I have seen no evidence of gold/silver being a good investment during deflationary times, as the gold bull market has progressed I have noticed the strong correlation between the performance of the US stock indices and that of gold it is not clear to me that gold is not just another debt bubble asset class like stocks or real estate, another carry trade so to speak. After buying gold/gold stocks in 2002 I became disolutioned with the poor returns from this sector due to the strength of the australian dollar, I live in QLD and although real estate was historically expensive in 2002 I would have done better getting a big loan and buying a house than buying gold and gold shares, lets face it gold/gold shares have been one of the worst asset classes to hold over the last 5 years in australia, yes real estate the gold bugs ultimate sheep investment has done better than gold over the last 5 years. The real problem I have with the idea of gold performing during deflationary times is that gold has absolutely no utility you can't eat it or sleep under its roof and it doesn't pay a dividend for all intensive purposes it is useless. I expect that the US is going to lead the western world into a protracted recession (this was always going to be the result of a housing bust in the ultimate consumer bubble economy) where asset prices that have been inflated by massive amounts of personal debt will fall, given golds lack of utility I cannot see it being spared from this process although it will probably perform better than stocks and real estate as it is operating off a much lower base. I am currently 100% cash but if I was to go into any sector now it would be agriculture, as yellowcake says people have got to eat.
