Gold prices, like everything else, are of course driven by supply and demand. But one must recognize the enormous explosion of the central banks’ balance sheets and the money supply which devalues the paper currency. We are not seeing across the board inflation as in the 70s and early 80s at least not yet, but when inflation does arrive (because of economic expansion) it would be easy to see gold prices rise further. It is very difficult to assign an intrinsic economic value with unstable fiat currencies over time. Other markers of value such as oil, land food commodities have fluctuated wildly and cannot be considered stable units of value. Historically, the precious metals, have been the best measure of value. The only thing that fiat currency has
going for it is legal tender status, which of course is crucial.
"The real price of every thing, what every thing really costs to the man who wants to acquire it, is the toil and trouble of acquiring it...
But though labour be the real measure of the exchangeable value of all commodities, it is not that by which their value is commonly estimated...
Every commodity, besides, is more frequently exchanged for, and thereby compared with, other commodities than with labour." - Adam Smith, The Wealth of Nations, 1776
"The real price of every thing, what every thing really costs to the man who wants to acquire it, is the toil and trouble of acquiring it...
But though labour be the real measure of the exchangeable value of all commodities, it is not that by which their value is commonly estimated...
Every commodity, besides, is more frequently exchanged for, and thereby compared with, other commodities than with labour." - Adam Smith, The Wealth of Nations, 1776