Gold made its run from $275 an ounce to over $1100 during the past six years. But gold bears who say gold is now "near its record highs" are way off the mark. While it is true that gold went to $850 back in 1980, in that same year gasoline was only 60 cents a gallon, you could buy a new car for only $6000, and there were only 4.4 billion people living on the planet. In order for gold to match the peak value it had in 1980, after adjusting for inflation over the past 29 years, gold would now have to reach $3400 an ounce.
According to these gold bears gold is in "vast oversupply", supply is now much greater than demand, and "vast" amounts of gold are being mined or sold from scrap (gold jewelry). These statements, while technically correct, are very misleading. Yes, it is true that new gold supply for 2009 is estimated to be 5100 metric tonnes (from mining, sales of scrap gold, IMF and net government sales), and gold demand estimates for 2009 will only be 1650 tonnes (from jewelry, industrial, and investor demands). But consider that the average amount of gold mined each year (about 2400 tonnes) is only about 2 percent of the world's total above ground gold stockpiles (127,500 tonnes) - hardly what could be called a "vast oversupply". While it is true that total gold stockpiles have increased significantly since 1980, the world population has also seen a big rise - to 6.7 billion people, thus increasing demand for gold. On a per capita basis, if total gold stockpiles were divvied up evenly to everyone on the planet, each person would be allocated less than one ounce. As the economy worsens, you can bet everyone will be flocking to gold, or wish they had gold. .