As some people might already know, for more than 2 years, I've spoken about why I invested 8% of my money into Gold and Silver, as a possible "insurance" (hedge) against Global Uncertainties. As some might also know, I have some investments denominated in US$.  Thus, how do I mitigate the risks of a possible devaluation of the dollar? By having some money into Gold and Silver.

My average cost of Gold is US$790. On Friday 29 May 2009, Gold closed US$979.50 or 24% up. My average cost for Silver is US$14. On 29 May 2009, closing price for Silver was US$15.79 or 12.8% up.

In the next year or so, Gold prices might rise beyond US$1,200, while Silver might rise beyond US$20...

One possible scenario that might occur in the next few years is "Stagflation". ie. the global economy bottomed, but just remain stagnant. However, because of the huge "printing of money" by governments all over the world to "save the economy", it resulted in sharp rise in inflation, thus resulting in a Stagflation.

In a Stagflation scenario, prices of  "real goods" including Gold and Silver, Real Estate, Land, French Fine Wine and other commodities will rise like crazy, which is why I have invested into some of these assets already. 

On the other hand, stocks typically do very badly in a stagflation because business volume remain low while costs increases, resulting in fall in corporate profits and thus low stock prices. Have you similarly positioned yourself for the possibility of a "stagflation"? How would your investment portfolio perform in a stagflation scenario? (I know I would still be making money from my diversifed investments though)....