This issue is entirely in the contrarian spirit of playing devil’s advocate. So put your pitchforks down. Take a deep breath. There is plenty of space to poke holes in (or rant) about our thesis by writing to info@contrarianprofits.com

So here it goes. The four reasons you shouldn’t buy gold today…

Reason 1: Did you know that the seventh largest holder of gold in the world is not a country, but an exchange traded fund? Yes, gold ETF SPDR Gold Shares (GLD) has amassed the seventh largest gold reserve in the world. This fund holds more gold than China, Switzerland, Japan, the United Kingdom or the European Central Bank.

So why does this matter? Because should big investors (hedge funds, pension funds) who hold this fund (and many due), decide to dump their shares or are forced to liquidate their holdings because of investor redemptions, who will buy up the excess slack? This excess supply would surely drive the price of gold down making for some unhappy gold bugs.

Reason 2: Gold is overbought at today’s price level. When anything becomes overbought quickly, as gold has in recent months, it has a habit of correcting just as quickly. According to Bob Prechter, CEO of Elliot Wave International, the precious metals are “heavily overbought” and the “path of least resistance” will be to the downside for many months. “[Gold's] going to go much further [down] than people think.”

While gold stocks have recently pushed their 200 and 50 day moving averages higher, which is a bullish indicator, the threat that speculators are leading the way is ever present. And if the current recession takes a double dip, which we think is highly possibly (and so does Nouriel Roubini), investors around the world will flee to the dollar again. When the dollar gets propped up, gold falls. And when it starts to fall, you can bet these speculators will be abandoning ship just as fast as they boarded. This could leave you, dear reader, with a sinking boatload of gold in the middle of the vast and hopeless ocean.

Reason 3: More inflation hedges are available today. In the past, gold served as the best inflation hedge out there. In the 1970s when inflation started taking off, so did gold. People piled into the precious metal at rates never before seen, driving the price up to historic highs.

Fast forward to today, and you have a much different investing environment. Gold’s monopoly as the only inflation hedge is over. Now, investors have a wealth of options such as currency ETFs, TIPS, short US Treasury ETFs, other baskets of commodities, and stock in companies that can raise prices on pace with inflation. While none of these vehicles is the perfect inflation hedge, each attracts money away from gold. And the less demand for gold, the less upward price pressure there will be.

Reason 4: The run up in gold is based on fear, not on increased demand. Right now, owning gold is a “fear trade.” The price of gold is not up because people are buying more jewelry or Indian saris. It’s up because people are scared of hyperinflation taking over, the mountain of debt crushing the US, and the fiat money system collapsing. But what if Chairman Ben, and all his merry henchmen, are actually doing the right thing? While it is hard to say this with a straight face, what if everything returns to normal and we experience a nice V-shaped recovery? Or, more plausibly, what if deflation wins the day? Both these scenarios will have serious downward consequences on the price of gold.

So, dear readers, what do you think? Are any of these scenarios possible? Write to us at info@contrarianprofits.com

That prospect has kept the gold bugs banging the drum to buy the metal, with the television and radio cluttered with ads that tout the benefit of doing so.

Last week, Lou Basenese noted the numerous reasons why the price of gold should be moving higher – but countered with the reasons why the price has continued to languish around $935.

Today, I’m going to look at another important factor that drives gold prices…

The Dollar-Gold-Inflation Relationship

While the recent rash of government spending hasn’t propelled gold prices to new highs, it has contributed to a decline in U.S. dollar.

Having reached a hit 89.70 less than two months after President Obama took office, the Dollar Index has since pulled back to around the 80.00 level. It could easily be lower, but because it’s measured against a basket of other currencies, the price is relative.

For example, the euro makes up about 60% of the Dollar Index weighting, since there are 16 nations using Europe’s single currency. And because Europe is also battling fiscal problems, in addition to Japan and Britain (whose currencies are also weighed against the dollar), the greenback has held its ground.

Most of the time, a weaker dollar will cause gold prices to rise, while a stronger dollar usually sees gold decline.

Add in the prospect of inflation (or hyper-inflation) at some point and the scene is set for gold to potentially make new, all-time highs.

Except we’re not even close to that point yet. Inflation is nowhere to be found – as evidenced by the Consumer Price Index falling by 1.3% in the 12 months through May. That was the largest drop in 50 years.

So how do we play gold in the short-term?

Don’t Blindly Follow The Crowd Into Gold

The main reason why the gold market concerns me at the moment is that despite almost everyone being bullish, the metal hasn’t been able to set new highs.

The long side is crowded with bulls, just like the technology sector was back in 1999. And we all know how that turned out.

That said, the gold market is much different than the tech sector. I believe every investor should have some gold or another precious metal in his or her portfolio… but there’s a better way to do it than by simply buying it outright at the moment.

The easiest way to do so is by following this ratio…

Use The Gold/Silver Ratio To Make Your Gold And Silver Purchases

In the selloff that began in March 2008, gold prices fell about 34% from high to low. By contrast, silver prices fell 60%.

This relationship is important because by the time the market set lows in October 2008, the gold/silver ratio(how many ounces of silver it takes to buy an ounce of gold) was trading at 81:1 – an extremely high level.

A ratio of 80:1 is considered high, while and 40:1 is considered low.

From the October lows to the recent highs, the gold/silver ratio has corrected itself, with silver more than doubling (and making new recovery highs in June), while gold has risen just 49%. However, the ratio remains around 69:1.

Here’s how to use the gold/silver ratio to make savvy metals purchases…

How The Gold/Silver Ratio Works

Investors who always keep a percentage of their assets in precious metals should keep a close eye on the gold/silver ratio.

Having a “ratio” position is a strategy that you want to adhere to all the time because it’s such a dependable trade and carries less risk than just being long, or short on the metals.

It works by basically timing your gold and silver purchases according to the ratio. For example, when the ratio is relatively high (as it is now, at 69:1), we swap gold for silver. When the ratio is relatively low, we buy back into gold.

So right now, the 69:1 ratio is too high to buy gold. I’m looking to make my next swap from silver back into gold when the ratio drops to around 40:1.

Personally, each time I cycle through a complete swap – gold to silver and back to gold again – I increase the value of the trade and hold more ounces of gold or silver than I started with.

Go The ETF Route With The Gold/Silver Ratio

If you don’t always have a percentage of your portfolio in precious metals, you can simply play the “ratio” using the SPDR Gold Shares (NYSE: GLD) and the iShares Silver Trust (NYSE: SLV).

When the ratio is high, you can short GLD while buying SLV, using the same dollar amount for both positions. When the ratio approaches 40:1, just reverse the positions.

Source: Use This Reliable Ratio To Time Your Gold And Silver Purchases

We’re scanning markets of the world today and scratching our heads… haven’t we heard this before?
There was a scare at the start of the year – banks were in trouble, the housing market was crashing and unemployment was rising. The S&P fell at a rate unseen in a long, long time. But then,a sucker’s rally! The worst was likely over, they said… stocks were oversold. The U.S. consumer, China and oil companies promised to lead us out of this mess. And of course, the current administration’s new multibillion stimulus plan will kick in any second.

After bottoming in early March, stocks soared well off their lows. With the S&P 500 at break-even for the year, stocks now face an inflection point.

Wait a second… what year is it?

We need not remind you of what happened in the second half of 2008. But it’s not worth worrying about… it’ll be different this time!
Stocks took quite a tumble Thursday. The worse-than-expected jobs report gave traders more than enough reason to be short into the three-day weekend. The S&P 500 fell nearly 3%. Since reaching its 2009 high in early June, the S&P is down 5%.
Major indexes are in trouble again today. The Dow and S&P opened down 0.75%, mostly thanks to sour moods left over from Thursday.
And just as in 2008, the smart money says there is more pain ahead:

“You may have green shoots, whatever you want to call them,” said market sage and author of The Black Swan Nassim Taleb. “You may have temporary relief, but you are still in a world that’s breaking. We’re in the middle of a crash. So if I’m going to forecast something, it is that it’s going to get worse, not better.”

And the root of all our woes, Mr. Taleb? “The monkey on our back is debt.”

Amen. This should be deja vu to our most dedicated readers…Nassim shared a similar sentiment at the 2007 Agora Financial Investment Symposium. We expect equally prophetic forecasts from our speakers this year. If you haven’t signed up to join us, better get on it right now… the show starts in two weeks.
Just like in 2008, the logical move is to sell dollars and buy useful assets, like gold. But just like last year, the current trade du jour is buy greenbacks, sell everything else. After Thursday’s, stock sell-off, the dollar index broke out of its recent range. It had been hovering just around 80 and now goes for 80.7.
“The dollar system or the system based on the dollar and euro have shown that they are flawed,” Russian President Medvedev told the international press today, yet another call from a BRIC nation to ditch the dollar. He’ll meet with President Obama this week. We wonder if he’ll have the stones to bring this up:

“In the long term, we must also think about a single unit of payment such as the International Monetary Fund’s Special Drawing Rights. We cannot be hostages to the economic situation of a single country, as is happening today with the United States.”
“Of the major world currencies, I have to say that Australia’s dollar is my favorite,” writes our currency man Bill Jenkins. “It has an edge because of its commodity-related economies and currencies.

“Now, Canada has the same edge. In fact, you may hear the Canadian and Australian dollars called the CommDolls (commodity dollars) for short. But Canada is inextricably tied to its neighbor to the south (namely, us), and that’s more than just a little problematic.

“Australia, on the other hand, is not tied to the United States. Instead, it’s better placed to trade with another resource-hungry nation — China.

“As China attempts to lift itself up by its own bootstraps, Australia comes into the picture. It has been widely understood that Australia is a little China. Not in culture, custom or language, but in economics. A significant part of Australia’s commodities flow into China, and the more the Chinese move ahead, the better it is for Australia.

“Also, let’s consider that Australia’s central bank is still holding its interest rates at 3%. In a fairly stable country, with a fairly stable currency, that is one heck of an attractive rate. Why, it is downright appealing!

“Indeed, Australia may now become the benefiting member of the next carry trade. After all, if can you borrow money at 0.25% and invest it at 3%, you stand to make a decent haul. And as risk appetite re-enters the market, you can bet your bottom dollar that Australia will likely be a real beneficiary.”

That’s just a snippet from Bill’s latest special report, which his Master FX Options Traders received over the weekend. Only subscribers have access to this report, which includes his provocative new short euro trade. If you want in on the action, click here.
From a technical standpoint, gold looks set for some short-term pain. Just like stocks, the gold chart is taking a page from 2008. Check it out:

When it hit the fan last year, gold failed to deliver the righteous moonshot many had forecast. It certainly was a better place to be than stocks, but gold still suffered. Until further notice, the same playbook appears to be in use today… gold may be the once and future money, but the dollar and U.S. Treasuries remain the ultimate flight to quality when the going gets tough.

After sticking to a tight range the last few weeks, gold fell today along with stocks. The spot price shed $10, to $925 an ounce.
“I see everything coming up roses for gold and those who mine it,” says Chris Mayer, armed with proof he’s not the only value hound with his eye on gold.

“For the first time in a couple of decades, some of America’s most successful, big-name investors are buying gold. David Einhorn, the hedge fund manager who predicted the downfall of Lehman Bros., recently bought gold for the first time.

“And then there is John Paulson, the guy who made billions of dollars by correctly anticipating the housing bust and credit crisis. Paulson just plunked down $1.3 billion for an 11% stake in AngloGold. He’s also got a big position in Kinross Gold.

“Peter Munk, the 81-year-old chairman and founder of Barrick Gold, also offers up his own anecdote about gold’s broadening appeal. ‘I have had more phone calls in the past six months than ever before — from people who have $120,000 inherited from grandmother, and from hedge fund managers with millions,’ he says. ‘I am not saying George Soros, but people of that caliber have told me they are buying gold.’

“You no longer have to be a gold bug to think gold will rise in price. In fact, this buying by some of the world’s greatest investors may be the leading indicator for a quick 116% climb — to $2,000 per ounce or higher. Give gold the cold stare of a professional handicapper and the odds look very good, indeed.”

Chris just gave his Capital & Crisis readers another gold stock for the long haul. He tells us it’s “a miner in a in politically safer area with a growing production profile, falling costs, a good balance sheet and a stock that is cheap on the face of it.” Sounds hard to beat, eh? For access to this pick and the rest of the C&C portfolio, click here.
Oil’s down today, too. The front-month contract is off $2, to $66 a barrel.
The American service industry contracted again in June, the ISM reports today. Their monthly gauge of the service sector scored 47 last month, 3 points below a “growth” reading of 50. At least that’s an improvement from May’s score of 44. In fact, June was the third straight monthly increase… we’ll keep on an eye on this one.
The FDIC closed down seven banks late Thursday, a single-day record for the credit crisis. That brings the total to 52 for the year. Considering the five bank failures the week before, it’s clear the pace of bank busts is accelerating.
Last in today’s deja vu issue, a role reversal that doesn’t remind us of the last 18 months whatsoever. Get this: A struggling bank bailed out a municipality over the weekend.

In an unfortunate sign of the times, many communities across the country canceled fireworks shows for the Fourth. You know the drill… budgets are tight, revenues are down, savings are nil.

New Providence, N.J., was one of those towns, until its local bank stepped in. Investors Savings Bank blew the dust of its wallet and wrote New Providence a $12,000 check to finance the fireworks display. That’s a tiny sum, even for a community bank, and probably equal parts philanthropy and marketing. But good grief… it’s the first such role reversal we’ve heard in a long time.
“How can we expect a heavily debited consumer-based economy to ‘recover’?” asks a reader, with a barrage of rhetorical questions. “When borrowing and spending drives the economy and unemployment soars and credit shrinks, how can we expect an increase in spending? When our goal is to recover and we have issues like this to deal with, can we really get there from here? I don’t see how it’s possible. In my opinion, we have been in a depression for over a year and our path from here is down, not up. What am I missing? How can our consumer economy recover? What will a recovery from here look like?

“By the way, paying a million dollars to have lunch with Buffett, who just lost $30 billion, is beyond stupid. Buffett can make it in good times, but in bad times, do just the opposite of what he does and you will get some of his money!”

The Ghosts of 2008, Gold Stocks, A Currency Play, Bank Role Reversal and More!

And as Adam Lass points out in Taipan Daily, “for most of this year, $50/barrel has been one of those psychological ‘lines in the sand,’ much like Dow 8,000 for a while there.”

There can only be two reasons for this, according to Adam:

First of all, there is the obvious: if the global economy recovers even in the slightest, the ensuing increases in manufacturing, shipping and travel will require energy, and despite the best of green intentions, for now energy still means oil.

Second, despite all the rumblings about finding a new world currency, oil is still priced globally in dollars. And while it may be taking Washington an agonizingly long time to actually disburse all the dollars it has promised, it is finally getting around to it.

Eventually, an increase in GDP might soak up enough of those dollars to make a difference. Just as eventually my wife’s dog will grow thumbs and learn to open his own food. Could happen: he’s a pretty smart little guy and all. Still, I am not holding my breath – on either front.

Gold is also likely to benefit from inflation. What many investors – even gold bugs – don’t realize is that small gold ‘explorers’ always produce the biggest gains in gold bull markets.

But what’s really interesting is that they typically explode in price after the price of gold has already jumped. In the late 1970s, for example, the price of gold skyrocketed from around $200 in 1979 to over $800 in January 1980. But it wasn’t until after the price of gold peaked that the best exploration companies saw their biggest gains.

What kind of profits are we talking about? Carolin Mines up 1,739%; Lincoln Resources up 2,464%; Copper Lake Expl. up 13,025%; David Minerals up 1,726%; Eagle River Mines up 3,479%; Silverado Mines up 3,987%; Wharf Resources up 2,779 %

A simple $500 invested in just 11 of these companies would have given you $172,585. $1,000 invested in each would have given you about $350,000.

Mining guru and friend Doug Casey has written a special report about today’s gold exploration companies, Toronto’s Secret Gold Investment. You can get the details here.

And I believe a small allocation (5% to 7%) has a useful place in a well-diversified portfolio. Over the long haul, studies confirm it helps increase returns while minimizing risk. A benefit we can all agree is desirable.

But over the short-to-intermediate term – the next six to nine months – I think gold is a terrible investment. After breaching the $1,000 per ounce mark again, as I suggested would happen to my subscribers on February 2, it is overdue for a retracement back to roughly $700 per ounce.

Those of you who expected it to drop the day after I suggested shorting gold need to understand that “short term” doesn’t mean “this week.” Just because it moved higher doesn’t negate the point of the recommendation.

Long story short, I view shorting gold as a way for me to hedge my long-term holdings. For traders, it’s a profit opportunity to consider. And whether we see eye to on this is irrelevant. Ultimately, the market will be the great arbiter of our differences.

For kicks though, let’s address a few of those minor points of disagreement…

Shorting Gold is Not Really Contrarian

A small army of you suggested I was being an “arbitrary” contrarian when I suggested that it was time to start shorting gold. That no evidence, just a warm and fuzzy feeling, existed to back up my call.

Are you kidding?

Sure your “Cousin Vinnie” as chronic poster Todd opined, the trash collector or the newspaper boy might not be investing in gold. But the rest of the lemmings certainly are…

• Investments in coins and bars increased 811% in the fourth quarter, according to the World Gold Council.

• Headlines abound in the mainstream press like this one from The Financial Times – “Gold primed to be ‘mania asset.’”

• Wannabe gold bugs are paying – willfully I might add – 20% premiums for coins and small bars. Forget buying gold, we should all become coin dealers!

• Investors – like teenage girls at New Kids on the Block concerts in the late 1980s – can’t reach out and touch the SPDR Gold ETF (GLD) enough. It’s now the second-largest ETF in the United States with a market cap of roughly $33 billion. With more than 1,000 metric tonnes of gold, speculators now control more gold than many industrialized nations. If that doesn’t scream “out of whack” I don’t know what does. Many of you respond by saying the investors here are institutions, so the inflows are not indicative of a top. You’re wrong. Individuals, according to Morningstar, accounted for an estimated 60% to 70% of the investments in the last four years.

• The world’s largest gold refinery is pumping gold coin blanks at a rate not seen in 23 years, according to Bloomberg.

• Reuters reports investment consultants are now advising pension funds and high-net worth clients to invest 5% to 7% percent allocation toward gold and gold stocks. After being an investment consultant to such clients, I can confirm such allocations are new. And will be followed, if they haven’t been already.

• If you’re a newsletter junkie, like myself, no doubt you also noticed the sudden explosion in “gold experts” that have some overlooked, stealth play on gold you need to consider. It’s poised for 500% gains (or more), they say! All you have to do is read a 16-page teaser and sign-up for some newsletter. Marketers tap into what’s hot, typically as a trend is cresting. Don’t expect this time to be any different.

• From today’s Wall Street Journal, futures investors are taking delivery of gold at more than double recent levels (4.5% versus 2%). Paranoia anyone?

If the above isn’t sufficient evidence to be a contrarian, I don’t know what qualifies then.

Why should I listen to you, Lou?

Others of you simply wanted to know, why you should listen to me – a Wall Street flunky, “idiot” or a “young analyst who thinks he’s got the magic touch and will never be wrong.”

Forget that the last reader – and yes it’s the chronic poster and my new “buddy” Todd – is completely clueless and didn’t catch my transparent about-face on the dollar here. Or my confession that I flubbed the rebound in financials.

I’m human. I will be wrong. I’m man enough to admit it. But I don’t think shorting gold will be one of those times.

And if I don’t have enough credentials to make such a claim, in your opinion, fine by me. Listen to someone more “qualified.” Plenty of them exist that are also starting to question the merits of investing in gold, or at least acknowledge the mania…

…Newsletter god, Dennis Gartman says, “It’s a little worrisome that so many people are piling in [to gold].” He expects a pullback, too. Just not as far as me.

…Peter Munk, founder of Barrick Gold, says he’s never seen such strong interest in physical gold ownership.

…”This will all end badly, just like all other bubbles,” predicts Leonard Kaplan, President of Prospector Asset Management, a commodities futures brokerage in Evanston, Ill.

…”Historically, when stocks begin to underperform gold, that’s a sign that gold is running out of steam,” according to Ray Hanson, a technical analyst at RBC.

My Biggest Concern

What really scares me is that some people take gold investing to an extreme. They actually believe in a government-orchestrated conspiracy to suppress prices, as some of you revealed in your comments.

It’s pointless to engage in lengthy debates with conspiracy theorists. Logic means little. But let’s suspend disbelief for a millisecond and say you’re right, that the price of gold is being fixed.

Why in the world would you throw hard-earned money after the slim prospects of actually exposing and overturning the fix? Talk about a low probability of success.

But I digress. What’s most troubling is many investors, including some in my industry, say gold is a forever position and they are committed to “a lifetime pattern of purchasing” and will never sell. Some of you even revealed 50% of your portfolio is invested in gold.

Here’s the thing. I know that Christopher Columbus says, “Whoever possesses it [gold] is lord of all he wants. By means of gold one can even get souls into Paradise.” But if financial Armageddon unfolds, which many gold bulls predict and in some sickly way wish for, gold will be priceless and worthless at the same time.

How so?

If world governments collapse, social order goes to heck, (NYSE:MCD) McDonald’s won’t magically be set-up to “make change” for your gold bars. ATMs won’t spit out Krugerrands.

What’s more, even if the price of gold tops, say $5,000 per ounce under such circumstances, what can you do about it? Cashing in on the gains means accepting the thing gold bugs completely despise, paper currency, in return. So indeed, it will be priceless, useless and worthless all at the same time.

Bottom line, the world isn’t set up to handle gold as a currency. Not now. Not ever. It’s merely an asset. And like all other assets, it’s susceptible to bubbles.

If you’re in the speculative mood, I recommend shorting gold in the coming months. Especially since, as the saying goes, “gold goes up on an escalator and comes down in an elevator.”

At the very least, examine your reasons for owning gold. If you believe the end of capitalism is nigh and financial ruin is imminent, just remember you need gold to be liquid, acceptable and portable for your investment to be really worth anything.

All three are big question marks, convincing me John Maynard Keynes was more right than most want to admit. Outside of a small allocation for diversification purposes, gold is indeed a barbarous relic.

I’m off to the message board to prepare for the onslaught of “fan mail”…

Source: Shorting Gold: 8 More Signs Gold is Overdue for a Correction

Gold hit two historic milestones in 2008. First, it hit its all-time high of $1,030 an ounce in early March.

Just three months later, the price of gold for December delivery fell to $681 an ounce, a 21-month low and 33.9% drop from its record high.

Most gold bugs were equal parts heartbroken and puzzled. Global stock markets tanked alongside the world’s biggest economies. But so did gold, which is widely considered to be a safe haven investment when everything else in spiraling south.

However, Money Morning Contributing Editor Martin Hutchinson- an investment banker with more than 25 years’ experience on Wall Street and Fleet Street and leading expert on the international financial markets- understood perfectly.

“Gold is not a safe haven against recession,” said Hutchinson. “It’s a safe haven against inflation.”

In the past year, commodities prices across the board skyrocketed- especially oil, which hit a record high $147 a barrel. Corn, wheat, and soybeans all hit record highs, as well.

That tightened household and corporate budgets, and was a primary reason why the U.S. economy walked backwards over the third-quarter finish line with -0.3% annualized growth. It was the first quarter of what most economists believe will be the nation’s first recession since 2001.

However, the inflation epidemic that preceded it- and arguably contributed to it- has waned significantly, as global demand for raw materials has slumped.

Prices for staple foods such as corn, soybeans and wheat have all come down from their record highs in near tandem.

Corn futures are down nearly 50% from their summer high of $8 per bushel. The same is true of soybeans and wheat, as each have lost roughly half their value. In fact, wheat hit a 16-month low in mid-October.

As most of us noticed, gas prices have fallen 48% from their July 17 high of $4.114 a gallon.

And not coincidentally, gold has fallen 22% in that same time frame.

However, this report examines the pending “re-re-correction” of commodities- the slow and steady rise of commodities after the roller coaster of record-high inflationary highs and a sudden breakneck fall below real value- to find the charted path of gold prices in 2009.

But it also reveals another wild card inflationary indicator that Hutchinson believes carry gold prices to $1,500 an ounce by the end of 2009…

Two Catalysts For Gold’s Climb

The U.S. Department of Agriculture’s Oct. 10 Crop Production Report said acreage for a handful of staple food commodities has shrunk:

• Corn acreage fell 1.2%.
• Soybean acreage dropped 1.4%.
• Canola acreage dropped 1.9%.
• Sunflower acreage shrank 0.8%.
• And acreage of dry edible beans fell 0.7%.

That naturally translates to higher prices because a squeezed supply increases demand, especially from the growing economies and populations in China, India and Latin America.

But Hutchinson believes another caveat in the cracks of our economy’s recovery will spell a sharp rebound in gold prices… one that could catapult it to $1,500 by the end of 2009.

“The government is pumping money in so many banks, and that money has to come out somewhere,” Hutchinson said.

The U.S. government’s historic bailout pumped $700 billion into its failing banking system… all to give banks back the capital they squandered in doling out defaulting loans.

Since September 2007, Ben Bernanke and the Federal Reserve have cut interest rates nine times- from 5.25% down to the current 1.0% rate- to increase bank-to-bank lending and bank-to-consumer lending.

“The government is pumping money in so many banks, and that money has to come out somewhere,” Hutchinson said.

And by the time is does, food prices should begin ticking upward, adding another set of thrusters to gold prices.

“Everybody thinks that because we’re having a horrible recession, we’re not to go have inflation. I think that’s probably wrong,” Hutchinson said. “I think gold has quite good hidden-store value.”

Should gold reach Hutchinson’s top-range price of $1,500 an ounce, it won’t be its real value. Just like how its deflated price now doesn’t reflect real value either.

Rather, $1,500 an ounce would be the marked-up price caused by another inflation-fueled investor flood into the yellow metal.

“As gold goes up, it gets more popular and investors start piling into it,” Hutchinson said.

And if gold gets anywhere near the $1,500 mark, sell. Prices that high will likely fall back or plateau as the Federal Reserve begins raising interest rates and strengthening the U.S. dollar, Hutchinson said.

Five Ways to Play Bottom-Basement Gold

Before we get too far ahead of ourselves, let’s first look at five ways to play bottom-basement gold.

SPDR Gold Trust ETF (GLD)- formerly StreetTracks Gold- is a fund whose shares are intended to parallel the movement of gold prices. Since gold prices started falling along with gas prices, SPDR Gold Trust has stayed within a 0.5% margin of gold prices. This ETF eliminates any investor concern over storage and delivery while giving them exactly what they want- gold.

Toronto-based Barrick Gold Corp. (ABX) has 27 mines, mostly in North America and South America, and is developing or exploring 11 more. With a market cap of more than $20 billion, it has considerably more liquidity than most mining companies. Barrick is primarily a gold miner, but it also has copper and zinc mining operations. As far as investors are concerned, there are two ways to look at that: It’s not a pure play, per se, but then again, this is a company stock not a brick of bullion. Also, having operations other than gold can help stabilize the company’s bottom line in case problems arise at a gold mine.

Denver-based Newmont Mining Corp. (NEM) is primarily a gold producer with operations in the U.S., Australia, Peru, Indonesia, Canada, New Zealand and Mexico. Its reserves are hovering around 86.5 million ounces. Like Barrick, this is a mining stock play, and it subject to market swings on top of fluctuations of gold prices. That can be a significant tailwind, especially if you believe the stock market has bottomed out or is close to doing so. Hutchinson- forever a value-minded investor- warned that Newmont might be a little too pricey now. Investors may want to wait for the company’s stock price to settle before getting in.

Hutchinson thinks the best value for a gold mining stock can be found in Yamana Gold Inc. (AUY), another Toronto-based company that’s small now, but has rapidly expanding production. 

But for investors who just want gold- not an ETF or stock- the best avenue is an EverBank Select Metals Account: EverBank accounts has a minimum deposit that is 98% lower than its competitors, and its commission costs are up to 86% lower than other metals’ brokers and bullion banks. It offers two types of gold accounts: Unallocated (Your purchased gold is pooled with that of other investors, eliminating storage and maintenance costs. $5,000 minimum deposit.) and Allocated (You directly own the gold you purchase, held in your own private account. $7,500 minimum deposit.) Both types of accounts can be set up 24/7 online. But if you prefer the phone, call 866-326-6241, and be sure to give them the code 12608 when setting up an account.

We should point out that the publisher of Money Morning has a marketing relationship with EverBank, but that’s because its products are best in show.

Source: Outlook 2009: Five Ways to Play Gold’s Steady Advance

The equities market are taking Geithner’s proposal as kindly as flatulence at a funeral. It may be bad news for some investors, but gold bugs love it.

Gold bugs are finally getting the fuel they need to get the price of their precious metal out of the rut it has fallen into.

With the Treasury’s latest banking-industry bailout going over like flatulence at a funeral, more and more investors are turning to the safety of gold. It has been the one asset class Washington has not been able to grossly manipulate… so far.

As I write, the price of an ounce of gold is trading for $914 an ounce, $21 higher than yesterday’s final price. As the market’s tank and volatility increases (just look at the VIX) for what seems like the nine hundredth time this year, investors are looking towards gold with a glistening eye.

Now that Obama is proving he and his team are not the overnight saviors so many voters thought they would be, gold demand is likely to continue its climb. In fact, most analysts expect gold demand to surge beyond 2007 levels this year.

If the precious metal climbed from $600 to nearly $1,000 in 2007, imagine what it could do this year.

We are just over a month into the New Year and already we have plenty of indications of what is to come. The U.S. Mint revealed this week that it sold over 92,000 ounces of its American Eagle coin in January. That adds up to more than four times what it sold during the same time last year.

Even more intriguing for gold bugsis the news trickling out of the gold ETF industry. It just announced that gold inflows increased to 1,317 tons last month, a record surge of 105 tons. That is a lot of gold. It proves investors are searching for safety and appreciation potential.

A golden opportunity

As always, you have several options if you want to take advantage of the bullish sentiment. You can take physical possession of a slab of gold in the form of bullion or gold coins.

But if you live in a rough neighborhood or don’t trust your mother-in-law, you may want to purchase shares of a gold-backed ETF like SPDR Gold Shares (NYSE:GLD). They are less prone to thievery.

Today’s action on the equities market is a good example of the portfolio-protecting abilities of gold. As I write, the S&P 500 is down by 3.68%, but the above-mentioned ETF is up by over 1.5%.

Some gold experts are calling for gold prices to hit $2,500 or even $3,000 by the end of this financial meltdown, but I am much more conservative. The figure is likely to top out at $1,500. That is a 60% gain from today’s prices. Not bad when the rest of the market’s are too afraid to move.

Gold may not be the sexiest or most thrilling investment out there. But we don’t invest to entertain ourselves. When the markets go haywire, you need to take action to protect what you have earned.

Now may be the last time to do it while prices are so cheap.

Source: Gold is getting sexier by the minute

Captain’s Log: Year of our Lord 2009, 6th day…

We have landed on a strange and wonderful watery planet – the third planet in orbit around the sun, a minor star in the Milky Way galaxy. Well, they say it is watery planet. Where we are, it is icy. But the locals say it warms up and the ice melts. We’re suspicious; maybe it’s just hype to attract tourists.

But what is strange about this planet is that its inhabitants all seem to play a game of make-believe, in which they all agree to believe things that every one of them knows is untrue. What is wonderful about it is that it seems so easy to make money here; there’s a fool on every corner just waiting for the chance to get rid of his wealth.

Recently, humans – the race that inhabits this place – believed that their lodges and living quarters would become more and more valuable – even though it was obvious that their houses deteriorated every day, as a consequence of solar radiation, wind erosion, liquor spilt on the carpets and other natural phenomenon. Then, on the back of this remarkable delusion, they built an entire world economy…including extravagantly complex financial instruments which the wisest among them called “weapons of mass financial destruction.”

Someone seems to have cut the power to that illusion a few months ago, so now they are taking up a new one: that if people are given more pieces of green paper they will all be richer.

Yesterday, the Dow – which measures stock prices in the United States – fell 81 points. But analysts say the technical indicators are still almost all positive; they think the US is beginning a major rally…or perhaps a new bull market.

The auto industry, meanwhile, reported terrible news. Sales fell 36% in December; GM (NYSE:GM) sold fewer vehicles than in any December in 49 years.

Oil rose $2 yesterday; amid all the gloom and doom, the oil price is moving up to nearly $50. Bond yields are rising too, along with the dollar. And gold fell $4 yesterday – for no particular reason.

Today’s press – the means by which delusions are shared and propagated – tells us that the government of this world’s richest nation, called the United States of America, is planning a “stimulus package” of something on the order of $1 trillion. What’s the package expected to stimulate? The idea is to get more of these pieces of paper into citizens’ hands, so that they will be encouraged to act as though they were wealthier. It doesn’t seem to bother anyone that the source of the misery of which so many now complain was the fact that, in the past, so many acted so much wealthier than they really were. Nor does it seem to disturb the collective fantasy that this stimulus plan is being created, more or less, by the same class of people who neither saw anything wrong with the last fantasy nor mentioned to anyone that it was going to collapse.

“Hopes pinned on rate cuts and fiscal packages,” says the headline in the Financial Times, a leading source of financial hallucination. It explains how the aforementioned U.S. government intends to cut taxes in order to put those aforementioned pieces of green paper into consumers’ hands.

Further in the paper, another headline – “Reports of $300 billion Obama tax cuts lift mood” – tells us that the public is getting in the spirit of the new fantasy even before it is officially launched.

“Optimism about central bank and government efforts to revive the global economy helped improve investor risk appetite yesterday,” continues the article.

“Fed Officials Endorse Big Stimulus to Battle US Recession,” adds another source – Bloomberg.

What a marvelous place! Every day is magic on this planet. Every day is a new day…with no memory of what happened the day before…nor any thought to what will happen tomorrow. People are ready to believe whatever makes their day more enjoyable…no matter how absurd.

Anyone who bothered to think about this ‘bailout’ plan for two seconds could see that it is a hoax and a scam. Those pieces of paper are not really wealth…they merely represent wealth. But since the U.S. government has no wealth in reserve – indeed, it is famously borrowing to make ends meet already – it can only pass out wealth to one person by taking it from someone else. It talks of ‘tax cuts,’ but we have heard nothing of spending cuts. So, what the global consequence must be is an increase in pieces of green paper – or let us say, demand for wealth – with no actual increase in wealth itself. It is just a shared illusion, in other words.

But we have to say too, after visiting this planet for a few weeks, we have fallen in love with it. We feel so superior. Almost everyone we talk to is a dope.

Besides, where else in the universe is it so easy to make money? As you know, dear reader, the easiest way to make above-market profits is to help the fools part company with their money. What other planet has so many fools?

We paraphrase one of the smartest of the humans, George Soros, who puts it this way: ‘The way to make profits is to find the premise that is wrong and bet against it.’ As far as we can tell, almost every major premise is wrong…or at least the over-arching premise of this new post-bubble era is as loony as the one that preceded it. Just as you can’t really get rich by borrowing and speculating… you can’t recover from a bust-up by borrowing and speculating more.

But heck, we don’t make the rules down here on Planet Earth…we just try to have some fun with them.

*** As we were saying, making money seems so easy here…especially now. There are companies that are in the business of pulling valuable minerals out of the ground that you can buy for less than the resources they own – even at today’s depressed prices. There are companies that drill and pump oil – still the major source of energy on Earth – you can buy now for only a couple times their annual profits. In Germany and Japan – two of the most productive and competitive nations on the planet – companies sell for what would normally be bargain prices… significantly less than book value. And emerging markets can now be bought at giveaway prices; considering that these economies still expect rapid rates of growth over the next 10-20 years, these could turn out to be fortune-builders for the next generation.

One of the easiest, surest ways to make money now is to buy high yield corporate bonds and sell low-yield U.S. Treasury bonds. When their last fantasy crashed, earthlings rushed to the apparent safety of U.S. government debt, forsaking the debt of their private enterprises. This pushed yields on the government debt to such low levels as had never been seen before…while yields on bonds rated C or worse rose over 30%. Of course, we have no particular opinion on what these yields should be, but it seems very likely that the “spread” between the two debt classes – now at a 100-year high – will narrow.

“If you’re looking at junk bonds,” adds Jim Paulsen of Wells Cap Management, “you have never had this kind of value before.”

But while we are talking about the bonds, an even surer bet to us is that U.S. government debt will decline in value. There is no theory that we know of that allows Treasury bonds to go up while the supply of them increases at such a rapid rate. Next year, the feds will borrow between $1.5 and $2 trillion – as much as 4 times the largest previous deficit in history. That means there will be a lot more U.S. Treasury bonds offered for sale. This increased supply is bound to put downward pressure on bond prices.

And we’re suspicious of those little green pieces of paper too. When you turn in a government bond, they give you green pieces of paper. But those are the same pieces of paper that they’re handing out all over town. According to the only theory we know, as supply increases – ceteris paribus – prices decrease. In this case, as they increase the number of those pieces of paper each one represents less and less wealth. The more pieces of green paper, the less each one is worth, in other words. And as we understand the earthling’s current delusion, they will intentionally increase the number of pieces of green paper until they go down in value. Yes, that is the purpose too, not only to put more ‘money’ in consumers’ hands…but to put out so many pieces of green paper that they go down in value. Why? They want to make sure consumers won’t be tempted to save them. Weird, huh? But it’s just another peculiar feature of the present dementia universalis on Planet Earth; humans believe they will all be richer if people spend their money, rather than hold onto it. Of course, every one of them knows it isn’t true; but they believe it anyway: that the more they consume their wealth the more wealth they will have. Like we said: super weird.

But it leads us to an investment that – under the circumstances – seems like a no-brainer. The only thing that bothers us is that so many earthlings seem to favor it too. Since humans are so prone to error, it makes us question our own judgment.

“US Treasuries are my least favorite asset,” says Mohamed El-Erian with Pimco. “My least favorite asset is US Treasury bills…and I don’t like the dollar either,” say Tim Bond of Barclay’s Capital. “Outside of a Treasury bond,” adds the aforementioned Jim Paulsen, “it is a remarkably good time to buy risk assets.”

Yet despite the agreement of these humans, we still think most of the species have seized onto a premise that is wrong – that dollar-based U.S. Treasury debt equals financial safety.

How do you bet against that premise? Probably the easiest way is to buy a more traditional form of money – which humans place at number 79 on their periodic table, gold. Believe it or not, over a long, long time gold has been extremely reliable. An ounce of it buys about as much bread in A.D. 2009 as it did in A.D. 9. As this present delusion blows up, humans will probably turn back to gold to protect their wealth.

As we said, the U.S. government is determined – ‘hell-bent,’ some would say – to keep consumers spending those little green pieces of paper. They have a plan to bring this about – at a cost of a trillion or so more of them. If this plan does what they hope it will do, prices will begin to rise. In fact, almost all asset classes will rise in price – especially gold. Shrewd investors will seek protection from inflation by buying gold – causing the price of the yellow metal to rise.

If the plan fails to work, on the other hand, the feds will continue emitting pieces of green paper, which will eventually call into question the value of the paper itself. Either way, probably the surest bet on the blue planet is that the price of gold will go up.

How high? Who can say? But we will be very surprised if it doesn’t at least equal – on an inflation-adjusted basis – its highest price ever, set in January of 1980. Then, it sold for $875. Adjust that price to today’s consumer price level and you get a price over $2,400.

Daily Reckoning readers who wish to take advantage of this terrestrial phenomenon should buy gold. If you wish to increase your risk and profits, you could buy the double ETF, giving you twice the gain from each dollar gold goes up. After all, this will probably be the last bubble…the biggest bubble of our lifetimes. For gold bugs, it is now or never. Those who really want to go for broke should mortgage their old houses and sell their young children to raise extra cash.

This advice is free. Of course, it is worth no more than you paid for it. All we ask is that if it doesn’t work out, please don’t rub our noses in it. We’ll feel bad enough.

Source: Bet Against a False Premise…Buy Gold

As a result, gold has started to shine again as a stable source of value at a time when the dollar and other commodities – like oil and copper – have fallen hard. The spot price of gold has climbed above $870 an ounce on the New York Mercantile Exchange, up about 20% from its October lows.

Gold has been on roller coaster ride in 2008, moving from its all time high of $1035 in March, to as low as $681 an ounce. Some of that decline occurred during the recent stock market plunge. Many investors were forced to liquidate profitable gold positions in order to raise money to cover their paper losses.

Its decline was then accelerated by the recent onslaught of financial bailouts, as many investors held a preference for liquidity and safety in the form of cash holdings guaranteed by the U.S. government.  That was reflected in the skyrocketing prices of government bonds and investments in government-backed banks, which also lowered yields.

But with the Fed’s recent decision to cut its target interest rate to a range of 0% to 0.25%, the dollar has suffered a significant decline. Suddenly, foreign investors who were scooping up dollars have cut back on their flight to safety, knocking the dollar index (NYBOT: DX) down 10% in the last month.  The index reflects the dollar’s value against the Euro, Japanese Yen, British Pound, Canadian Dollar, Swedish Krona, and Swiss Franc.

The Fed’s interest rate cut may also have given gold a comparative boost in the eyes of investors. Gold, which never pays interest, suddenly doesn’t look so bad when compared to T-bills, which also are paying zero interest lately.

Volatility has risen this year compared to previous years, and the last few months have been the most volatile of all – an indication of investor ambivalence. But any uncertainty about the increasing price of gold may have been waylaid by the Fed’s recent rate cut and its dampening effect on the dollar and Treasuries.

Consequently, don’t expect this rally to be short-lived. As we pointed out in our 2009 Outlook Report on Gold, the fundamentals in the market hold the promise of more gains ahead.

It appears unlikely central bankers around the world will stop stimulating economies, printing money and doing whatever it takes until growth and confidence are restored – even if the cost is rampant inflation.

Consider these wild card inflation indicators that Money Morning Contributing Editor Martin Hutchinson believes will carry gold prices to $1,500 an ounce by the end of 2009:

• Over $7 trillion of freshly minted U.S. dollars are now in circulation with the aim of saving the global financial system.
• The incoming Obama administration has promised another $1 trillion or so stimulus package is on the way.
• It’s likely the Fed’s interest rate cuts will soon be followed by central banks around the world.

These economic stimuli are designed to do one thing – get the consumer spending again.

The bailout of the banks was the first step, but the banks are still keeping a tight rein on credit. Now the government is trying to get easily available, cheap money back into the hands of the consumer by running the printing presses around the clock.

“The government is pumping money in so many banks, and that money has to come out somewhere,” said Hutchinson.

Some of that money will “come out” into the economy in the form of higher stock prices. That will make consumers wealthier, and could give them more confidence in the economy. More confidence means more spending. As that happens, prices for goods should begin ticking upward, giving another booster shot to gold prices.

For instance some of that money is already going into gold bars and coins. In fact, the U.S. Mint was forced to suspend sales of the popular American Eagle and Buffalo gold coins for extended periods twice in the last year. The mint was unable to secure enough gold blanks from suppliers to match demand.

“I’ve never seen a case where demand was so high and supply was so short,” Chicago coin dealer Harlan Berk told the Associated Press.

With massive amounts of capital floating around, the time it takes to re-inflate the global economy will be far shorter than most analysts expect. Governments fear deflation more than anything.  It appears they will only fight inflation when they are assured they have won the first battle, which is growth at any cost.

When inflation kicks in, the dollar’s buying power will suffer long-term.  In fact, we expect a decline in all the world’s paper money, over time.  Historically, investors in gold have prospered during periods of weakening fiat currencies.

That leaves gold as a bright light in the investment world, making it an odds-on favorite to open a new leg of a long-term uptrend

Gold Bugs Have Fed to Thank for Recent Rally

The world’s stock markets tanked, as did some of its biggest economies. In such an environment, they thought, gold should have risen. After all, gold is widely considered to be a safe-haven investment when everything else is spiraling south.

However, Money Morning Contributing Editor Martin Hutchinson – an investment banker with more than 25 years’ experience on Wall Street and a leading expert on the international financial markets – understood perfectly what other investors did not.

“Gold is not a safe haven against recession,” said Hutchinson. “It’s a safe haven against inflation.”

In the past year, commodities prices skyrocketed – across the board. That was especially true of oil, which hit a record high $147 a barrel. Corn, wheat, and soybeans all hit record highs, as well.

That price escalation tightened household and corporate budgets, and was a primary reason why the U.S. economy posted a gross-domestic product (GDP) decline of 0.3%. With that negative growth, the third quarter was the beginning of what many experts believe will be the nation’s first recession since 2001.

However, the inflation epidemic has waned significantly, as global demand for raw materials has plummeted.

Price for such staple foods as corn, soybeans and wheat have all come down from their record highs – in near-lockstep fashion.

Corn futures are down nearly 50% from their summer high of $8 per bushel. The same is true of soybeans and wheat, with each having lost roughly half their value. In fact, wheat hit a 16-month low in mid-October.

As most of us noticed, gas prices have fallen 48% from their July 17 high of $4.114 a gallon.

And not coincidentally, gold has fallen 22% in that same time frame.

However, this report examines the pending commodities rebound – a projected slow-and-steady increase in commodity prices that will reverse the breakneck plunge below fair value that commodities have experienced for much of this year.

Our objective now: To chart the expected path of gold prices in the New Year.

This report also reveals another wild card inflationary indicator that Hutchinson believes will carry gold prices to $1,500 an ounce by the end of 2009.

Two Catalysts For Gold’s Climb

The U.S. Department of Agriculture’s Oct. 10 Crop Production Report said acreage for a handful of staple food commodities has shrunk:

• Corn acreage fell 1.2%.
• Soybean acreage dropped 1.4%.
• Canola acreage dropped 1.9%.
• Sunflower acreage shrank 0.8%.
• And acreage of dry edible beans fell 0.7%.

That naturally translates to higher prices because it squeezes the supply of the particular commodity. And it does so at a time when demand continues to escalate from populations in China, India and Latin America. And higher prices equal inflation.

But Hutchinson – who correctly predicted this last run-up in gold prices – says there’s another catalyst that’s right now inherent in the U.S. economy that could help vault gold prices to $1,500 an ounce by the end of 2009. And it has to do with the much-ballyhooed $700 billion rescue plan.

“The government is pumping money in so many banks, and that money has to come out somewhere,” Hutchinson said.

The philosophy behind the rescue plan is elegantly simple: By providing a portion of the $700 billion to foundering U.S banks, the Treasury Department believed it could provide banks with badly needed capital, and get them to start lending money once again – jump-starting the economy in the process.

Since September 2007, U.S. Federal Reserve policymakers have cut the benchmark Federal Funds target rate nine times – from 5.25% down to the current 1.0% rate – to increase bank-to-bank lending and bank-to-consumer lending.

“The government is pumping money in so many banks, and that money has to come out somewhere,” Hutchinson said.

Right now, banks aren’t boosting lending. Instead, they are using the cash to finance buyouts of other banks. Even so, that money will “come out” into the economy in the form of higher stock prices for banks. That will make consumer/investors wealthier, and could make them more confidence in the economy. If they’re more confident, they will spend. As that happens, food prices should begin ticking upward, adding another set of thrusters to gold prices.

“Everybody thinks that because we’re having a horrible recession, we’re not to going have inflation. I think that’s probably wrong,” Hutchinson said. “I think gold has quite good hidden-store value.”

As gold prices increase, count on more investors leaving the sidelines to invest, too, causing the surge in gold prices to accelerate and steepen.

“As gold goes up, it gets more popular and investors start piling into it,” Hutchinson said.

And if gold gets anywhere near the $1,500 mark, sell. Prices that high will likely fall back or plateau as the Federal Reserve begins raising interest rates and strengthening the U.S. dollar, Hutchinson said.

Five Ways to Play Bottom-Basement Gold

Before we get too far ahead of ourselves, let’s first look at five ways to play bargain-basement gold prices.

The SPDR Gold Trust ETF (GLD) – formerly StreetTracks Gold – is a fund whose shares are intended to parallel the movement of gold prices. Since gold prices started falling along with gas prices, SPDR Gold Trust has stayed within a 0.5% margin of gold prices. This exchange-traded fund (ETF) eliminates any investor concern over storage and delivery while giving them exactly what they want – gold.

Toronto-based Barrick Gold Corp. (ABX) has 27 mines, mostly in North America and South America, and is developing or exploring 11 more. With a market cap of more than $20 billion, it has considerably more liquidity than most mining companies. Barrick is primarily a gold miner, but it also has copper and zinc mining operations. As far as investors are concerned, there are two ways to look at that: It’s not a pure play, per se, but then again, this is a company stock, not a bar of bullion. Also, having operations other than gold can help stabilize the company’s bottom line in case problems arise at a gold mine.

Denver-based Newmont Mining Corp. (NEM) is primarily a gold producer with operations in the United States, Australia, Peru, Indonesia, Canada, New Zealand and Mexico. Its reserves are hovering around 86.5 million ounces. Like Barrick, this is a mining stock play, and is subject to market swings – as well as fluctuations in gold prices. That can be a significant tailwind, especially if you believe the stock market has bottomed out or is close to doing so. Hutchinson – forever a value-oriented investor – warned that Newmont might be a little too pricey now. Investors may want to wait for the company’s stock price to settle before getting in.

Hutchinson thinks the best value for a gold mining stock can be found in Yamana Gold Inc. (AUY), another Toronto-based company that’s small now, but has rapidly expanding production. 

But for investors who just want gold – not an ETF or stock – the best avenue is an EverBank Select Metals Account: EverBank accounts has a minimum deposit that is 98% lower than its competitors, and its commission costs are up to 86% lower than other metals’ brokers and bullion banks. It offers two types of gold accounts: Unallocated (your purchased gold is pooled with that of other investors, eliminating storage and maintenance costs; the minimum deposit is $5,000), and Allocated (you directly own the gold you purchase, held in your own private account; $7,500 is the minimum deposit here).

Both types of accounts can be set up 24/7 online. But if you prefer the phone, call 866-326-6241, and be sure to give them the code 12608 when setting up an account.

We should point out that the publisher of Money Morning has a marketing relationship with EverBank, but that’s because its products are among the best in class.

Source: Five Ways to Play Gold’s Rebound to $1,500 an Ounce

[Editor's Note: With the New Year upon us, it's a good time for investors to be looking ahead. With that in mind, Money Morning will be running installments of our "Outlook 2009" economic forecasting series into the New Year.]