MELBOURNE - One of the keys to a successful investment portfolio is diversification-a mix of stocks, bonds, property, cash, and commodities.
In this article, we're going to focus on a commodity - gold.
While it's a mistake to make gold 100% of any investment portfolio, gold represents currently approximately 15% of the investment portfolios of many successful investors.
Increases in gold prices have made gold a 'hot' investment.
In just two years, from mid-2009 to mid-2011, the price of gold almost doubled.
And the market fundamentals indicate the rise will continue.
However, there are other reasons to retain the gold in your portfolio - and even increase the percentage to 20%.

1. Gold is physical.
   It's a real commodity you can touch and feel: you can go to your safe and take a look at your gold coins and gold bars.
   There's a feeling of safety and security-and this helps gold retain its value.
   


2. Counties around the world have been printing billions-most notably in the United Kingdom and United States.
   This means the Pound and Dollar are depreciating while a tangible asset, like gold, is appreciating.
   Gold is likely to appreciate as long as countries continue to try to sort out their economic problems by printing money.
   United States Federal Reserve Chairman Ben Bernanke held a press conference on April 27, 2011.
   He said that quantitative easing (aka printing money) will continue.
   During the press conference, the dollar fell to 1.
   47 against the euro and $1.
   66 against the pound.
   Gold rose 1.
   4%.
   


3. While governments can print money, they can't print gold.
   In fact, the supply of gold is decreasing - it's not easy to mine and gold ore requires expensive processing.
   There's a reason the jeweler in your neighbourhood has a sign outside the shop saying, "WE BUY GOLD.
   " And while the supply is finite, the demand is increasing.
   


4. Investors are extremely worried that the policy of printing money will lead to inflation.
   Their " buy gold " tactic is a hedge against inflation.
   Inflation is starting to rise in the United Kingdom where it was 4% in March, 2011.
   


5. Central banks around the world are buying gold bullion.
   India, China, Qatar, and Russia are among the countries buying gold.
   These countries will continue to buy gold as they follow a strategy of diversifying their investment portfolio-and leaving the weakening dollar.
   China will likely increase its gold reserves to 6,000 tons in the next five years and may spend $1 trillion on gold bullion.
   


6. The last major gold rally ended in 1980 when the Federal Reserve increased interest rates to 20%.
   The current Federal Reserve Chairman has indicated he's not likely to increase interest rates - even from the current historically low levels.
   

There are plenty of reasons to buy gold and make it approximately 20% of your asset allocation.
Perhaps the biggest reason is that gold can protect your wealth against the ravages of inflation.
You might want to view it as insurance against calamity.
If you have gold in your portfolio, it's time to look seriously at increasing the percentage of gold in your portfolio.
If you have never owned gold, contact a gold expert to learn more about this attractive commodity-as a way to deal with the upcoming inflation storm and also diversify your portfolio.