THE world's financial system is wobbling again, yet gold has gone missing in action.

Its price has been subdued by recent standards, that is. Oddly enough, the safe haven is suddenly seen as risky.

Gold is still way off its record $US1921 an ounce of three months ago and that was well under the $US2292 it would be if it had kept pace with inflation since its 1980 peak.

The local price, thanks to the stronger currency, is even more lacklustre.

So, on face value, gold hasn't even done its job as a hedge against inflation.

Still, you can argue that the other way round as well: as an alternative to paper money it's really showing the collapse in the US dollar's value because it buys less bullion.

Besides, bullion had to bear relentless central-bank selling — including by, guess who, but Martin Place is a clue — at the bottom for 20 years. So what is gold worth?

Unlike other commodities, its price is almost purely demand-driven and that's based on sentiment. No, make that fear.

If anything, there's an artificial shortage because central banks have switched from being sellers to buyers.

Then there's the soaring cost of mining gold.

Although seen as the last resort in a paper world, in truth a lot of gold's value has to do with near-zero interest rates in the US and Europe. They pull down the value of the US dollar, in which gold is quoted, as well as overcome its inherent disadvantage of not paying anything.

Needless to say, many have tried to value it. One popular method is comparing how much an ounce of gold would buy on Wall Street.

If you pretend the entire Dow index is one stock, then a share would be worth about 7 ounces of gold. Since the average is 10 ounces — it dropped to only one ounce in 1980 — that suggests either Wall Street is undervalued or gold is overvalued.

Another way of valuing it is comparing it with oil. It recently took 0.05 ounces of gold to buy a barrel of oil, which was smack on the long-term average, according to a study by UBS.

The US-dollar gold price has been rising an average 16 per cent a year since its run began 11 years ago but, in the past three years, this has accelerated to 20 per cent or more.

Since the US Federal Reserve has promised not to lift interest rates for another two years, there's no reason to expect the gold price to drop soon. By the same token, though, there's nothing to push it up much further.

The US recovery appears to be finally gaining some traction, which could be expected to push up the US dollar and so hurt gold.

Gold bugs point to the world's central banks printing more money which, in normal times, would be inflationary.

But, with high unemployment in the US and Europe in deflation mode as spending is slashed and taxes raised, an inflationary surge is some way off.