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Contrarians' Day: Gold May Have More Upside

Gold has proved itself to be the ultimate contrarian bet against the market over the past three years. So is the gold rush over, or is there still time for individual investors to profit from this trend?

It depends: If you think the economy is reviving and the bull market has returned, you may not think you have much need for gold. However, the verdict is still out on a recovery -- and if we get one, it doesn't automatically mean a return of the bull.

If you believe the economy and the markets are still in for tough sledding, many investors might consider adding some gold to their portfolio. While gold's enormous rally may signal the easy money to be had is gone, some savvy professionals think the gold rally has plenty of life.

"I think we're in the early stages of a bull market for gold," said First Eagle Funds co-president Jean-Marie Eveillard in a recent 10 Questions interview . Several other high-profile pundits cite many reasons for a long run for gold: the weak outlook for major currencies, signs of a slow-growth global economy and the fact that we're coming off two decades of sliding gold prices.

Indeed, gold-oriented mutual funds have returned a cumulative 24.88% on average during the past three years -- far and away the best fund category, according to Lipper, a Reuters company.

Whether you are a bull, a bear or ambivalent, the fact is a small gold stake is a smart hedge in this tricky market. Gold funds have a very low correlation with the broader market -- when the S&P 500 rallies, gold falters, and vice versa. Finding assets that don't always move in tandem is a vital component of a diversified portfolio.
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