Mick Weinstein The Week's Best Stock Blogs

Diamonds may be a girl's best friend, but gold and silver are her traditional safe havens during times of market uncertainty and rising inflation - like now. For investors who aren't interested in following the vagaries of mining stocks, exchange traded funds (ETFs) like streetTRACKS Gold (GLD) and Barclays iShares Silver Trust (SLV) have made investing in the physical metal much easier. All you need is a standard brokerage account and you can hold the equivalent of bullion with the click of a button.

This ease of investment in precious metals ETFs has contributed to run-ups in the metals' prices. As Hard Assets Investor reported recently: "The European-based platinum ETFs... together own about 365,000 ounces of platinum as compared to about 40,000 ounces at the end of 2007. All of that platinum stored by the ETFs has been taken away from industrial users and no doubt contributed to the rise in platinum prices."

Amidst a big selloff in precious metals over the past month (gold is down about 15% and silver has fallen about 30%), market bloggers consider their next move:

• David Templeton notes that the U.S. Mint remarkably stopped selling the American Eagle gold coin this week - the first halt since production began 20 years ago - because the mint's inventories were depleted during the recent fall in gold prices. That sounds bullish indeed, but Templeton thinks this demand may be short-lived: "When the speculators head for the exit, one could see a rapid decline in the price of gold."

• CFA charterholder and hedge fund advisor Cam Hui agrees that this gold correction may have further to run: "Investors haven't sold enough of their positions to warrant a call for an intermediate term bottom... (but) not all is lost for the gold bulls... smart funds... remain stubbornly overweight the materials sector, indicating that they haven't given up on their commodity bet."

• Yet Michael Fitzsimmons points to huge stated demand from bullion dealers like Kitco as reason to view the current market as "a wonderful opportunity" to buy gold vehicles. Fitzsimmons suspects that there is a "tremendous unwinding of leverage in the gold market causing a short term price drop that is neither fundamental nor warranted. When was the last time a confrontation between Russia and the U.S. caused the price of gold to drop? When was the last time rising inflation numbers caused gold to drop?"

• Hard assets expert Brad Zigler acknowledges that "gold has certainly been thwacked in the past few weeks. As much as gold has fallen, though, gold stocks have plunged even farther. The sell-off in mining stocks has been so deep that they look, at least to some, historically cheap in relationship to gold itself." Zigler finds options trader Larry McMillan suggesting a bullish play on this development - a put/call spread on the Market Vectors Gold Miners ETF (GDX) against the GLD.

• Silver expert Tom Szabo comments on the recent 10:1 split in the silver ETF, explaining how it's all about increasing liquidity in the instrument. Szabo owns SLV and believes that "[w]ith SLV baskets more like water now than sand, we may see the premier silver ETF go on an absolute gobbling spree in the months ahead. This, on top of SLV being possibly one of the most strongly held investment vehicles out there with virtually no decline in its holdings after a 40%+ price drop."

• Marc Courtenay has a bone to pick with those who think precious metals will continue downward: "I don't smell a bear market, I smell manipulators, paper-traders and self-styled gurus... the fact of the matter is the world that supported gold at $970 hasn't become a safer, friendlier, less inflationary place where the US dollar remains the bastion of safe paper currencies. On the contrary, the things that usually make gold a safe haven, money-preserving cache are increasing... For this reason, we expect a rebound will occur fairly quickly. Gold is a compelling buy under $800, with little downside risk and tremendous upside potential."

• Global macroeconomist Gary Dorsch thinks that gold's traditional "role as a safe haven in times of financial crisis might come into play again, if the Fed is forced into another round of rate cuts to fend off a systematic meltdown in the US credit markets." Moreover, "the direction of gold prices and inflation expectations also hinges on the direction of world oil prices. It's doubtful that the ECB hawks and the Group-of-Six central banks would have been so successful in knocking gold and oil prices lower without the help of Saudi king Abdullah, the central banker of oil."

• Tim Iacono, author of the blog ‘The Mess That Greenspan Made', comments on gold's divergence between the paper and physical markets and the curious lack of inventory reduction at the GLD ETF.

• Finally, James Conrad believes something's way out of whack in these markets. "North American shops are completely bare of silver. Indian shops are empty of both silver and gold. Even the Indian banks don't have any gold or silver." According to Conrad, the big western bullion banks, based in New York and London, control both the gold and silver trade. With "true physical metal still in severe shortage, the metal will disappear quickly, as the price goes down below where true market forces should be bringing it to reach equilibrium between supply and demand... We have a disconnect between reality markets and fantasy markets." Conrad owns both physical gold and positions in GLD and SLV.