The answer to this question is an easy one, yet can also be confusing. Gold is not expensive. Nor is it inexpensive. Gold, in and of itself, is value.
I’m not saying that $1,350. for an ounce of gold is not expensive (The price of gold as of the printing of this book. You can find the current price of gold here at Ask About Gold). Yet for a period of over thousand years, humankind in every country around the world has used gold as a standard for the value of anything else. This is why the value of gold and whether it is going up or down is the perfect way to gauge how the global economy is doing.
Periods in which investors could profit by buying and holding gold have been terrible for workers and for the economy as a whole. Technically, buying gold isn’t an “investment” at all; it’s a trade. Gold is a zero-sum game. Whatever one investor gains, another loses. A real investment, on the other hand, makes everyone better off, while a gold trade is made up of a winning party and a losing party – one who has gold and one who has a government issued bank note that is redeemable for gold.
There are lots of analysts that are trying to forecast where gold prices will go next. While the reality is that this kind of prediction is fundamentally impossible, since future gold price movements will be caused by events that have not yet happened, it doesn’t take an expert analyst to tell you where the world economy is heading.
If gold prices remain where they are now in dollar terms, the GDP deflator will have to more than double to restore the equilibrium that has existed for centuries between the price of gold and the prices of all other goods and services. While some pundits claim that, “This time, it’s different,” I wouldn’t count on it.