First, we hope you bought gold many years ago. That would make it simpler. Then, we could say: hold! Gold is an antidote to paper. There is so much paper... and so much more apparently on the way... that the gold play seems like a winner. It's a bet that the money system that has been around since August '71 is going to fall apart.

We still think that is a good bet. Our Trade of the Decade remains. Buy gold on dips; sell stocks on rallies. We've done well with this trade; we'll stick with it a bit longer.

But what if you don't own gold? The yellow stuff is now over $1,000. In fact, it looks like $1,000 could be a new support level for the metal - with most of the support coming from the Chinese. China has relatively little gold in its central bank. It must see what we see - the weakness of the dollar and of the dollar-reserve monetary system. It must worry about the value of the $2 trillion or so it has in dollars. It must also wonder how it is going to run its economy if the dollar falls apart. American buyers were its consumers of first and last resort. To whom will China sell if its most important customers' money becomes worthless?

Recent comments by a group of Chinese officials make it clear that they are thinking of these things... and that they have decided to add more gold to their reserves. In fact, all the central banks have become net buyers. No more selling off gold reserves. That is seen as a mug's game - which it is. Replacing gold with paper? C'mon, what were they thinking?

So China is a buyer. Trouble is, it has to be a discreet buyer. It has too much money. It could cause the price to skyrocket overnight. Then, it would be paying too much. So, perhaps it does what we do - China buys on dips! For example, the order may have gone out: buy gold whenever the price goes below $1,000.

We don't know what their buying strategy is... but the Chinese are probably going to be big buyers over the next few years.

Should you buy along with the Chinese? Should you compete with the Chinese for each ounce of gold that comes on the market?

Good question. Unfortunately, we don't have a good answer. So let's try a different question: Is gold going up or down?

The answer to that is simpler: gold is going up... then down... then up again. It is going up because the feds - including the feds in China - are encouraging speculation. Then, it is going down when the next phase of the bear market reasserts itself and the speculators run for cover. Then, it is going back up... much farther and faster... when the Fed becomes desperate and finally throw caution - and dollars - to the wind. We're confident this last stage will arrive. Our hesitation is that it will take much longer than we expect. Gold may rise in a deflation... but it soars in a period of inflation. That period could be a long way off.

The feds can't revive the consumer economy. Despite all you read... the consumer economy is probably going to limp along for many years. No boom in consumer spending = no inflation.

" US retail sales surge as economy strengthens," announces a Reuters headline. Don't believe it. Between the seasonal adjustments and the feds' giveaways the retail sales numbers are meaningless. The real story is that there is little - or no - real organic improvement in the economy. The largest banks that get federal bailout money, for example, have actually reduced their lending for 6 months in a row.

But the feds can stimulate speculation. The dollar has become the 'carry trade' currency. The big players borrow in dollars... and use the money to speculate - against the dollar! They buy gold. They buy Brazilian bonds. They buy aluminum futures. They buy stocks.

The Dow rose 108 points yesterday. Oil rose over $72. Almost all commodities are up - except natural gas… although it's starting to move.

The post-crash party seems to be going well. It may continue. But the underlying problems of the real economy have not been corrected. They will rise up like zombies in a bad horror movie and bring the party to a close. Absent support from the Chinese, the price of gold will probably go down along with everything else.

The Chinese have the money and the motive. They alone could move the price of gold to $3,000 if they wanted to. And maybe they do.

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Editor's Note: Bill Bonner is the founder and editor of The Daily Reckoning. He is also the author, with Addison Wiggin, of the national best sellers Financial Reckoning Day: Surviving the Soft Depression of the 21st Century and Empire of Debt: The Rise of an Epic Financial Crisis.