The question about owning gold should not be 'why' but 'how much'. At the very least, gold should be considered a form of insurance against either financial collapse or rising inflation. It is pointless therefore to ask 'why' if you generally believe in the merits of owning insurance on anything. You don't buy insurance for your house as an investment, but as a hedge against the low-probability scenario of it burning down or being destroyed by a hurricane or flood.

The only caveat to this analogy is if you don't believe gold is a suitable form of insurance. But then what is? One scenario where gold may fail the test would be a deflationary economy. However, considering the amount of pump-priming that central banks are engaged in, the likelihood of deflation has receded compared to six months ago. Furthermore, the scenario of a Japanese-style deflation is unlikely for the American economy because our financial system (unlike Japan's) is hard-wired to domestic economic growth and any deflation would quickly result in renewed systemic stress which would in turn lead to more investors buying gold.

The future state of the US economy depends to some degree on the demographics of the United States. Demographics are not everything in the world of economics and investing, but they can be an important determinant of growth. For example, the maturing of baby boomers in the 1980s and 1990s combined with the technology revolution, the Reagan tax cuts, and the declines in commodity prices and interest rates, produced a powerful cocktail which propelled stocks 14-fold in the 18 years between 1982 and 2000.

A useful measure of demographic change and its impact on the economy is the number of economically active people relative to the number of inactive people. If, for example, 75% of the population works and produces while the other 25% studies or enjoys retirement, the economy will fare better than if only 50% produces while the other 50% studies and cruises. The active population creates the wealth and, directly or indirectly, supports the inactive or less active population.

At the World Economic Forum in Davos this week, George Soros warned that the subprime crisis would bring about the end of the US dollar as the world's default reserve currency. In recent years, as emerging economies posted growth rates approaching 10%, and as the US economy's share of global GDP declined, it made sense for other countries' central banks to park their reserves partly in dollars, partly in other currencies.

There are however two problems with forecasting a final demise of the US dollar.