Gold buzz - some facts !

George Soros is one of the famed investors and it appears he's unwinding his gold trade. Most of the commodities started to tumble, not sure if it is just transitory or the start of a big decline. Silver started
to tumble this week along with many other commodities. When big boys start dumping that usually indicates the party is getting over.

http://blogs.forbes.com/robertlenzner/2011/05/04/soros-reported-to-have-sold-gold-position-in-april/

Generally any good  business over time will significantly outperform a commodity especially from an inflationary standpoint. Besides demand from jewelry and very little industrial applications gold's value mostly depends on what others would be willing to pay. At times its value really depends on various factors like speculation, fear and uncertainity. Refer to the historic prices of gold from 1980 until now posted in an other article in this blog.
Buffetts comments on this
Regarding gold, Buffett has been critical of the greater fool phenomenon surrounding gold, and reiterated that at the 2010 annual shareholder meeting. To highlight the criticism, he said when he first bought into Berkshire, the stock price was three-quarters of the price of an ounce of gold. Today, Berkshire A shares are about $125,000 and gold is about $1,560 an ounce. Do the math.

Gold price history - last 30 years !

Gold price history over the past 30 years in US dollars.  The 1980 price was touched again in 2006 but considering inflation, a dollar in 1980 would be worth much less than a dollar today, may be 1/3rd of that. So what are the dynamics at play during these 2 decades that saw the severe price decline. Not sure if it is lack of interest in gold as an asset class, extraordinary growth in the developed world coupled with technolgocial innovations. But what are the chances of getting this repeated and when would that be.  If may be in the very near future, if all the head winds recede and global growth picks up momentum without any crisis on the horizon, would gold be as alluring then as it is now. In this recent gold buzz, the investor demand for the yellow metal has exceeded the tradional demand sectors like jewelry and industrial use.
1980 ................612.56
1981 ................459.64
1982 ................375.91
1983 ................424.00
1984 ................360.66
1985 ................317.66
1986 ................368.24
1987 ................447.95
1988 ................438.31
1989 ................382.58
1990 ................384.93
1991 ................363.29
1992 ................344.97
1993 ................360.91
1994 ................385.42
1995 ................385.50
1996 ................389.09
1997 ................332.39
1998 ................295.24
1999 ................279.91
2000 ................280.10
2001 ................272.22
2002 ................311.33
2003 ................364.80
2004 ................410.52
2005 ................446.00
2006 ................610.00
2007 ................702.57
2008 ................871.96
2009 ................972.35
2010 ................1224.53