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Is gold really an investment or just a hedge against inflation?
The problem I have with gold is that it's only worth what someone will pay you for it.  To a degree that's true with any equity, but with a company there are other capital resources etc that provide a base value for the company, and generally a business model that generates income. Gold just sits there. it doesn't make products, it doesn't perform services, you can't eat it, and the main people making money off of it are the folks charging a not insubstantial commission to sell it to you, or buy it back.  Sure it's used in small quantities for things like plating electrical contacts, dental work, shielding etc. But Industrial uses account for only 10% of consumption.  Mostly it's just hoarded, either in the form of Jewelry (50%) or 'investment' (bullion/coins) 40%.  Its value derives largely from rarity and other than the last few years, there's no track record of steady growth over time like the stock market or real-estate. Just look at what gold prices did between 10 to 30 years ago, I'm not sure it came anywhere near close to keeping pace with inflation during that time.  If you look at the chart, you see a steady price until the US went off the gold standard in 1971, and rules regarding ownership and trading of gold were relaxed.  There was a brief run up for a few years after that as the market 'found its level' as it were, and you really need to look from about 74 forward (which it experienced its first 'test' and demonstration of a 'supporting' price around 400/oz inflation adjusted.  Then the price fluctuated largely between 800 to 400 per ounce (adjusted for inflation) for the next 30 years. (Other than a brief sympathetic 'Silver Tuesday' spike due to the Hunt Brothers manipulation of silver prices in 1980.)  Not sure if there is any causality, but it is interesting to note that the recent 'runup' in price starts in 2000 at almost the same time the last country (the Swiss) went off the 'gold standard' and gold was no longer tied to any currency (or vise versa)   If you bought in '75 as a hedge against inflation, you were DOWN, as much as 50% during much of the next 33 years.  If you managed to buy at a 'low' the couple of times that gold was going down and found support around 400/oz (adjusted) then you were on average up slightly as much as a little over 50% (throwing out silver Tuesday) but then from about '98 through '05 had barely broken even.  I personally view 'investments' in gold at this time as a speculation.  Look at the history below, and ask yourself if buying today would more likely end up as buying in 1972  or 1975? (or gods forbid, 1980)  Would you be taking advantage of a buying opportunity, or piling onto a bubble and end up buying at the high?  Note from Joe - The article Demand and Supply adds to the discussion, and supports Chuck's answer.