In August, 1971, the US began a unique experiment in modern finance- with, I must add, after a very bumpy start, astonishing success, until recently. This was an experiment in "fiat money." The trick was to make the US$, without any fixed exchange rate to Gold, a store of value that wouldn't drive people back into the yellow metal.
I've put together a few graphs, the first of which depicts the relative value of an investment in Gold and in Fed Funds (I also ran a few simulations with Bonds and found that the 10 year has an even better relative return, thanks to the timely reset in 1981, although even there Gold is beginning to outperform) assuming that the Gold was purchased when Nixon closed the Gold window and held for the duration of the simulation while the coincident Fed Funds investment was reinvested daily (I used average monthly rates, which should be close enough).
As you can see, despite the very bumpy start, US$s invested in Fed Funds became as "good as (the) Gold" purchased at the beginning of the experiment by 1998 or so.
The second graph examines the Volcker Fed era, with a much higher starting Gold price.
The third graph examines the Greenspan era.
Surprisingly, to me at least, the Greenspan era also was a better time to own US$s earning Fed Funds than Gold (although how this was done is a matter of some debate (see GATA)). Certainly by 2000, Gold once again began to shine as the relative return this century is 2.16.
The final graph examines the Bernanke Fed era.
Under Chairman Bernanke, Gold has been a much better investment than US$s, invested anywhere in the curve. While the relative performance during his Chairmanship is not yet as poor as that under Arthur Burns, Nixon's man at the Fed, with US yields so low he just might catch up (or down as the case may be).
Ultimately, as Ben Graham taught; in the short run, the market is like a voting machine--tallying up which securities are popular and unpopular. But in the long run, the market is like a weighing machine.
Since 2000, the scale is tipping, increasingly, towards Gold.