Bloomberg says gold is worth half what it was in 1980, here:
After taking inflation into account, gold is worth almost half of what it was in 1980. It reached a then-record $850 that year after U.S. political and financial turmoil in the late 1970s caused a surge in consumer prices. The metal is valued at $464 in 1980 dollars, according to a calculator on the website of the Fed Bank of Minneapolis.
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Assuming that's true (which it isn't because $850 was a bubble price), theoretically gold has another 45% up to go from today's $1,311 before reaching parity with the 1980 record value of $850. As it happens, that level would be $1,900 an ounce, which we already reached in September 2011.
Since the 1980 high was clearly a bubble price, we may infer that we've already repeated that bubble high in inflation-adjusted terms.
The question is, what's the fair price. The average price in 1980 was about $613, but the low was about $482. That low today adjusted for inflation is something between $1,140 and $1,340.
Today's last spot price is $1,322.
I'd say gold is about where it should be today, adjusted for inflation relative to 1980.
But 1980 was the blowoff top of a horribly inflationary decade, and gold prices would subsequently sink farther to $300 an ounce. In a fiat currency system dedicated to a strong dollar policy, that's about as low as it gets in the late 20th century floating currency regime. So $300 an ounce in 1985 gets you to only $640 an ounce in 2012 adjusted for inflation, meaning gold needs to fall about 50% from where it is today, if . . . IF! we go back to a strong dollar policy.
Don't hold your breath. They don't believe in it.
