Forget Gold, Buy This Instead

Aside from briefly providing shelter in last year's financial panic, the dollar has been losing ground to most other currencies for quite a while. The World Economic Forum recently ranked the stability of the dollar at No. 50 worldwide, about 20 spots below the Slovak Republic.

Now, I'm not suggesting the U.S. is about to become as creditworthy as a banana republic, but it would be a wise precaution to have a portion of your net worth denominated in something other than dollars.

Widening trade deficits and word that government expenditures have leapt +18% in 2009 do nothing to inspire confidence. If you're nervous about losing purchasing power, just think of the bankers in Beijing: China holds more than $800 billion in Treasuries and $2 trillion worth of dollar reserves.

It's no secret that foreign creditors are queasy about the dollar. Leaders in countries like China, Japan and Saudi Arabia are exploring ways to dump their holdings in favor of other currencies. Elsewhere, officials in Russia and France are trying to price oil in gold and Euros rather than dollars.

But just because the outlook for the dollar is bleak doesn't mean investors should head for the hills. There are plenty of ways to benefit from a falling dollar.

Given the ripe conditions for runaway inflation, silver is shining brightly as a reliable store of value -- much like its yellow cousin. Silver's dual function as a versatile metal and an effective inflation hedge, has helped the metal to outpace gold during the past 12 months.

But unlike gold, which is virtually indestructible (and just recycles from one form to another), silver inventories get depleted every day. Current estimates suggest there are only about one billion ounces above ground, and sovereign wealth funds from wealthy Gulf States like Dubai are buying up a lot of it.

Bullish investors are betting that silver will be a good place to park cash in the coming months. According to the U.S. Mint, the public scooped up 16.1 million American Eagle one-ounce silver coins in the first half of the year, about +75% more than the 9.1 million that were purchased during the same time last year.

But whereas gold is limited in terms of utility, silver is prized for its unique properties like electrical and thermal conductivity. The metal is used in commercial applications ranging from photography to medicine. In fact, industrial usage eats up approximately 60% of the world's supply each year.

With global industrial output getting back on track, demand for physical silver is heating up from multiple sources -- not the least of which is the investment community. A new exchange-traded fund investing directly in silver bullion attracted $100 million worth of assets in its first 20 trading days alone.

And, silver trades at just $18 per ounce, less than 1/60th of the $1150 that gold is fetching on the spot market. That ratio has usually been lower during the past few decades -- if silver appreciates to its historic ratio, investors could see additional gains.

None of this is meant to downplay the outlook for gold, just to say that silver will benefit from some of the exact same underlying catalysts -- plus a few more.

Good Investing!

Nathan Slaughter
Chief Investment Strategist
The ETF Authority

P.S. -- The new fund I mentioned earlier is one of my "Favorite New Fund" picks for The ETF Authority. This new ETF gives investors an opportunity to invest in silver without the added expense of storage costs and insurance premiums. One share in this fund represents an interest in one pure ounce of silver. To get the name of this fund, click here.

U.S. electric sports car maker Tesla Motors plans to go public soon, two sources familiar with the matter said, amid growing interest in green technology and battery-powered vehicles.

An IPO filing from the six-year-old start-up, best known for its $109,000 all-electric Roadster, is expected any day, said one of the sources. The person did not give a specific time frame, although IPOs typically take several months.

-- Reuters

Gold prices climbed for the sixth straight session on speculation that the dollar will decline, boosting demand for the metal as an alternative investment. Gold reached a record $1,153.40 an ounce on Nov. 18 and has fallen once in 15 sessions this month.

-- Bloomberg

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