Evelina's point is that gold has been a lousy investment, falling well behind inflation over the past 25 years. She also quotes some traders who believe that the recent rally has come from the securitization of gold in the form of ETFs.

We generally understand that much, I think, so here is my additional take.

For about 20 years, gold was clearly an under-performing asset because there was a global credit tightening cycle. Money that was available in the economy was able to find a home in investment that produced an economic return that exceeded any true measure of inflation. During that lengthy cycle, gold was less attractive than financial assets.

Nevertheless, throughout this cycle, there was, like death and taxes, the inevitability of consumer price inflation. The CPI growth was minimal, far less than GDP growth, so gold fell well behind.

But, just like the 1970s period that followed the Vietnam War era, which flooded the world with new money, CPI growth has, in recent years (what with Y2K and Afghanistan plus Iraq 2), outpaced GDP growth.

The latter statement seems unlikely, based on the reported news, but it is true for these reasons: (i) the world's biggest economies (USA, Europe, Japan) have been much slower growing than smaller ones like China, India, Russia and Brazil, but the smaller ones have been getting most of the media attention, (ii) the methods of calculating inflation data, and the natural biases of those civil servants who produce them, have changed, and the data presently being reported is inaccurate.

So, every time that CPI grows faster than GDP, gold (and the other precious metals) is going to rally.

For 20 years (1980-2000) there was a disinflation cycle, and now there is an inflation cycle. It is clearly a different ballgame; so whenever I see references to gold price trends and cycles of the 1980-2000 period as being normal for this cycle, I simply ignore them.

This is a new era.

As to the securitization of gold (and silver soon), just like the previous securitization of oil, there is more buying, and in an inflation cycle that buying will be even greater than later in subsequent disinflation cycles.

Is the impact of new Gold ETFs any different than what happened with put and call equity options 25-30 years ago? I don't think so.

Stock options lowered trading risks and hence increased (by a large margin) the amount of stock trading. In fact share trading volumes literally took off after options became well understood and used by traders.

So to infer that there is a temporary phenomenon in gold trading caused by ETFs is faulty logic. Lower risk plus increased use and understanding of these ETFs will dramatically increase gold trading in the future.

Just wait until several hundred million Chinese and Indian traders get accustomed to trading in ETFs, options and futures for gold and silver. This market will boom.

Moreover, as precious metals (especially gold) are storehouses of value, the residents of war-torn regions, and in countries where governments tend to over-spend, which creates inflation, will increasingly turn to these metals as money instead of paper and wooden nickels.

To sum up, I really like the professional work of Econoday's Evelina Tainer, but I respectfully disagree with her posture regarding gold. I take one look at her PPI/CPI charts, plus my belief that the actual data is much higher, and the rampant growth in M3 (the "quantitative easing"), and that's all I need to support my view that gold has every reason to continue breaking out to the upside.

Government's anywhere will not tell those who elected them that they are doing a less than effective job in fighting inflation. That would mean taking shots at themselves as well as at the personal spending and savings habits of those who elect them.

So, wink, wink, everything is just rosy. But in this cycle, I'll color those roses gold, silver and platinum.