Using historical reference points to value gold as an inflation-hedge...
Going back 1000's of years right up until now, there has been a pretty consistent average amount of bread you can buy with an ounce of gold.
It's the equivalent of 350 X 1kg loaves.
I usually buy a 700gm loaf for $3.50, though you could easily pay a bit more. It would take 500 of these loaves to equal the 350 above. 500 X $3.50 = $1750.
AUD gold price is currently $2200. Which would equate to $4.40 per 700gm loaf.
So by this measure, the gold price at the moment is fair to somewhat high, and could easily go 10% lower. Or inflation could increase the cost of a loaf by 10% or more, and gold would still be fairly valued.
Of course the inflation picture is much wider than that (as alluded to in my previous post), but it's interesting to see how relevant this relationship still is.
