'Vital' buys: A trio of gold favorites

"Gold is the only financial asset that isn't someone else's liability and it's the only asset that's reliably held its value over time," notes global investor and resource expert Yiannis Mostrous.
In his Vital Resource Investor, he adds, "Indeed, gold has held its value for millenia. An ounce of gold still buys a quality men's suit, just as it did in the days of ancient Greece." Here, he reviews a trio of ideas, each for investors with various levels of risk tolerance.

Mostrous explains, "To date, Americans have never had to experience the society-wrenching events that have affected much of the world for centuries. But most of the globe's population hasn't forgotten the value of gold in times of extreme strife and social turmoil.

"And with incomes rising in many of these countries, beneficiaries have used their newfound savings to beef up their holdings. That's a trend with serious legs, particularly as Asia continues to grow.

"Then there's inflation, the ultimate debaser of all paper currencies. Despite surging energy and food prices, core inflation remains at elevated -- but still relatively moderate -- levels in most of the developed world.

"Developing world inflation, however, is a far different story. And many countries have seen sharp price acceleration across the board, including China.

"So far, the slowdown has been relatively mild by historical standards. But truly aggressive action to curtail inflation could tip the balance into a deep recession, pushing up the cost of currencies dramatically as the prices of basics -- such as food and energy -- soar on often subsidized demand overseas.

"Trying to figure out what central bankers are going to do in advance is not what we're about. But given the extreme risks of igniting a major recession, it seems like the Fed and its counterparts have little choice but to continue to live with at least creeping inflation.

"As long as that's the case, currencies will debase, and the stage will be set for a renewed surge in gold in the coming months. And if they do act dramatically and the worst occurs, the yellow metal is nearly certain to go higher still amid the economic chaos that ensues.

"Gold's greatest selling point is that it's still well off its highs in inflation-adjusted terms. By that standard, setting a new high would imply a move to at least $3,000 an ounce. As we've said here before, that's not a prediction. But it is a pretty good indication that this market can run a lot further.

"The most conservative play is SPDR Gold Trust (NYSE: GLD), an exchange traded fund that represents a position in gold bullion. We continue to rate a buy at the current market price.

"Next is Goldcorp (NYSE: GG), a large and growing producer that still rates a buy up to 45. Finally, our leveraged bet and turnaround story is Lihir Gold (NASDAQ: LIHR), a small, more leveraged Austrlian player. The stock is a buy only for those who can handle higher volatility.
"Overall, gold is a huge, volatile market traded on a global scale, and it's affected by myriad pressures over both the long and short term. Playing it right means being willing to take these moves in stride. Patience is the biggest challenge when it comes to cashing in on what's likely to come for gold.

"The biggest near-term risk to our profits now is the possibility of further strength in the US dollar in coming weeks. The key is that the potential reward from gold's next leg up is well worth the risk. The bottom line: If haven't bought gold positions already, now's a good time to pick some up."