I like your position on any other scenario. If "Armageddon" doesn't come, then the price of gold will fluctuate and you are lucky to catch it in a buy low, sell high position. There are many gold bugs that suffered for decades with no income on their investments during good and bad economies, while stocks paid dividends and were optionable for protection and income.
Nothing wrong with having some gold, but more than 5% seems rather foolish. If you want insurance for your investments, buy some leap puts on the DOW or SPY while you dabble in stocks. I sell calls and puts for my retirement income from a self directed IRA. If you combine the income of dividend paying stocks with covered calls against them and selling puts to re-aquire the stock when called away, it's entirely possible to make 20% per year pretty consistently. Even counting the last couple of years, I have an average of 16% return over the last 8 years.
To believe that you can fire a bullet on gold and be on target at $900 an ounce and be higher a couple of years from now is just guessing. The Republicans may be in charge a couple of years from now and they have already said they are aiming to squash the spending in the out years of the stimulus bill IF they have 2 consecutive quarters of growth in GDP. That could greatly change the complexion of the gold futures prices. Gold may not go up that much in DEflationary times and then be cut off when inflation might start. Dreams of $2000 an ounce may go quickly up in flames. I would suggest TRADING GLD or it's options for short term gain rather than taking delivery on the metal. It's more liquid that way and you don't have to store it. If he decides gold is going higher, I would buy leap GLD calls a couple of years out for a tenth of the money he plans to spend on the metal. A GLD 100 2011 call is $20 as I write this. He could make many trades or just hold on to some for a lot less money and get the same effect as having a bag of coins to worry over. In the next 2 years, if gold doesn't zoom to unheard of prices, you haven't lost all your money, and if it does zoom, you are in with leverage.
If one decides to trade gold stocks, you have better companies and worse companies. There are many options that make any company vary in value. The price of oil, electricity, revolts and civil wars, or even a dumb CEO could lose your money even with $2k an ounce gold. I invested in NEM awhile back and the stock went down even with a rising gold price. Each investment must be looked at separately. At one time Citi was the gold standard of banks. I just get nervous putting too much money in one area. If he plans to overweight in gold, it has been my experience he will lose. A balanced approach with a quick trigger finger if you are wrong will make you the most money in the long run. Many people that are buying now will hold on to gold at $1k per ounce, even to $2k per ounce, but will not sell as it approaches $600 an ounce. You can find some gold bugs bragging now that they bought gold for $350 an ounce, but for decades they wouldn't even admit they had any. I have made many thousands of trades over those years and have done ok for myself. They brag of a double over those years and I can show many doubles in less than a year. It is possible gold will be $1500-$2000 and ounce in a year, but you could win the lottery also. IMHO, if gold is $2000 an ounce in a year, the Democrats will be out of power. Gas will be $5 a gallon, food will be ridiculous, unemployment will be over 10%, and almost any other metric measured will suck. You could take the same dollars you have in gold and buy a CD drawing 20+ %. I did that back in the Carter years(19%).
The only thing that makes me think the gold bugs may be right this time is the word "trillions". We ain't never done that before. I hope we chicken out. I have to base my moves on past experience. Recessions don't last over a couple of years as a rule. We may be wrong this time. Now we are back to "Armageddon". I prefer .45 ACP, 12 ga, and .308, for that.
btt