SAN FRANCISCO (MarketWatch) — Gold hit a long-anticipated high-water mark Friday, briefly breaking through $1,300 an ounce. But the precious metal still has a long way to go to reclaim its inflation-adjusted all-time highs.

A gold investor who bought an ounce of the metal at its January 1980 peak would need gold to advance by more than $1,000 an ounce from today’s record levels to come out ahead when 30 years of inflation are taken into account.

People who bought gold in 1980 “have not even halfway broken even,” said Jon Nadler, a senior analyst with Kitco Metals.

On Friday, gold for December delivery, the most active contract, posted an intraday high of $1,301.60 an ounce and closed at $1,298.10 an ounce on the Comex division of the New York Mercantile Exchange. That was its sixth record high in the past seven sessions. Read more on metals stocks.

The $1,300 mark “was the line in the sand between bulls and bears,” said Adam Klopfenstein, a senior market strategist at Lind-Waldock in Chicago.

Gold bulls had been yearning to cross that mark since gold first made forays into record high territory in May, amid the flare-up of the European debt crisis. Even many gold bears had admitted gold was on track to hit $1,300 an ounce later this year or next year.

But the gold standard, so to speak, remains beating that 1980s real-term record. Holding gold comes at a price; unlike bonds or blue-chip stocks, the investment carries no yield or dividend payout, and the investor typically bears some cost for storing the gold.

For a gold trade to be worthwhile, prices need to rally enough to make up for the reduced purchasing power of an investor who sits on his gold holdings over the years.

Panic driven

Whether gold will advance to the 1980 levels, and when, is of course open for debate.

A different set of concerns faced investors then. Gold hit a record high of $875 an ounce on Nymex in January 1980, about two months after the start of the Iran hostages crisis and less than a month after the Soviet Union invasion of Afghanistan. That’s equivalent to about $2,318.84 an ounce in today’s dollars.

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“Then it was panic buying, and you had a very nervous country,” said Scott Meyers, a senior market analyst with MF Global’s Pioneer Futures in New York. The U.S. was stunned by the Iranian Revolution and the subsequent hostage situation in the U.S. Embassy in Tehran, “and the only place for people to offset that fear, from a portfolio standpoint, was gold.”

Inflation in the U.S. had jumped into the double-digits, eroding investments like bonds.

There were no other U.S. futures markets in early 1980s, making gold attractive for investors seeking to play international and geopolitical upheavals.

Gold itself was a newfangled form of investment. The U.S. government had abolished Depression-era restrictions on owning and trading gold only five years earlier. Very few possessed any expertise in gold investing.

The only similarity between 1980 and 2010 “is the amount of noise from the-end-of-the-world crowd,” said Kitco’s Nadler.

Thirty years ago, Nadler was working at a gold dealer and would see people lining up to sell their jewelry and silver candelabra. Silver hit a nominal record high of $50.35 an ounce on Jan. 18, 1980.

Through the years -- and through market calamities such as the crash of 1987 and the dot.com collapse -- gold has a proven record of mitigating portfolio losses, Nadler said.

But in recent years, a bubble mentality has formed around the metal, with mining companies and hedge fund managers doing most of the hype, Nadler believes.

Even if you don’t worry about the effects of inflation, gold proved to be money-losing proposition for most of the last thirty years.

Gold fell hard after the early 1980 peak. By January 1981, gold could be bought below $600 an ounce most days.

It would end the year below $400 and average $317 in 1985. Gold spent most of the 1990s stuck around $350 and below, according to the World Gold Council, a trade group funded by gold mining companies. It wasn’t until early 2008 that gold returned to its 1980, nominal peak. Read the gold futures column from January 2008.

Few now expect price drops of the same scale. Gold has risen every year since 2001, with annual gains ranging from 2.5% in 2001 to 31% in 2007, according to FactSet. So far this year, gold futures have risen 18%.

This year’s string of record highs came after a steady move up starting in July, following a spike in May at the height of the European debt crisis and other high marks in June.

It has been an “orderly move up,” unlike the 1980 peak, Pioneer’s Meyers said.

A few analysts are setting their sights at $1,500 an ounce. The consensus is the upward trend to gold will continue as yields on government bonds are likely to keep falling and the dollar remains under pressure.

That, “and a state of chronic pessimism among investors,” analysts at Barclays said in a recent note to clients. “Prices have gone from being driven by a short-term panic of a major global credit default to medium-term fears about the pace and strength of the global recovery and inflation.”