It's always possible that a major catastrophe will destroy our economic system, but its far more likely that we will either limp along or improve. I remember the same fears in the seventies, and the concomitant buying of gold, at the same time as the price of gold spiked to $800.00. Yes, the economy was turbulent, but that's not an indication of imminent total meltdown. In the past year the price of gold has been at record highs. Why this encourages scared people to buy is beyond me; the most likely scenario is that it will go down in value.
The idea is to diversify into lower-risk assets than the U.S. dollar or other currencies, even if those investments will cost more in the long run. It doesn't matter what gold costs right now if the USD experiences further free-fall, which is not out of the question.
This is generally the same reason there are buyers of sovereign debt (i.e. Treasury Notes) at a negative interest rate.
If the Eurozone collapses, as is more possible every day now, then that's a case in point for diversifying away from Euros. Some other choices in this Great Recession are USD, U.S. Treasury Notes, Japanese Yen, Swiss Francs, etc, none particularly attractive right now. The Chinese Yuan isn't a viable choice because it is pegged to the dollar.
[Edit:] The point is to deal with the current high risk of currency free-fall, not your normal everyday investment ebb and flow.
In the past year the price of gold has been at record highs. Why this encourages scared people to buy is beyond me
Because people are heavily influenced by the "panic! panic!" media nowadays.
Supposedly things would "never be the same again" after September 11 and the industry for comedy would collapse. Then we were meant to be dying of avian flu.. and then swine flu. And then the economy was meant to collapse some time in 2009. And then.. oh yeah.
