By James Debevec, Minyanville

NEW YORK (Minyanville) — It is rather difficult to spend time on a financial website these days without stumbling across yet another bullish gold article. A not-so-small cottage industry has emerged with respect to commodities and precious metals in particular. This is reminiscent of the tech mania back in 1999. However, there is trouble in paradise.

One reliable and robust indicator suggests that gold prices in 2011 are the second-most overvalued of any year since at least 1890. History suggests a reversion to the mean will take place and gold will trade at much lower levels over the next couple of decades.

Gold is historically a rather mediocre investment. MeasuringWorth.com provides gold and CPI data going back to 1257 and 1264 respectively. If one splices a few data series together and crunches some numbers, one would find that inflation goes up by 0.75% a year while gold goes up by 0.77% a year.

It is difficult to find another asset that comes as close to inflation as gold does. Do not interpret this to mean that gold and inflation match in any given year. It just means that sometimes people love gold (2002-2010) and it goes up a lot. And sometimes people have little interest in gold (1981-1998) and it goes down a lot. Over decades and centuries, everything more or less evens out.

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So gold does indeed do a remarkable job of holding value. However, don’t forget about those pesky storage and security costs which are not factored into the price of gold. Every year you have to trim a little sliver off your gold bar to make sure you aren’t going to get robbed. So 30 years from your purchase, you may not even be able to buy what you could have bought then due to security costs.

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Originally from TheStreet