Prefer the spelling with two y’s, gypsy, to any of its variants: gipsy denies the Egyptian etymological origins of the word, and, as with gypsie or gipsie, emphasizes a writer’s discomfort with a word that, like pygmy, lacks any of our language’s five consistent vowels.
When referring to a member of the South Asian people, use the capitalized Gypsy, but bear in mind that this derogatory term should be replaced with Roma (see roma or romani). When used as an adjective or in a figurative sense to refer to any nomadic or free-spirited person, use the lowercase gypsy, though a less-offensive term will almost certainly be better.