Since its August 22, 2011 peak, gold returned -30% as of the beginning of September 2013. The last calendar year gold prices fell was 2000. For the first 10 months of 2013, gold was down 22%. One observer points out, “Gold is somewhat of a chameleon of an asset because investors tend to value it as a function of something else, and it’s sometimes tough to tell what that is.” Part of this is because no one really knows how to value gold. Its price is driven by investor perceptions of allure and scarcity.
From the end of 2000 to August 2011, gold increased almost seven fold. During the 1980s and 1990s, gold’s price dropped from $533 to $289 an ounce, despite the fact prices for goods and services (inflation) doubled. Even as of November 2013, gold was still below its 1980s inflation-adjusted peak of > $2,300.