The Bridgewater team has put out an interesting Special Report on gold, which you will find worth your time to read. With their 'perspective on gold in the new paradigm' they offer some good insights regarding gold as an investment in stagflationary times.

We’ve been talking a lot about gold lately—why we think the new paradigm will continue to favor it, and its strategic role in portfolios as a source of diversification in light of the reality that nominal bonds are now more or less dead weight. In this research, we’ll share our thoughts on some of the common questions we are getting from clients:

• Am I too late? Is gold's rally behind us?
• Isn’t gold currently very expensive?
• Why hold an unproductive asset that offers no yield?
• Is it prudent to add exposure to an asset with such a small market?

In brief: in a world of ongoing pressure for policy makers across the globe to print and spend, zero interest rates, tectonic shifts in where global power lies, and conflict, gold has a unique role in protecting portfolios.

,Gold’s Price Is Actually Low Compared to Other Storeholds of Wealth

While the price of an ounce of gold in dollars is at historical highs, the price is actually very low relative to history when you compare gold to the competition: paper currency cash and other assets. We show a number of such comparisons below.

As investors have become more comfortable with the safety of fiat money, and as inflation hasn’t been a problem during the lifetimes of so many investors, very little of the enormous piles of paper money that have been printed has made its way into gold.Gold is one of the few effective diversifiers against the depreciation of paper currencies (and assets denominated in paper currency), as they all compete with gold as a storehold of wealth. And with interest rates at zero and the money supply increasing at warp speed, paper currencies are offering the worst deal ever, providing little incentive to hold them relative to gold.

So far, this printing hasn’t produced too much in the way of inflation that erodes the real value of the currency, and it has succeeded in supporting financial assets. But given how much ongoing printing and spending will be needed, and given that replacing lost incomes is inherently more inflationary than replacing credit (as it doesn’t replace the supply those incomes were paying for), we could very well see inflationary pressures mount while the economy remains weak.

A stagflationary outcome would put policy makers in a tough spot and leave paper currency assets vulnerable, while gold would likely be a valuable source of diversification. Stay too easy and risk further inflation (like after WWII, or most famously, the ’70s). Tighten too soon and risk plunging the world back into a deflationary downturn, like in 1937. This range of possibilities is illustrated in the table below, which breaks up the major periods of reflation into when the policy response was insufficient, successful, or turned into stagflation.

A U.S. dollar is an IOU from the Federal Reserve Bank. It's a promissory note that doesn't actually promise anything. It's not backed by gold or silver. ~ P.J. O’Rourke

,>> Read the report here.