Historically, the U.S. stock market has been one of the key leading indicators of a U.S. economic rebound.

With the Standard & Poor's 500 Index up more than 60% from its March lows – and the Dow Jones Industrial Average up nearly 40% – prognosticators are finally confident that the U.S. economy will dodge the "double-dip" recession that has been the focus of much fear since the Bush and Obama administrations launched their financial counterattacks on the worst financial crisis since the Great Depression.

But those same forecasters are reluctant to forecast a sharp economic rebound for 2010. In fact, as opposed to a classic "V-shaped" economic recovery that would accelerate as the year goes on, many economists are predicting that the rate of growth will slow as the New Year unfolds.

Forecasts from Standard & Poor's Inc. (NYSE: MHP) and Goldman Sachs Group Inc. (NYSE: GS) illustrate this outlook. S&P recently projected average GDP growth of 1.6% for all of 2010, while top Goldman Sachs economists expect to see the U.S. growth rate decline from 3% early in the year to 1.75% by the fourth quarter.

"We don't expect a V-shaped recovery; in fact we think that 2010 is going to be a bit slower in terms of annualized GDP growth than the second half of 2009," Goldman Sachs Chief U.S. Economist Jan Hatzius said during a recent speech in New York City.

For analysts and economists who play the forecasting game, 2010 promises to be one of the toughest challenges in decades.

Unemployment has pierced the psychologically daunting 10% level, placing U.S. joblessness at its highest level in a quarter century. Serious questions remain about the strength of the country's banking and financial systems. The U.S. dollar is under siege and inflationary concerns are at their highest levels in years. There's massive uncertainty about the nation's residential and commercial real estate markets. And even the stock-market rebound – one of the strongest in history – is considered suspect by some analysts: They worry that federal stimulus money and the U.S. Federal Reserve's "zero-interest-rate policy" has forced bearish investors to become reluctant bulls.

Among the difficulties would-be forecasters currently face economists face is the fact that 4% of the economic growth in recent months is attributable to temporary factors, most notably the replenishing of inventories and government fiscal stimulus, Goldman's Hatzius said. Those factors are likely to diminish by the second half of 2010, due to high unemployment, budget-conscious consumers, and overcapacity in the manufacturing sector and housing markets.
Despite these obvious difficulties, the outlook for 2010 is far from dismal. Among the bright spots:

• The stimulus seems to be having its intended effect – one reason the odds of a double-dip recession remain remote.
• The U.S. housing market – a crucial element of the consumer sector – is showing signs of bottoming out.
• The weak U.S. dollar is making U.S. exports highly competitive, giving a much-needed boost to American manufacturers.
• With their reluctance to hire, businesses are clearly operating in a highly cost-conscious zone – a reality that could bode well for corporate profits, and for stock prices.
• And the overall outlook for the U.S. economy is much better than it was a year or 18 months ago, and actually continues to improve – albeit slowly – a reality that can feed on itself to further bolster growth.

In this leadoff story in Money Morning's Third Annual "Outlook" forecasting series, we'll take a look at overall expectations for the U.S. economy for the New Year, will consider four key challenges, and will give you our take on each one. The areas that we'll explore will include:

• Economic expectations and the odds of a double-dip downturn.
• The odds for maintaining growth with a "jobless recovery."
• The outlook for business investment and spending.
• And the risks and rewards of current central bank policies.

Let's take a look …

Handicapping U.S. Growth in 2010

A new survey concluded that top economic forecasters have grown in confidence that the U.S. recovery is sustainable. But those analysts also expect that growth will fall short of the typical post-recession rebound, the Blue Chip Economic Indicators newsletter reported in its November issue.

The U.S. economy should expand 2.7% next year, the consensus estimate of 52 economists polled by the newsletter. That's an upward revision from the consensus prediction of 2.5% made just one month before.

"The major uncertainty surrounding the outlook for growth next year involves the degree to which private demand accelerates as the positive contributions to GDP from reduced business inventory liquidation and fiscal stimulus play out," the newsletter said.

Those factors alone pose some significant challenges to a robust rebound. Add in the near-certainty that this recovery will be a jobless one – as well as the fact that most economists believe that U.S. growth will slow, and not accelerate – as 2010 progresses, and it might be overly optimistic to expect a growth rate of 2.7%, which is how well the economic often performs even during healthy periods.

Money Morning Chief Investment Strategist Keith Fitz-Gerald is forecasting growth of, at best, 2.0% in 2010, a key reason he continues to tell investors to look abroad for some of the most-profitable investment plays.

The U.S. economy "will be lucky to do 2.0% " next year, Fitz-Gerald said. "The economy faces some very difficult challenges. There's a slight chance – depending on what happens with some outside factors – that the U.S. could do 2.5%, but I really doubt it. China could actually pull us along [to higher-than-expected growth], but those are some long odds."

That's not to say that 2.0% growth is bad news. That's more than enough to negate the odds of a double-dip recession. Indeed, after reviewing U.S. economic history all the way back to the 1850s, Deutsche Bank AG (NYSE: DB) economists recently found that double-dip recessions are exceedingly rare.

And Money Morning Contributing Writer Jon Markman notes that when these double-dip downturns do occur, they happen under circumstances quite different from the ones that we face today. Reprised recessions usually occur in concert with a fight against inflation.

"A repeat of the 1980s just isn't in the cards," Markman said.

Money Morning's Outlook: Overall, the likelihood is that the U.S. economy will experience slow GDP growth. In terms of the average growth rate for the year, investors are most likely looking at a range of 1.0% to 2.0% for all of 2010, as a protracted jobless recovery extends the housing and banking crisis, puts a damper on wages, reduces consumption. And that growth rate will decelerate as the year progresses, meaning that it's measure investors should watch closely.

U.S. Joblessness Will Stifle Consumer Spending

As we've all learned as far back as Econ 101, the U.S. marketplace is chiefly consumer driven. Historically, consumer spending spurred 60% of U.S. growth. In recent years, that number has surged as high as 70%. Given the U.S. economy's avowed consumer focus – coupled with the near-certainty that we're facing a jobless recovery – investors who are hoping for stronger-than-expected growth would best keep the champagne on ice, according to economist Joel Naroff.

"We need households to become a little more confident and businesses to start thinking about tomorrow so we can transition out of the government- and Fed-supported economy into a private-sector recovery," Naroff, president of the Holland, PA-based Naroff Economic Advisors, said in a note to investors.

To that end, Naroff is concerned about the effect a jobless recovery could have on consumer spending.

"Can consumers save the day? Only if incomes grow solidly and that is not going to happen … businesses have some room to expand without hiring lots of new employees," Naroff noted. "It could take four to five years for the unemployment rate to get back to full employment. There is little reason to expect that happy times are here again."
The U.S. unemployment rate in October pierced the psychologically important 10% barrier for the first time since 1983, as employers made deeper-than-predicted payroll cuts.

It's no surprise, then, that U.S. consumers in September cut their spending for the first time in five months, reducing their outlays for products and services by a hefty 0.5%.

Only one other time since World War II has the unemployment rate topped 10% – between September 1982 and June 1983. It hit 10.1% in September 1982, moving up from 9.8% the month before.

The economy, as measured by gross domestic product (GDP), was basically flat in summer 1982. But the economy at that time was actually getting ready to recover.

Then the economy began to surge in early 1983, fueled by tax cuts and, more importantly, substantial interest-rate cuts by the Federal Reserve. By the end of 1983, the unemployment rate was down to 8.3% and dropped to 7.3% in 1984 and 7.0% in 1985.

But that was then and this is now.

Although the official unemployment rate hit 10.2% last month, the employment outlook is actually much worse: If you factor in part-time workers who'd prefer a full-time position, and people who want work but have given up looking, the "real" unemployment rate is actually a record-high 17.5%.

That means that more than 16 million people are now out of work, compared to 6 million in 1982. In July – the last month the government released statistics – there were more than six officially unemployed persons for every job opening. Historically, the ratio is closer to 2-to-1.

What's worse is that productivity is increasing as employers are successfully getting their existing staff to produce more in fewer hours – making it less likely they will start hiring.

Any improvements will come slowly. In the Blue Chip Economic IndicatorsNovember issue, 52% of the economists surveyed said the unemployment rate won't fall back below the 7.0% level on a sustained basis until the second half of 2013 – and it may take longer than that.

Money Morning's Outlook: The recession may technically have ended, but for the millions of unemployed workers the hard times are far from over. Given that almost one-fifth of the U.S. work force is unemployed or underemployed, don't expect consumers to step up and step in if stimulus spending falls short, or ends. The upshot is that, from this vantage point, GDP growth for the New Year is likely to be severely constrained.

[Editor's Note: Part II of Money Morning's U.S. economic outlook story will appear tomorrow (Wednesday). Part II will focus on business spending and the U.S. Federal Reserve.]

News & Related Story Links:

• Money Morning:
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• Reuters:
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• Money Morning:
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• MarketWatch:
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• Reuters:
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• MarketWatch:
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• Standard & Poor's:
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• Knowledge@W.P. Carey:
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• Naroff Economic Advisors:
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• 401K.fidelity.com:
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• Duke University Fuqua School of Business:
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• Money Morning Week Ahead Column:
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The U.S. unemployment rate zoomed to an unexpected 10.2% in October, piercing the double-digit barrier for the first time in 26 years as employers continued to slash payrolls even as the nation's economy continues to improve.

The jobless rate pierced the psychologically important 10% barrier for the first time since 1983, as employers made deeper-than-predicted payroll cuts. In fact, the number of unemployed Americans grew by 190,000 last month, the Labor Department said Friday.

Economists had predicted job losses would reach 175,000, and that the unemployment rate would reach 9.9%, according to a survey of economists conducted by Bloomberg News. The unemployment rate was 9.8% in September.

"The rise in the unemployment rate is very ugly," Ethan Harris, chief U.S. economist at Bank of America Merrill Lynch (NYSE: BAC), said in an interview with Bloomberg Television in New York. "This is a big backward step to get this high of an unemployment number this early in the recovery."

Including part-time workers who'd prefer a full-time position – and people who want work but who have given up looking – unemployment levels reached a record 17.5% in October, up from 17% in September. That's almost one-fifth of the U.S. work force.

The uptick in joblessness comes just after the U.S. economy delivered better-than-expected growth in the third quarter. On Oct. 29, the U.S. Commerce Department said that gross domestic product (GDP) in the world's largest economy grew 3.5% during that three-month stretch. That was slightly better than the 3.2% that economists were expecting.

October marked the 22nd consecutive month that payrolls have declined, which means that a total of 8.2 million people have been thrown out of work since the recession began in December 2007. A total of 15.7 million Americans are now out of work, the Labor Department report said.

One glimmer of hope was that payrolls in August and September were revised higher by 91,000 jobs.  Additionally, the pace of layoffs has slowed sharply from early this year, when nearly 750,000 jobs were lost in January.

Even though the economy grew by 3.5% in the third quarter, the rebound is predicted by some economists to be a "jobless recovery," making it especially difficult on Americans who are already out of work.

"The unemployment rate of 10.2% is problematic because it gives a sense of urgency to Washington, D.C. Washington will be looking for any increase in stimulus," Tom Sowanick, co-president and chief investment officer at OmniVest Group LLC told Reuters.

The weak labor market and anemic wage growth are expected to keep inflation in check   for some time, giving the U.S. Federal Reserve free rein to maintain supportive policies.

The central bank on Wednesday said the economy will continue to be sluggish as it held overnight interest rates near zero and reiterated a pledge to keep borrowing costs low for an "extended period."

The labor market is being closely watched for signs of whether the economic recovery that started in the third quarter can be sustained without government support.

President Barack Obama has said job creation is a critical piece of any economic recovery, and the Fed has hinted that economic growth by itself won't be enough to raise borrowing costs.

The jobless rate is "the dominant variable driving changes in the fed funds" rate, and the central bank "has never raised rates with unemployment rising." economist Joseph LaVorgna of Deutsche Bank Securities Inc. (NYSE: DB) wrote in a client note that was obtained by Bloomberg.

Some companies are laying off workers as concerns grow that consumer spending will dry up as government-assistance programs run out. Johnson & Johnson (NYSE: JNJ), the world's largest health-products company announced last week it will shed as many as 7,000 workers, potentially reducing its payrolls by 7%

In October, job losses were across almost all sectors. Manufacturing employment fell 61,000, construction payrolls dropped 62,000, and the services sector cut 61,000 workers. Education and health services bucked the trend by adding 45,000 jobs. Government employment was flat.

The worsening unemployment picture could cause problems for Democrats who control Congress as they face congressional elections in November 2010.

This week, voters in Virginia and New Jersey showed their displeasure over the weak economy by ousting two Democratic governors in New Jersey and Virginia. According to election polls, the economy and unemployment were the most important issues, Bloomberg reported.

News & Related Story Links:

• Bloomberg:
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• OmniVest Group LLC:
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• Money Morning:
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• Reuters:
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• Money Morning News Analysis:
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The news sent the stock markets soaring as the Dow Jones Industrial Average rose 204.05 points, or 2.08%%, to close at 10,006.19, while the Standard & Poor's 500 Index popped 20.13 points, or 1.92%, to close at 1,066.63 and the Nasdaq Composite Index gained 49.8 points, or 2.42%, to close at 2,105.32.

Business productivity rose a higher-than-expected 9.5%, its fastest pace in six years, as companies squeezed more output from fewer workers. A survey of analysts by Reuters had projected productivity, or output per hour per worker, to rise at a 6.4% rate in the third quarter.

Productivity data "has indicated resilience and growth, though it also has a negative connotation of more being done with fewer workers," Peter Kenny, managing director, Knight Equity Markets in Jersey City, New Jersey told Reuters. "Expect unemployment to creep up as productivity does."

But other analysts think businesses have cut to the bone already and, combined with an economy showing new evidence of growth in the third quarter, companies will now be forced to hire workers to replenish inventories.

"The combination of very a powerful productivity gain and low labor costs … keeps inflation at bay. This reinforces the Fed's ability to stay on the sidelines for an 'extended' period.'" Richard DeKaser, president, Woodley Park Research in Washington told Reuters.

The central bank on Wednesday expressed optimism an economic recovery was underway and policymakers voted to keep the target federal-funds rate for inter-bank lending at a record-low range of zero to 0.25%.

Initial claims for jobless benefits decreased by 20,000 to 512,000 in the week ended Oct. 31, the lowest level since early January, the Labor Department reported. The previous week's level was revised to 532,000.

Economists surveyed by Dow Jones Newswires had projected a drop of only 5,000 claims.

More significantly, the four-week moving average for new claims fell 3,000 to 523,750 last week, declining for the ninth week in a row, indicating the labor market may be stabilizing. The four-week moving average is seen by economists as a more accurate gauge because it evens out week-to-week volatility in the data.

"Over the past two weeks, initial jobless claims were somewhat disappointing," Barclays Capital economist Michelle Meyer told The Wall Street Journal. "But the four-week moving average has actually still improved."

However, October unemployment figures today (Friday) are expected to show that the U.S. unemployment rate soared above 10% in October, even as the pace of layoffs slowed. The national unemployment rate hit 9.8% in September.

Analysts have forecast that payrolls fell 175,000 in October, compared with a decline of 263,000 in September.

After the worst recession in 70 years, fixing the labor market is critical to a sustained economic recovery.  Wide-spread unemployment is putting a chill on consumer spending, responsible for 70% of all economic activity.

The economy grew in the third quarter for the first time in more than a year, mostly on the back of government stimulus programs. But keeping economic growth on track will eventually mean weaning the economy off government stimulus.

"We need households to become a little more confident and businesses to start thinking about tomorrow so we can transition out of the government and Fed supported economy into a private sector recovery," said Joel Naroff, President of Holland, Pennsylvania- based Naroff Economic Advisors, in a note to investors.

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• Reuters:
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The news sent the Dow Jones Industrial Average plummeting by 294.85 points, or 2.51%, on Friday to close at 9,712.73.  Meanwhile, the Standard & Poor's 500 Index fell by 29.93 points, or 2.81%, to close at 1,036.18 and the Nasdaq Composite Index plunged 52.44 points, or 2.5% to close at 2,045.11.

The Commerce Department said purchases fell by 0.5%, after gaining 1.4% in August, matching the median estimate of economists surveyed by Bloomberg News. But consumers continued to increase their savings even as their incomes dropped.

The Reuters/University of Michigan's consumer sentiment index rose to 70.6 in late October, up from 69.4 earlier in the month. However, that's still down from September's reading of 73.5.

"Consumers were more optimistic about prospects for the national economy, inflation, and the unemployment rate, although most consumers thought their own finances would remain problematic for some time," said Richard Curtin, the director of the survey.

Stagnant wages and mounting concern over surging unemployment are increasing fears that consumers will pull back this winter as the government's spending programs run out of funding.

"The consumer went out spending in August, but once that incentive was taken away they didn't have the same reason to spend as much," Jonathan Basile, an economist at Credit Suisse Group AG (NYSE ADR: CS) in New York told Bloomberg. "Consumers are going to be selective and not necessarily aggressive going into the holiday season."

Consumer spending, which accounts for almost 70% of all U.S. economic activity, got a shot in the arm in the third quarter from the popular Car Allowance Rebate System (CARS), better known as the "cash for clunkers" program, which offered discounts on some new automobile purchases.

Government data on Thursday showed the economy grew at a 3.5% annual rate in the third quarter, probably ending the recession that began in December 2007. Consumer spending for the July-Sept. quarter actually gained 3.4%, thanks in large part to cash for clunkers, which ended in August.

But with a "jobless recovery" on the horizon, the labor market could be too weak to support domestic demand, leading to concerns the economy's nascent recovery could stumble once the government support wanes.

Wages and salaries fell 0.2% after a 0.2% gain the prior month and employment costs in the United States rose 0.4% in the third quarter.  While wages and salaries from year-ago levels increased by 1.5%, it was the smallest increase since 1982, when record keeping began.

"The issue of poor labor income remains quite front and center," Pierre Ellis, senior economist at Decision Economics in New York told Reuters. "The ability to finance consumer spending growth will come down to improvement in the labor market."

And even though incomes dropped, Americans increased savings, further raising concerns about consumer confidence. Savings increased to an annual rate of $355.6 billion, pushing the savings rate up to 3.3% last month from 2.8% in August.

"It sets up a very weak fourth quarter for consumption. It might be around flat to up 1% annualized in the fourth quarter," Ian Morris, chief economist at HSBC Securities in New York told Reuters. "But if inventories add and you get some rise in business investment, you could get a much more decent fourth-quarter (GDP gain) of around 3%."

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The stock market has soared 58% since its March 2008 low – and the media is proclaiming that the recovery has begun.

Not so fast.

There are three major factors threatening to stall the recovery before it even gets started.  And the "jobless recovery" you've been hearing about is just one of them.

That's why now it's more important than ever to protect your money.

This report unveils the 3 factors holding back the U.S. recovery.  And, it shows you not only how to protect your money, but how to profit until the economy rebounds for good.

Are American Workers Facing a Jobless Recovery?

Since the recession started in December 2007, the economy has shed a staggering 6.9 million jobs, the highest number of job losses since the Great Depression.

High unemployment has put a serious damper on the economy.  It's simple – if people don't have jobs, they can't spend money.

The reduction in consumer spending ripples through every sector of the economy – touching such key business areas as housing and manufacturing, and influencing the prices of such everyday items as gasoline and food.

The most commonly quoted number in the media is the "official" unemployment rate, which now stands at 9.7%.

But to get the real picture, you have to add in what the government refers to as "discouraged" workers and "marginally attached" workers – those who have stopped looking for work, or who haven't looked for work recently.  Add those in and the U.S. unemployment rate starts to approach 17%.

And it gets even worse. If you include the people that the government doesn't even count – such as unemployed farm workers, the idle self-employed, and workers in private homes – the unemployment rate reaches a jaw-dropping 20.6%, according to figures compiled by John Williams of Shadow Government Statistics. If that's true, an astonishing 25.5 million people are currently out of work in the U.S.

Analysts have been cheered by the recent decline in initial applications for jobless benefits (down by 12,000 to 545,000 in the week ended September 12).  Overall, payrolls lost "only" 216,000 jobs in August, which was lower than economists' forecast and the smallest number of job losses in the past year.

U.S. President Barack Obama said recently that unemployment is "bottoming out," and cited increases in exports and heightened manufacturing activity as evidence of long-awaited economic expansion.

However, declining initial claims doesn't mean new jobs are being created.  There are still an astonishing number of people unemployed.

In fact, a September survey of economists indicated the unemployment rate would soar past 10% in 2009, according to Bloomberg News.

"It's nice to see another move down in initial claims but the continuing number is definitely kind of sticking at pretty high levels," Michael Feroli, an economist at JPMorgan Chase & Co. (NYSE: JPM) told Bloomberg. "As long as we're continuing to see pretty high initial and continuing claims, we'll still have negative job growth."

The fact is, economic pundits know that either the unemployment situation in the U.S. improves in the second half of 2009 or the entire economic recovery could be snuffed out.

The Housing Market Continues to Struggle

The housing market is still feeling the pinch as well.  Housing starts increased by just 1.5% in August, and are down by a whopping 29.6% from a year ago.

More alarmingly, new permits – considered a gauge of future activity – were down a whopping 44% from a year ago, according to the Commerce Department.

Adding to builders' anxiety is the pending expiration of an $8,000 tax credit for first-time homebuyers, which is set to end in November.

White House Spokesman Robert Gibbs said the administration's economic team is evaluating the tax credit's effect on new home sales and will soon make a recommendation on extending the credit to the president.

If the credit is not extended past November, builders fear the upward trend in housing sales could be stalled or even reversed.

A revision to the latest data showed new-home sales exceeded forecasts in July, extending a string of gains to four straight months, putting a much-needed dent in inventories, according to the National Association of Home Builders (NAHB).

But, the NAHB report indicated much of the increase might be due to falling prices of new homes, with median prices down by 11.5% since July 2008.

"The real reason home sales are picking up is that home prices have collapsed," Mike Larson, a Weiss Research analyst commenting on the NAHB index told The Wall Street Journal. "That collapse has made housing affordable once again in many markets."

If prices begin to rise again, home sales could grind to a halt quickly.

Rising Inflation Looms on the Horizon

In the last year alone, the Federal Reserve has injected over $2 trillion into the financial system via increased loans to banks.  The Term Asset-Backed Securities Facility (TALF) program has added another $25 billion and they've pledged to pay back $1.75 trillion in mortgage-backed securities, Treasury notes and bonds.  In addition, they've lowered the benchmark Federal Funds rate to nearly zero.

Factor that in with Congress's $787 billion bailout, and the money supply has increased 110% in the past year.

This is a huge jump from the 6% average annual increase that has occurred in the 95 years since the Fed was created.

"That can only lead to serious inflation, perhaps even hyperinflation.  This will cause the value of the U.S. dollar – which has been eroding since 2001 – to decline at an even-more-frenetic pace," said Money Morning Contributing Editor Peter Krauth.

Over time, this erosion will lead to a big increase in the prices of many goods.

At what point will inflation become enough of a concern, and at what point does U.S. growth become sustainable enough, to warrant a change in Fed policy? Bernanke has provided very few clues about what his so-called "exit strategy" will involve, or how it will be implemented.

At some point, Bernanke will have to raise the Fed's benchmark rate from its current record low range. However, doing so to soon could undermine the fragile recovery, while waiting too long could lead to a surge in inflation.

The Federal Open Market Committee (FOMC) has voted unanimously to keep the benchmark Federal Funds Rate at its record low range. But as the economy recovers, there is likely to be more disagreement over whether or not the withdrawal of monetary stimulus is moving at the appropriate pace.

"We at the Fed are ready, willing, and able to tighten policy when it's necessary to maintain price stability, " said Janet Yellen, President of the San Francisco Federal Reserve Bank. "We don't want to wait until we're at 5% unemployment and 2% inflation because if we wait that long, given the lags in monetary policy, we'd clearly overshoot."

How to Protect Your Portfolio

There seem to be more questions than answers surrounding the future of the economy.  Despite soaring unemployment, looming inflation and a struggling housing sector, the stock market has rallied 58% from its March 2009 low.  Are we about to face a major market correction or will the rally continue?

One of the best ways to hedge against a struggling dollar and an economy that may be stalling is by investing in commodities.  Money Morning Contributing Editor Peter Krauth thinks spectacular gains are in store for gold and silver stocks.

"The biggest bang-for-buck still lies with the junior gold sector," said Krauth. The best proxy for this is the S&P/TSX Venture Composite Index (CDNX), otherwise known as the Toronto Venture Exchange. It consists of about 75% resource stocks.  The CDNX has been steadily carving new highs almost uninterrupted since March, now posting a whopping 80% gain since its December 2008 low. That's an impressive performance, especially for an index.

You can also play gold and silver more directly with exchange-traded funds (ETFs).  Consider the SPDR Gold Trust (NYSE: GLD).  Each share of GLD represents 1/10th of an ounce of gold.  It's highly liquid, and provides you with the quickest and easiest way to get exposure to gold.

Investing in silver might be an even better option: The metal is currently trading at less than 15% of its 1980 high, the equivalent of $130 per ounce. If that's a move you like, the iShares Silver Trust ETF (NYSE: SLV) seems the best way to play silver directly.

[Editor's Note: The U.S. Treasury has just approved a new currency experts are calling "Gold Dollars." This new currency can be used just like regular dollars, but is backed by physical gold. Not many investors know about this change yet. This report gives you all the details on "gold dollars," and how you can use this program to your benefit. ]

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