Jeff Clark at Casey Research (htp: The Mogambo Guru) plays with the numbers to estimate gold's potential.
One stat is created from a comparison of all the world's cash with all the world's gold: "Total central banks reserves (including gold holdings) = $4.8 trillion, divided by 929.6 million ounces total gold reserves held by all official institutions that issue currency = $5,246 gold price." Or about £3,500 per ounce.
HOWEVER: the World Gold Council estimates that all the gold ever mined to the end of 2006 is about 158,000 tonnes, or 5,079.7 million ounces. If we round down to 5 billion ounces (to allow for some permanent loss, but offset to some extent by new mining - esp. in China - since 2006) we get a gold price of $960 per ounce - not far off where we are today. Allow a bit of cash held outside banks, and gold would be worth - what? $1,000? $1,200?
Yes, there may be a spike like in 1980 - and there may not be. But speculation/panic aside, it would seem that, globally, the current gold-to-money ratio is not quite so wrong as might seem at first sight. So the story is not really about gold, but about the weakness of the dollar in a heavily unbalanced US economy. Priced in a different, stronger currency, gold may not zoom to the moon.