Is Gold Overpriced?

There's gold in them thar hills! Gold I tells ya! Gooooold!

Now, in 1971, the purchasing power of gold was about equal to what it had been going all the way back to 1796, yessiree (see Figure 1.1 of this report from the World Gold Council). Back in '71 gold was about 40$/oz (see graph). Since then why, the purchasing power of gold has gone up. Indeed it has. But if'n we take 1971's gold value to be fair an' square, then the fair value of gold in 2009 should be $213.17 (according to the bls inflation calculator).

Now, of course there be some fussin' about how Uncle Sam calculates inflation (I'll leave you to figure that one), so $213 may be a might shy of gold's true worth. Still though, $213 is a long long way from $1000.