what is gold “worth”? nobody has a formula because it has no real value based on cash flow, so we look at relative prices and say it should be relatively “more” or “less” …. and with that thought in mind i suggest you study this chart and tell me what price it implies is “fair”
It also makes sense for gold prices to be plunging, since the market now realizes that the Fed is not going to be doing QE forever, which in turn implies that the risk of runaway inflation and dollar debasement is much less than previously feared. As I mentioned last April, gold had reached incredibly high levels on the back of speculative fever and concerns over too much Fed easing. Gold is now well on its way to re-linking with other commodity prices, with a likely price target of $900-1000/oz. Commodity prices in general appear to be under a little selling pressure, but gold is the bigger story since its rise, in retrospect, was extraordinarily overdone.