Sorry I'm replying again...I think this is an interesting topic and I'm also to hear other people's thoughts and ideas. The purpose of bonds is mainly diversification for times of losing equity markets. One potential problem is high inflation at the same time, effectively making your bonds also go backwards. This has happened a few times but rare. (my understanding).
Gold, so it seems to go on available back data and theory, is what you have in your portfolio to fix those times. Testing on back data suggests to me that you don't need a huge amount, really, maybe 5% is plenty (Gold by itself doesn't return dividends and is entirely reliant on market driven market value growth). Playing with US market data this holds true, as it does for available Aus data.
Another potential option apart from metals other than gold (eg Silver...) is bond diversification, which your Advisor is suggesting. But, in your case I'm assuming that those bond products (without looking them up) stick to US-centred bonds? The US will have its own inflation rate, so you could potentially mitigate that (at least somewhat) by diversifying your bonds globally. This also diversifies, potentially, their returns and issues like, government bankruptcy/implosion/zombie apocolypse, etc. I'd be suprised if this worked better than Physical gold in hedging that type of risk, however, holding bonds over the long term will see more growth than holding Gold.
I'm not sure how to test this theory with available calculators though. Tyler would likely have ideas on how to do it or could do it.
