Neither Bullish nor Bearish on Gold, Just Buggish

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"Is gold going up because people are afraid of the dollar going down?"

The trouble with being a contrarian is that you can never be quite contrarian enough. We began having doubts about the 'feds inflate. . .gold soars' hypothesis last year. It was too easy. . .too obvious. And if it were that easy to inflate a nation's currency, how come the Japanese couldn't get the hang of it in the '90s?

So, we moved towards a contrarian position—inflation, yes, but not for a while. And gold? Well, we are in it for the long run. In the short run, anything could happen.

To clarify our view on gold, the Daily Reckoning is not bearish on the metal. It is not bullish on the metal either. It is buggish. We are gold bugs. In the long run, gold will retain its value. Because that's all we ask of it, we are always satisfied. Even if it is down in the short run, it will come back in the long run.

Gold is not a speculation for us; it is a means of saving money. As Richard Russell says: "a man should count his wealth neither in dollars nor in euros; he should count it in ounces."

Our views on gold are still contrarian. But our views on the gold market have become commonplace. Now. . .everyone's a contrarian. As we read the blogs, it has become common to forecast a dip in the gold price—followed by a new, big bull market after inflation has found its footing.

Is gold going up because people are afraid of the dollar going down? Well, maybe. But that is like saying the dollar is going down because people are afraid gold is going up. Which came first—the chicken or the egg?

And what about the economy? Our contrarian position has remained unchanged. As we put it last week, there are few problems that enlightened central banking can solve; a credit contraction is not one of them. All the bankers can do is make it worse—by delaying it, disguising it or diverting it in another direction (such as converting deflation into hyperinflation).

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