Gold has been slowly gaining the characteristics of assets like the dot-coms in the late 90's and housing in mid 2000's; that being arguments heavy in excitement and light on substantive reasons for it being a good investment. Despite the recent concern towards deflation, interest in gold remains relatively high. Lets start with a cursory examination of gold. Gold is a metal, it yields no rents or earnings, it ostensibly hedges against inflation, but it has tripled in price over the past 10 years (growing over 10% per year) even though inflation has run at around 2%. On that basis alone, gold does not appear to correlate to inflation, yet people concerned about inflation make that a case for gold.
But gold is also a store of value. Unlike the U.S. dollar no government agency can debase the value of gold. The fed can print money to pay ballooning debts, but as long as a sizable gold deposit is not discovered, there should be no concern of a sudden increase in the supply of of gold which would diminish the value of your holding. True enough, but gold is a not a monopoly in store of value. There exist valuable art paintings, silver, platinum and other currencies like the Swiss Franc or even the Chinese yuan which is ostensibly undervalued relative to the U.S. dollar. So why not purchase one of these competing stores of wealth? They may or may not have seen a significant rise in price and perhaps they are run by governments not drowning in debt.
As foolish an argument was for housing a couple years ago, housing can at least be measured against the rents it earns. By that measure it had gotten out of whack in the mid 2000's as the Economist had reported. Gold and other commodities have no such feature. Instead the price of gold can only be determined by speculative activity. Warren Buffett also commented on gold; "it gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head." We must remember that all commodities, except for water, have substitutes in one form or another.
The Economist wrote an exceptional piece on gold: http://www.economist.com/node/16536800
for those interested.