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America failed to collapse into ruinous anarchy this week when its president late Tuesday endorsed a deficit-reduction plan proposed by the Senate. Policy makers, it's beginning to seem, are a few weeks of mannerly negotiation away from a $4 trillion improvement in public finances and reforms to entitlement programs and the tax code.

For gold investors, it was a minor setback. Their glimmering prize has jumped six-fold in price in a decade and on Tuesday fetched $1,601 per ounce. On Wednesday, it lost as much as $20 before recovering. More trouble could be afoot. Sources close to the matter say rivers have yet to run red with blood (although the Hudson could do with lower PCB levels).

Gold, absent neurotic fear, is a lousy investment. In 2001, when America last ran a surplus, the stuff sold for barely $300 an ounce adjusted for inflation, following a two-decade decline. Since then, terrorist attacks, wars, the popping of stock and real estate bubbles, squander and squabbling have propelled it ever higher. Exchange-traded funds have helped. A gold investment used to require a bit of research into where to buy it and how to hold it. Now anyone scared by a chalkboard diagram of a conspiracy among Soros, Obama and Marx (Karl, not Groucho) can simply call their broker.

Of course, gold's rising price serves as justification for the public's angst, and as reason to buy more gold. And advisors who come out for it find a ready audience.

But consider for a moment some things that could go wrong.

There might not be runaway inflation, for one. Government excess, of which there has been plenty, is supposed to lead to money-printing and higher prices. Consumer prices fell last month, however. They're 3.6% higher than a year ago, but only because energy prices are up 20%, and those have started to fall.

Second, gold may turn out to be a lousy hedge against inflation. Inflation results in a rise in the price of ordinary goods, after all, so a common way to fight it is by owning ordinary goods. Rapper teeth aside, gold doesn't have the same practical value as oil, corn, copper and steel. As I've noted before, its historical connection to wealth comes only from a handful of chemical traits that made it ideal for the job of shaping coins by hand long before the age of mints and central banks. No country uses gold as money today or has plans to do so.

Third, America might not go bust. As this column noted recently, the debt won't hit record levels as a percentage of the economy until 2025 under pessimistic assumptions, and the U.S. spends vastly more than rich peers in categories like healthcare and defense, suggesting it can save plenty with little pain once the mood strikes Washington, as it might be now.

Further, the wars might wind down, the economy might remain sluggish but stable, the president might turn out to be a decent man rather than a saboteur and Tea Party tantrums might win serious spending cuts. Gold might even lose some pitchmen. Longtime conspiracy theorist and gold endorser Glen Beck aired his last show at the end of June. (Unlike the Hitchcock-watching, wine-spilling bullies who nearly lynched him last month in Manhattan's Bryant Park, friends in my Queens neighborhood enjoyed his show and miss him.) In other words, it might turn out that we're all OK, and that would be anything but OK for gold. Plenty of its holders are not only sane but savvy, but I worry that the run-up has been amplified by the tinfoil underpants crowd.

There's no mathematical way to demonstrate that gold is expensive. Companies have cash flows, real estate has rent and machines have utility, but gold just has its shine. There are a couple of troubling signs, however. First, those exchange-traded funds have now amassed about as much of the metal as can be mined in a year, leaving a large supply available for fast sale. Second, prices for gold miner shares have noticeably lagged behind those for gold. Miners are becoming less attractive to gold fans, The Economist argued last month, because they're hedging prices, reducing production spending and diversifying into other metals. When gold miners are cautious on gold, it's probably a bearish sign.

By the way, I think gold could easily hit $2,400 an ounce before it plunges. Its inflation-adjusted high reached in the early 1980s was more than $1,800, so if $1,600 is a bubble, it's a half-hearted one. I like my bubble peaks to be properly absurd, and $2,400 feels right. But unlike others with similar forecasts, I freely admit the absence of any rationale for mine. And I wouldn't recommend anyone to bet their savings on it.