Updating the Gold Model
I have blogged quite extensively, for example here, about Eddy Elfenbein's model for gold, and posted about it on multiple threads of Fool and other random bloggers, since at least July or August of 2011. Peter Brandt digs it, and now I note another respected financial/investment blogger, David Merkel, of Alephblog, has updated and highlighted the model. His post was also highlighted today on AbnormalReturns. My post above says more about the model than Merkel's post does, but it is a symptom of the broadening of the appeal of this model. Merkel thinks gold keeps going up because of this. I do not, in the short term. I think if you see signs of deflation without further Federal easing (and/or liquidity problems), as we have been seeing, then gold goes down. I don't see gold having another major spike until and if either: a) the economy improves but without the Fed taking its foot off of it easing gas; or b) the Fed implements another round of quantitive easing. But that's just one non-expert's opinion.
I view gold as essentially a currency speculation that people conflate with being an alternative to stocks. As I have stated before, including here, posting as DTAF (though now that I check that link, it looks like all of the comments got deleted), I view gold miners as underperforming because they are just companies, and thus are essentially claims to 20-years of free cash flows or so. Thus, since the stock market does not expect current gold prices to last for anything remotely approaching 20-years, they will never appreciate to the level one would otherwise expect, given current gold prices. (Whether the market is correct or incorrect is a separate issue.)
Disclosure: I am neither long nor short any gold, silver, gold miners, silver miners, other metals, related ETFs, leveraged ETFs, etc., etc.