Are the ‘gold bugs’ right?

There is a section of the investment community (or perhaps they could better be described as prophets of doom) that constantly advocates investing in gold. According to them, world equity markets are about to crash and assets such as cash and bonds will be worthless, too. They would have us believe that the gold price will soon be US$2 000.

The wild and extremist predictions aside, do gold (as opposed to gold-mining shares) and other precious metals have any role to play in a diversified portfolio? If so, what proportion of one’s assets, on average, should be allocated to gold? Should the holding be in the form of actual physical gold (such as Krugerrands) or exchange traded funds (ETFs) ?

M Skosana