Buy Gold Without Being Weighed Down

The real case for gold isn't that the financial world is going to come to an end. It isn't even the risk of runaway inflation. It's the risk to the U.S. dollar.

America is living way beyond its means. We are running up massive federal deficits and borrowing hundreds of billions a year from the rest of the world to support our lifestyle. Friends at one of the biggest (U.S.) investment banks in London refer to the greenback these days as the "American peso." One of them -- a conservative financial type -- even calls the U.S. "a banana republic ... without the bananas."

But don't just listen to them; listen to Congress. In January 2005, as President Bush was gearing up for his annual state of the union address, the Congressional Budget Office issued its review of the economy and government finances.

Little noticed in the document was this prediction: "CBO assumes that the exchange value of the dollar will decline gradually over the next 10 years because the current-account deficit will remain large in dollar terms (though not keep widening) and will add to the supply of dollar assets for investors."

You can take your own view on this. A shrewd investor I know who was buying gold back when it was $255 an ounce and no one wanted it also likes silver these days. You can buy that cheaply online as well, through the ETF (SLV Quote)Silver Fund (SLV) run by iShares giant Barclays.

Everyone has their own view on the metals. But if I were going to buy them as an investment, I would rather buy the ETF than the coins.