All us crazy Gold bugs are ready to accept the apology of gurus and strategists that have filled the airways and internet with the unrelenting drivel on buying paper equities over the past two decades. We just have not heard it yet. We may have to wait longer, though the evidence suggests it should come soon. Twenty years should be sufficient time for them to recognize the error of their ways.

Chart below portrays the performance of $Gold versus the S&P 500 over the past twenty years. Winner is clear and obvious. Owning Gold over the years has been a far better investment than paper equities. Note that we have used total return for the S&P 500 which includes dividends. We did not adjust for the outrageous fees that investors had to pay for someone to "manage" those equities.

Latest rally in equities portrayed in that chart is the third one in twenty years. That burst of enthusiasm has about as much likelihood of succeeding as the first two. Reason we can say that is the force, or energy, that has so distorted the price of investment assets in this period should benefit Gold more in the future than paper equities.

Gold has been an incredible success because it is the only investment that benefits from the inept Keynesians running most Western governments. Washington, D.C. has been one of the best friends of Gold bugs. It continuously spews out policies that make Gold more valuable.

Our biggest benefactor has been the U.S. Federal Reserve. No central bank in history has pursued inappropriate monetary policy for such a long period of time. Despite twenty years of errors, it refuses to change. Recently the FOMC minutes indicated that some member might be starting to question the wisdom of their current policy. They may revisit damage being done by quantitative easing, NEXT YEAR. Whew, we were worried for a moment they might be coming to their senses. We should thank them for reassuring us that Gold will be worth more a year from now.

Let us not forget the rest of policy makers in Washington. How should we describe them? Better not try. Anyone that still believes the U.S. government has any serious intentions of dealing with the deficit should quit smoking those mail order cigarettes from Colorado. The recent "deal" to fix Obama Fiscal Cliff I should be renamed the Gold Appreciation Act. It fixes nothing, and makes Gold a better investment for the coming year.

With the end of an old year passing we always like to review the above chart. In it are plotted the year end ratios of US$Gold to the S&P 500 for the past 68 years. Solid black line is the average of that ratio for the period. It might be described as representing the fair or reasonable value for that ratio. Relative to equities it suggests a reasonable value for Gold at the present time. In other words, not seriously under valued or dangerously over valued relative to equities.

Green line, the upper one, represents the mean, or average, plus one standard deviation. When above that ratio we should worry. Gold would then be over valued relative to equities. Note that this method of valuation does not say anything about under valuation of Gold relative to the dollar.

GOLD THOUGHTS comes from Ned W. Schmidt,CFA as part of a mission to save investors from the regular financial crises created by Keynesianism, and the high priests of that misguided ideology. He is publisher of The Value View Gold Report, monthly, and Trading Thoughts. To receive these reports, go to: www.valueviewgoldreport.com