Your stand that gold should be an indispensable part of one's portfolio on the back drop of monetary insanity around the world and the war cycle starting in 2016-end is absolutely valid.
However, gold is not and has never been, a hedge against inflation. Gold is is a hedge against government, currency collapse, political & economic uncertainty. Lets talk some numbers.
In 1980, Dow was 1000, while gold was $875. Till date, Dow has risen approx 16 X, while gold is at approx $ 1100. Clearly, in this period Dow has beaten inflation while gold has not.
Lets go still further back. The high in the Dow in 1929 was 386. In terms of INFLATION ADJUSTED [and not nominal] USD, it translates into approx $ 5000 [where 1 Dow point = $ 1 for calculation purpose]. Applying the same calculation would indicate $ 6000 for gold. Again, Dow has beaten gold where inflation is concerned.
Interestingly, that $ 5000 for every point of Dow also translates into a support level of approx 15000 for the Dow, which is where it bounced off from in Aug 2015 [15370] and Jan 2016 [15450] What does this mean ? It means that any sudden and sharp fall in Dow below 15000 will be a washout and bear trap in preparation for the final parabolic move up. But we will discuss that if & when we do get such a washout.
During the gold bull market of the 70s, gold declined 47% between 1974 - 1976. The context for that year is that the IMF had three major gold auctions from June to September, dumping a lot of gold onto the market. Both the US and the Soviet Union were also selling gold at the time. If you review the sentiment regarding gold in 1976 by reading what the so-called analysts, investment advisors and of course that reliable contrarian indicator -- Time magazine -- was saying, its almost similar to the general sentiment about gold now. Almost -- and that is why I believe, as also the technicals indicate that a final washout is needed to quieten all the gold bulls and also get most of the same pack of idiots -- the analysts & advisors -- screaming against gold. That will be the fuel for the next bull phase. An article in Time badmouthing gold should be the perfect indicator to buy with both hands !
Yes, gold is an essential part of portfolio in preparation for the years ahead. Yes, gold [and not platinum or bitcoin] is the hedge against the eventualities mentioned above. It is readily accepted and universally recognizable.
But lets not confuse gold as hedge against inflation. Its an insurance. Even in India, gold has not beaten inflation over longer terms [ > 20 years] -- while equities and real estate have.
The need for gold arises because all economies & countries are drowning in debt at all levels and failures of government & currency, as also invasions & secessions are possibilities that might become reality in any part of the world at any time.
So acquiring some gold at the lows is the first step towards insuring at least some part of one's portfolio. Its impossible to predict whether things might get so bad as to actually having to use gold in place of cash, and whether guns would be a better asset in such situations; but without going to extremes, I'm considering only the possibility of currency depreciation or failure and depression induced defaults -- and gold is the preferred asset / insurance in those eventualities.
Gold has a history of low returns over long periods of time, so buying gold to protect savings against inflation can be a costly mistake.
