To look at gold as a hedge against inflation, we have to look at the real value of gold over time. For example, if someone bought gold at the peak in 1980, he would still have lost money after taking inflation into consideration today.
If someone had bought gold in 1914, he would have gained about 200% in the course of the last century after taking inflation into consideration. It is not an amazing return.
Everything must be put in context. I am a buyer of gold today but I will be a seller of gold one day, I'm quite sure.
With US government printing money and with almost 0% interest rate, inflation is likely to become a serious problem in future. As mentioned by Jim Rogers many times over, gold will probably see US$2,000 an ounce again.
The following chart is taken from an article on inflation adjusted value of gold by Barry Ritholtz - October 7th, 2009, 11:30AM:
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