Ask Matt:: Has the price of gold hit its peak?

— -- Q: Has the price of gold hit its peak?

A: Gold is enjoying its golden days with investors.

Gold is oftentimes seen as the ultimate financial safety play. When you can't trust governments to pay their debt and have no faith paper currencies will hold their value, investors take comfort in things they dig out of the ground.

Gold rose 10% in 2011 as gold futures for February delivery settled at $1,566.80 an ounce at the end of the year. Despite the 10% gain, it is down from a record high of $1,891 in August.

You ask a valid question. Many investors would also love to know what the future price of assets will be. Trying to guess the future direction of gold prices has been a pastime of forecasters and wise men for centuries.

Forecasting the future value of most investments, though, is very difficult if not impossible. But that's especially the case with gold. Gold's value isn't based on fundamentals like earnings, revenue, profit growth, dividends or cash flow, things that can be guessed at. Gold is a metal. The value is determined, simply, by how much another investor is willing to pay for it.

All the traditional tools used to measure the expected returns of an asset simple don't apply to gold. If more people continue to fret over the value of the dollar or the creditworthiness of governments, there's certainly a possibility that they will seek gold as a place to protect their assets. And if that happens, the price of gold certainly could rise.

However, if the economy continues to improve, government deficits shrink and the dollar gains strength, gold could be very vulnerable. It's unusual for an asset to do as well as gold has over the past few years and even gold analysts warn a correction wouldn't surprise them.

I realize I haven't answered your question. But again, you're asking me to answer something that no one can accurately predict.

But don't be discouraged. Just because you can't predict the future, doesn't mean you have to be paralyzed. If you think that markets will eventually return to their historical trend, you might want to avoid gold. Gold has done so well for so long it wouldn't be surprising to see it lag as other asset classes, namely stocks, catch up. Gold over the very long run has been a poor investment, delivered poor average annual returns, yet with high volatility.

However, if you're in the camp of pessimists that see unemployment rising, debt soaring and the dollar falling, then gold might make sense for you. Under these dire circumstances it's very possible that other investors would be willing to buy gold, which could push the price higher. Just remember, again, that over the long term gold has been a poor investment.

Matt Krantz is a financial markets reporter at USA TODAY and author of Investing Online for Dummies and Fundamental Analysis for Dummies. He answers a different reader question every weekday in his Ask Matt column at money.usatoday.com. To submit a question, e-mail Matt at mkrantz@usatoday.com. Follow Matt on Twitter at: twitter.com/mattkrantz