John Tobey's method follows from gold being money. In his analysis, he has a graph of the CPI basket as measured in ounces of gold:
As the graph shows, the average is 1.75 ounces of gold. When it's above the average, gold is undervalued and a buy. The most undervalued period was just before the London Gold Pool gave up on controlling the price of gold in 1968: gold was then $35. The subsequent eleven years saw a rip-roaring bull market. Gold wasn't as undervalued in 2001, but it was about half of where it should be given the CPI basket. That undervaluation preceded and gave fuel to the current bull market.
The graph also shows that gold at $1,450 is about as overvalued in his terms as it was at the peak of the 1970s bull market. Thus, he concludes that gold is a high-risk buy. Had the metal been at its average, it would be selling for $571.
Of course, there are two objections to this analysis. First of all, inflation is global and so is gold demand. As Third World nations with traditions of holding gold become rich, like India and China have, then his metric becomes less accurate. Secondly, the current CPI may well be understated, as John Williams of Shadowstats has been showing. His calculations of the CPI using the same methodology used in the 1970s shows the last decade as experiencing '70s-level inflation.