Gold may be trading at record levels of around $1,400 an ounce, but this could be a massive underestimate of its true potential as a hedge against inflation, argues Paul Tustain, chief executive of Bullion Vault.

Tustain believes that the current price of gold fails to truly reflect the precious metal’s ability to protect against the risks of hyper inflation, currency crises, sovereign debt defaults, and other serious economic shocks.

In light of this his firm has developed a proprietary online gold calculator designed to help investors see the “true” value of gold in the current uncertain environment.

Having analysed historical data and the probability of various inflation outcomes over a 15-year period, Tustain calculates the current “fair value” of gold today is more like $3,844 an ounce.

“I believe that gold is worth a very great deal more than the price it’s currently trading at, based on my expectations for the rate of inflation and currency devaluation,” said Tustain, adding that he believes that the current price discounts the risk of hyperinflation to zero.

Once dismissed as the preserve of eccentrics, gold has been gaining in popularity among wealth managers as an alternative to paper-based fiat currencies amid fears that quantitative easing will trigger high inflation. Detractors of the metal caution investors to be aware of states' interference with the metal’s price and that there is a lack of accurate data available on gold.