Ah, I see we have someone with a sense of history. Generally (until recent wild price swings) 1 oz of gold would buy 10 barrels of oil. That equation has held true for a very long time (before the irrationality of the commodity markets in 2007, at least). Given that understanding, oil at $40/barrel should give us a value for gold at $400/oz.
Some things have changed, though... for example, gold has more industrial, high-tech uses these days and oil has become more plentiful with modern extraction technics. Back in the old days, gold was mainly used as a storehouse of value. The increased industrial demand will likely give gold a premium over its historical valuation relative to oil so I maintain my price target around $700/oz.
Thanks pgyanke. Like oil, gold is a commodity. The gold supply has more than doubled (that is, all the gold ever mined, not that is currently traded per se) since 1960 or so. Even apart from unknown extraterrestrial sources, it’s not farfetched to speculate that the gold figure will double again during the next 50 years, but the production increases will be streaky, and made feasible by the occasional price bubble. Like gold, oil is in finite supply, but unlike gold, oil’s commercial uses mostly consist of some sort of combustion, or use in chemistry to make other products with finite lifespans. Substitutes for gold in industrial and commercial uses come about thanks to price spikes. Oil use drops when the oil price spikes, but (like gold) the price spikes also lead to more production, often from previously unprofitable sources.