Economic Forces: The forces that affect the price of bullion are often opposed to that of other asset classes. In times of uncertainty when investors are very wary of buying, for instance, equities, they favour gold in order to give exposure to a vehicle that is likely to benefit from turbulent times. This independent movement of precious metals to other financial assets can reduce overall portfolio volatility and contributes balance.

Preservation of Purchasing Power: Gold has traditionally performed well as a long-term store of wealth and purchasing power. This is commonly known as the inflation hedge.

Asset Allocation: Experts suggest that 8% to 12% of a portfolio should be allocated to precious metals. No matter what level of risk an investor wishes to take, every portfolio needs a secure foundation.

Central banks in several countries have stated their intent to increase their gold holdings instead of selling.

Gold funds are in a long term up-trend with bullion, most recently setting new all-time highs.

The trend of commodity price rises is relative to gold price increases.

Worldwide gold production is not matching consumption. The price should go up with demand.

Most gold consumption comes from India and China and their demand is increasing with the increase in national wealth.

The short positions held by hedged gold funds are being methodically reduced.

U.S. government policies over the last couple of years have systematically projected the U.S. economy down a road with uncontrollable federal spending and uncontrollably increasing trade deficits. Both will cause the dollar to lose in international value and should increase the price of alternative investments, such as gold.

With the recent devaluation of many international currencies, the U.S. dollar was the international safe haven of last resort. We are seeing signs of this ending due to many financial factors and many believe that gold will once again take this mantle.

There are over One and a half Trillion dollars ($1,500,000,000,000) of U.S. debt owned by foreigners, which could be repatriated under certain conditions. This could cause a major decline in the value of the dollar and a soaring gold price.

So, in brief if your portfolio is heavily influenced by the correlation of most other asset classes, the idea is that gold/bullion will provide you with a hedge in times of turmoil and still reward in times of growth and economic optimism