “It’s a tangible asset that I don’t think has a lot of downside potential at the moment.”