Reinhard

Value of Gold Over the Ages

What's mostly wrong with this graph, IMHO, is the "adjusted for inflation" part, since they most likely use a CPI (consumer price index). First, the CPI is always understated by governments having an agenda (so they can pay out smaller entitlement payments). Second, even if it was right, it is not the correct measure of adjusting for the price of gold, since gold is a hard asset, while consumer products get cheaper due to efficiency of production.
The right measure is the money-supply which measures the rate of creation of money and credit. This is the rate at which money loses its value compared to something that isn't much created or destroyed (gold). This would tilt the above graph downwards and make gold cheaper than it looks. Why should gold have a value at all? It has a utility as medium of exchange and storage of wealth, and is probably worth a certain proportion of our total wealth, depending on how much we trust other investments and paper money. If paper money is created at a rate of 7%, the interest rates should be at least 7%. At 10%, one can still stay ahead of the devaluation. If interest rates are only 5%, paper money loses its relevance as an investment, and people will wake up and rather hold gold. This is why gold fluctuates and doesn't go exactly inversely to the money-supply.