With gold's safe-haven status eroding, analysts say volatility indexes like the VIX are becoming the preferred method for hedging risk.
As a traditional safe-have asset, gold typically rallies during periods of heightened economic risk, but in recent years gold's behavior has befuddled many analysts. Over the course of the over two-week U.S. government shutdown, for example, gold has fallen 3.35 percent.
"As the world becomes more virtual, the value of a physical commodity as a store of value or hedge against turmoil is falling," said Scott Nations, president and CEO of NationsShares, told CNBC Asia's Squawk Box.
(Read more: The odd reason why gold rose on the Senate deal)
"Here in the U.S., volatility indices like the VIX are now really where people are looking if they want some sort of 'Armageddon trade,'" said Nations.
The Chicago Board Options Exchange (CBOE) Volatility Index - also known as the fear index - shows the market's expectations for stock market volatility over the next 30 days. Traders buy the VIX when they expect a period of short-term volatility, and make profits when these expectations are realized. The VIX, which has an inverse correlation with the S&P 500, is often viewed as an effective hedge against falling stock prices.
On October 8 the VIX spiked from 13 to near 21 amid heightened fear of the rising risk of a U.S. debt default, but was still well off highs of 43 at the time of the last U.S. debt ceiling drama in August to September 2011 and highs of near 60 in October 2008. On Thursday it had fallen back to 14.71 as news of a deal in Washington to end the government shutdown and avert a debt default, settled market anxiety.
According to Nations, a recent influx in the volume of VIX trades has demonstrated how investors have flocked to these types of volatility instruments as hedging tools.
(Read more: What happens to gold if debt deadline is breached?)
"On October 8, 1.78 million VIX options traded... And 1.24 million VIX options traded [Wednesday] versus a 30-day average of 600,000 as the likelihood of a deal started people closing their VIX hedges," he added.
Vishnu Varathan, senior economist at Mizhuo Bank said he was also losing faith in gold's value as a safe haven, but was unsure whether volatility indices like the VIX could offer a viable replacement as protection against global economic risk.
"By definition, an asset with a speculative element cannot be an unadulterated safe haven, especially if that speculation is positively correlated to risk appetite," said Varathan, referring to gold.
However, Varathan found fault with the idea of a VIX as a universal "safe haven" play because in his view the trading tool is too narrowly linked to the S&P 500.
"If something happens in emerging markets, there is a chance that it does not necessarily affect the VIX, so it's a less precise measure and may not be the best indicator [of global risk sentiment]," said Varathan, who also pointed out that the VIX spike during times of heightened euro zone risk in recent years, such as the Cyprus banking crisis in March this year, was more muted.
(Read more: This gold chart is ugly: expert)
Meanwhile, other analysts told CNBC gold was still demonstrating characteristics of a safe-haven trade.
"A lot of people talk about how gold is not acting like a safe haven. Gold bulls argue that if you look at gold two years ago [at the time of the last debt ceiling crisis in 2011], it skyrocketed to $1,900 [per ounce]. The difference is people were fearful then and are not now," said Matt Grossman, senior equity strategist at T3Live.com.