For larger picture of gold jewelry, click on image.

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In my last article, I discussed investing in numismatics and bullion coins.  Now, let's look at miner stocks vs. gold and silver bullion in my ongoing quest to find the best way to stay safe, and still profit during difficult times.

According to an article by Lawrence Williams on Mineweb, after years of selling, for the last 2 years the banks are buying gold bullion again.

LONDON (MINEWEB) -

"According to the latest IMF statistics at least 12 countries are known to have increased their gold reserves in March indicating the continuation of a trend now going back more than two years, and one which has been on its own a substantial supporter of the higher gold prices seen over the period.  Overall Central Banks appear to have purchased no less than 58 tonnes in the month, which could suggest an acceleration in their increases in holdings if buying at this rate continues throughout the year."

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by Diane Alter, Contributing Writer, Money Morning

Gold prices had gold bugs giddy in the fall of 2011. In September, the luminous yellow metal touched an intraday high of $1,920 a troy ounce, putting the precious metal up roughly 35% for the year.

At the time it seemed like investors, traders and even the guy at the corner store were all buying, hoarding, and lusting for gold.  But the stellar gains were short lived, and by the end of the year gold prices had fallen by nearly 20%.   Part of the striking decline in gold was due to the fact that the "smart" money that had once been amongst gold's biggest cheerleaders, sold it.

Some booked profits, some sold it to reflect gains in portfolios, others were forced to sell to meet margin requirements, and others wanted to start the New Year with a clean slate.

Click on picture for huge image of hidden $100 billion gold and precious gems hoard discovered in a vault under an Indian temple.

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You need to find a store of wealth that is secure, keeps up with inflation, and holds its value during deflation.  Gold is the obvious choice, but silver is very good too.  Platinum, and palladium are possibilities if you want diversity.  At the moment, platinum is cheaper than gold which doesn't happen often, but does it hold its value?  The Yahoo chart below suggests there are better choices at the moment.  Palladium does better than platinum but not nearly as well as gold and silver.

Silver was close to all time highs recently and gold has overtaken platinum in price.  Silver, along with platinum and palladium, may have an advantage over gold in so far as our government has confiscated gold once before.  If you are looking for security, you want an asset that won't be taken away.  I know this sounds crazy, but this happened to our parents and grandparents in 1933.  Who knows if it will happen again.  First, lets look at how these metals hold their value.

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What is driving the metals market now?  I have pointed out in a recent article, Has Gold Lost It's Way, that gold and the metals stocks have a close correlation with the overall market at the moment.  Although there is a varying state of decline, GDX (Market Vectors Gold Miners ETF), GLD (SPDR Gold Trust ETF), SIL (Global X Silver Miners ETF), SLV (iShares Silver Trust ETF), DJI (Dow Jones Industrials Average),  IXIC (Nasdaq), GSPC (S & P 500), are all down in the last month with low trading volume.  The summer gloom days and geo-political problems will most likely help this trend continue for a while.Read more »

by Frank Holmes, Contributing Writer, CEO and chief investment officer of U.S. Global Investors Inc.

Last week was a challenging one for gold investors. Gold prices have been on the downside.

Although the yellow metal has been on a spectacular 11-year bull run, recent strength in the economy has some thinking gold's heyday is over.  As I often say, investing, like life, is about managing expectations-even throughout gold's decade-long rise, price action over the short term can go both ways. It helps to look at what happens after short-term drops.Read more »

The market is starting to look sick, including the metals and their stocks.  Let's take a look at some of the problems.

1. Fed says no new easing for now.  We have been living on a printing high for the last 3 years.  Just the thought of no new stimulus has the market falling.  I showed in a previous article, Has Gold Lost It's Way, how stimulus affected the metals and the market.

2. No new money is coming into the market.  You can see from the Trend-Chart.com chart below that the money flow is tapering off and so are the stock prices.  Less money chasing the same amount of goods usually means lower prices.

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Written by Goldfinger

I don't trash any method of making money as long as it is profitable, and it hurts nobody.  Note my bold faced words.  This week I turn on investor Warren Buffett who suggested in the Berkshire Hathaway annual report there is a best way to invest - dividing investing opportunities into 3 parts:

• terror over economic collapse drives individuals to currency-based assets, most particularly U.S. obligations, and
• fear of currency collapse fosters movement to sterile assets such as gold.
• investment in productive assets
  

Of course Mr. Buffett says investment in productive assets is the way to go.

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