UPDATE: Gold might be up this year, but it's worth only $800
By Mark Hulbert, MarketWatch
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The gold bugs are stirring.
A 10% gain by the yellow metal this year is rekindling hope among long-suffering bulls that the major bear market that began nearly three years ago finally might be over.
They argue that gold will continue to rise because investors will be seeking a hedge against rising inflation, currency fluctuations and geopolitical uncertainty.
Yet according to Duke University finance professor Campbell Harvey, one of academia's leading experts on gold prices, the odds are poor that the metal will return any time soon to its all-time high in August 2011. That month, the spot Comex gold contract reached an intraday high of $1,929.20, more than $600 above Thursday's settle price of $1,320.40.
He puts gold's fair value today at a little higher than $800.
A valuation model Harvey proposed in a National Bureau of Economic Research study 18 months ago, when gold was nearly $1,700 an ounce, correctly foresaw that the metal was overvalued.