First and foremost, gold is a physical asset. This distinguishes it from paper financial instruments like stocks and bonds. When gold performs well as an investment, it often means that most of your other investments are performing poorly. Just a look at the current rates you can get on a bank deposit will tell you how true this is. Gold should be the foundation of your investment holdings because for thousands of years it has been the primary means by which people, as well as civilizations, have preserved their wealth.
Gold is also a traditional means of protection from inflation.
Some investors have been disappointed with the performance of gold in the past decade, but they are forgetting the primary purpose of gold as a hedge against inflation. But because there has been very little inflation in the American economy in the past decade does not mean that gold has been a bad investment. The proper comparison is not to other forms of investment performance, but much like buying fire insurance and not having the house burn down. Gold is the most effective protection of your purchasing power. This is illustrated by comparing its value today with its value in Biblical times.