The Hardcore Goldbug Case: An Example

One of the reasons why goldbugs are staying bullish despite gold's recent troubles is they're not pure technicians. When the technical indicators are confounded, they shift to the fundamental argument. In a nutshell, the case for gold as a long-term investment is based upon the bloated amount of paper money out there and huge government deficits; those deficits will likely be monetized, at least in part

A colourful example comes from Adam Brochert of Gold Versus Paper; he lays the case out in detail. Part of it is based on gold as reproach and threat to the fractional-reserve system as overseen/managed by paper-currency-issuing central banks. The deflationary tendency of a creaky fractional-reserve system, which we've experienced, is offsetting the inflationary tendencies inherent in fiat money; both together create uncertainly and panic. Gold is rising as a result, and will continue to rise due to the flawed nature of the current fiat-money standard. He's the fellow who coined the term "paper bugs" to describe fiat-money supporters.


A similar path is treaded by Bill Sardi over at LewRockwell.com. He claims that the gold market is being manipulated downwards, and the basis for his claim is that gold isn't rising with the U.S. money supply. His case for gold rising is the metal spreading as an alternative investment as newly-created money induces inflation.