Most commodities will do reasonably well during periods of inflation. This is simple supply vs. demand economics with the exchange rate of dollars for commodities. The caveat is that some commodities will not do well if inflation reaches a point where businesses start to hurt causing industrial commodities to not do to well. Gold, being a money substitute, will probably do even better than most commodities during times of inflation as we saw in the 1970s.

Where gold really stands apart from other commodities, is that it appears that gold also does very well during times of deflation. Rapid deflation usually signals a depression, in which case people will want gold, and it will go up in price. Other commodities will plumet in value during rapid deflation. I think we have been seeing this during the last year or so.

So like you say, gold is a protection against currency problems, and can hedge against both inflation and deflation which makes it play a vital role in the PP that other commodities cannot fill.

I started out investing in commodity based ETC’s which used futures funds. Even worse I used a leveraged fund. I was hurt by both fees and contango. One only has to look at the chart here http://retirementinvestingtoday.blogspot.com/2010/04/investing-mistakes-ive-made-contango.html to see the damage that can be done if you don’t know what you’re doing with these things

So for me know I’m still using ETC’s but it’s now the “plain vanilla” physical gold variety.