Hi Monogamy, I missed seeing that article but thankyou all the same (an to Chuck, thankyou for your observations - as my earlier posting noted, I prefer the physical stuff, to the traded stuff - and have done so for some time).
As to my earlier remarks, I well remember all those lessons in economics (theory, macroeconomics, econometrics, etc) which were all done at the time of the Iran-Iraq war breaking out, and of the Tanker Wars taking place in the western part of the Persian Gulf.
I also remember studying gold at length, and approximating it from a store of value /wealth perspective.
I also remember studying economic history to see what the impact was of maintaining, or re-stating to a gold standard, etc.
My point to this though is that gold has long ceased to hold many of these intrinsic qualities which over the millenia have determined to shape it as a currency of value.
In the last 22 years, gold has taken on many of the speculative elements and behavioural mechanisms that befit the physical underlying stocks to which gold bears an association, etc.
On a technicality, whether or not gold is overbought should be left to the econometricians, and others, whose daily liveliehood, depends on understanding the ins-and-outs of gold, and where it may be heading.
For now, gold production continues to outpace gold consumption by a very wide margin. So, whether or not you believe that the forces of supply and demand will kick in to determine what gold is up, really is up to you.
But, where things stand, I see gold being driven by 3 factors: 1) physical demand (likely underlying gold price would be closer to $300); 2) currency /economic demand (likely to spike gold above $300, but not by much); and 3) sentiment (especially, fear) which appears to be driving at least 80 -90% of the current momentum in gold, especially with the mooted buying from out of East Asia.
If 1) and 2) are sustaining the gold rally, then the price may well go higher (and perhaps stay higher than its long term trading average, which is closer to $330, than it is to current trading values).
If, however, 3) is the real driver behind the current rally, then I would be concerned for where gold will fall back to once the fear factor subsides.
Looking at the chart on gold posted by Nickoo on 4th February: 1) Gold spiked ~20 years ago (reference, to your time-line) due to the outbreak of the Iran-Iraq war. It rose to ~$850, then fell back sharply to $500. A secondary spike then followed which saw gold spike to >$700, before falling back to ~$300. Just as quick as each of these spikes came, they also receded. 2) The next spike followed in 82/3, primarily as a result of the Tanker Wars in the Western Persian Gulf. This saw gold rise from $300 to ~$550, before falling back to ~$275. 3) The next spike followed approximately at the time of October '87, and saw gold rise from sub-$300 to $500, before falling back to ~$350. 4) In 1990/1, lesser spikes kicked in (ie: about the time at which the 17th Province was seized, and then subsequently liberated). Gold rose from $350, peaked at ~$450, fell back below $350, and then in time for the Gulf War, peaked back up to $450, before subsequently dropping away (over a medium-term trend) to ~$330. 5) A steady range in the $350 -$400 region then followed for much of President Clinton's first term in power. A small peak in 1995 (to ~$425) appears to have co-incided with the first Bosnian actions, and the downing of a US pilot over Bosnia in June 1995. 6) From 1996 to 1998, gold slipped heavily, touching down at ~$250, before spiking back up to to ~$350 during the time of the Asian Economic Crisis.
Gold has now been back on the move since September 11.
However, far from being a store of value (and a future indicator of inflation, currency value, or the like), gold appears to have been more a store of fear. And, on each and every occasion that the fear has subsequently receded from view, the drop in the gold price has been back to its long-term underlying trend which is closer to $330 (on average), or below.
