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Peter Schiff and Mark Dow do battle on gold

Peter Schiff and Mark Dow disagree on the long-term outlook for gold, but that's not the only thing they take opposite sides on.

In a passionate and charged debate on Thursday's episode of "Futures Now," Schiff and Dow presented divergent views on the Fed, government data and inflation. And interestingly, each of these disagreements came together to paint a picture of why they see gold going in different directions.

First of all, while Dow, author of the Behavioral Macro blog, sees gold going higher before it drops much lower, he says that the only way to gauge the action in gold is by looking at sentiment.

"The longer-term view on gold is still bearish," Dow said. "I think ultimately the economy will improve, rates will go higher, we're not going to get the inflation that a few people still fear, and that will mean that the second half of the gold bubble will melt. But it's hard to tell if we're at that point now, or if that point comes a few months out."

For Dow, "gold is the ultimate psychological trade. It's the ultimate sentiment-driven asset. It's not about fundamentals. There are no fundamentals. ... So you really have to go by how the sentiment is manifest in the market, and whether or not it's at an extreme."

Dow believes that sentiment is now neither especially bullish nor exceptionally bearish, making it difficult to predict gold's next move.

But Schiff's take is very different.

"I disagree with just about everything that Mark said with respect to his comments on sentiment," Schiff responded. "I still think the sentiment is quite negative on gold. Maybe not as negative as it was, but very few people believe in this rally ... so I think the sentiment still favors higher gold prices."

"The fundamentals have favored higher gold prices all along," Schiff continued. "It's just that most people don't understand how great [the fundamentals] are. They believe the myth of the U.S. recovery. They believe the Fed can actually unwind its balance sheet, that it can end QE, that it can raise interest rates and that the economy is going to keep on expanding. None of that is going to happen. It's all fantasy. "

But Dow says that Schiff's understanding of the Fed is fundamentally flawed.

"I think what people really haven't been understanding and are slowly coming around to is how the transmission of monetary policy actually works. A lot of people way back in 2009, 2010 started predicting inflation, an explosion of yields, a collapse in the dollar—a whole series of things that didn't manifest themselves. Now people are starting to learn that, wait a minute, printing money does not lead to inflation automatically," Dow said.

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Unsurprisingly, Schiff did not take this attack on his prognostications lying down.

"I disagree! First of all, we have had inflation. Printing money is inflation. Consumer prices are rising. Stock prices are rising. Real estate prices are rising. The Fed wants to deny that prices are going up because they don't want to raise rates because they can't afford it. But I'm not going to hide behind these doctored CPI numbers and try to say there's no inflation because the CPI doesn't reveal it when it's actually there," Schiff retorted.

"Reality disagrees with you," Dow responded. "People aren't flocking to gold, they're not selling Treasurys."

To the extent that inflation is perceived, "it's because human biases overestimate the impact of inflation on a daily basis," Dow said. "We go to the store, we only notice the prices that go up, we don't notice the prices that go down or we don't notice the prices that haven't changed."

Dow also notes that MIT's Billion Prices Project, which tracks a large number of online prices, has registered similar readings to the CPI, which makes his point that the government is not manipulating the data, in fact the Fed stimulus has not led to the massive inflation that Schiff has long predicted.

Nonetheless, Schiff continues to predict a dollar collapse, and says that investors "need to be buying gold, other commodities, and they need to be investing outside the U.S., to get a hedge against inflation."

Still, performance tends to speak louder than words. And the mutual funds that Schiff personally runs or co-runs—the EuroPac International Value Fund, the EuroPac International Bond Fund and the EuroPac Hard Asset Fund—have lost a respective 4.8 percent, 4.5 percent and 14.2 percent over the past 12 months, according to FactSet. This as the S&P has gained 20 percent, and even the CRB Commodity Index is up 2.7 percent.

—By CNBC's Alex Rosenberg. Follow him on Twitter: @CNBCAlex.

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