http://seekingalpha.com/article/8584...

You'll be happy you own gold and silver once you read this, compliments of our associates at Stansberry Research and the S&A Digest: "Sovereign wealth funds," foreign government investment pools, are dumping the dollar. One big fund in the Persian Gulf has cut its dollar-denominated holdings from more than 80% a year ago to less than 60%.

China's State Administration of Foreign Exchange [SAFE] is working out deals with European private-equity funds to diversify away from the dollar. SAFE holds the majority of China's $1.6 trillion in foreign currency reserves in U.S. dollars.

Foreigners also hold roughly $1.5 trillion in Fannie (FNM) and Freddie (FRE) AAA-rated debt. Merrill Lynch (MER) warned that the U.S. could face a foreign "financing crisis" within months as Fannie and Freddie unwind. And Merrill is certainly credible on the subject of financing crises, having caused more than its share of them...

Merrill has about 40,000 customers holding roughly $6 billion of securities called auction-rate preferred securities. Like all auction-rate securities, you can only sell them at auction, which occurs only once a month. These obviously illiquid instruments were successfully marketed as liquid, money-market instruments, which can be sold instantly at any time.

Market makers used to act as buyers of last resort if auctions didn't work well. But since auctions started failing earlier this year, the buyers of last resort have dried up and blown away. They don't want to get stuck with bad paper. They just want to stick others with it. Mutual funds that bought these securities as cash equivalents have a problem. They're unable to liquidate auction-rate securities to pay the large redemptions they all face in a bear market.

We all know gold and silver are great to own during inflationary periods, but how about Google (GOOG)? Google raised the price of its online advertising 19% in the past year. And the worst-performing industries, mortgages and retail, are paying the highest prices. Google raised mortgage-company advertising rates 35% and retail rates 9.3%. Bloomberg expects Google shares to rise 25%."

Friday morning Google and Microsoft (MSFT) were hammered after reporting their quarterly earnings. Google's results were lower than expected, the result of the weakening economy hurting advertising revenue, while Microsoft missed forecasts by a penny. Google's shares were down 10% last time I checked, and Microsoft's shares were down over 7%. So much for the latest, so-called "relief rally".

I don't know about you but this has my attention, and if I wasn't already invested in gold and silver, I'd be convinced to start accumulating. In fact, any corrections that might unfold in the gold and silver markets this summer is another chance to buy the exchange-traded funds for gold (GLD) and silver (SLV).

Now if you want to have a sleepless night, or you want to reassure yourself that buying some shares of Barrick Gold (ABX), Goldcorp (GG), Kinross Gold (KGC), Silver Wheaton (SLW) and Silver Standard Resources (SSRI) are a good idea, check out what Stephen Leeb of The Complete Investor wrote to us on Friday:

Will Israel attack Iran? Or is the U.S. secretly planning to make peace with this rogue nation? Either way, what will these events do to oil prices? That's the trillion-dollar question these days. But buried in a recent New York Times article on the subject is the deeper truth that shows that – no matter what action Israel, the U.S., or Iran takes – or even if diplomacy triumphs – oil prices will skyrocket regardless.

The head of OPEC, Abdalla Salem el-Badri, said it all last week. On the one hand, he admitted that OPEC could not make up for the loss of Iranian oil, in the event it goes offline. On the other hand, he said that OPEC might halt investment in new oil production capacity.

If oil supplies are so tight already that OPEC cannot do without Iran (which contributes less than 5% of the world's oil), how will the world meet fast rising demand from the developing world over the next few years? And with supplies so tight, why cut back on development ... unless you already know you've reached a permanent peak and can't raise output no matter how hard you try?

Let's face it. Whether another war breaks out in the Middle East or not, oil prices will shoot to the moon over the next few years, rewriting the rules on which investments will pay off and which will collapse into dust. Inflation will soar, along with the cost of producing all commodities, destroying the real return on most securities.

When I read Leeb's book "The Coming Economic Collapse...How You Can Thrive When Oil Costs $200 a Barrel", it was 2006 and oil was around $70 a barrel, so this gentleman and his team certainly seem to be on the ball (or on "the barrel" depending on your perspective).

That is why I think a subscription to The Complete Investor is something you should seriously consider. I'm a subscriber, and I'm NOT PAID to recommend this uniquely valuable newsletter or any newsletter. Here's some questions they were asking us about on Friday morning:

Are you prepared for what is about to unfold?

• Russian and Saudi Arabian oil production have peaked – leaving the world with no way to meet our rapidly growing demand for energy.
• Oil prices must surpass $240 a barrel in the next few years in order to avoid severe shortages...
• Commodity prices, already at record highs, are poised to make their greatest gains in history over the next five years.
• Inflation will climb as high as 25%-30% annually, destroying the value of most people's savings and crushing their retirement dreams.
• 95% of Americans will experience a lower standard of living within the next 10 years.

These are bold assertions, but again, Dr. Leeb has a lot of credibility and his research team works hard to be accurate. If they are correct or anywhere close to correct, gold and silver prices are going to soar. The same is true for copper and most likely platinum and paladium.

Precious metals tend to do very well when energy and commodity prices are "already at record highs, [and] are poised to make their greatest gains in history over the next five years"!

Right now gold seems high at around $957 and silver also seems high at over $18 an ounce. But there are bus loads of seasoned analysts and respected precious metals "bugs" who are saying gold could go to $3,000 and silver might go over $50 an ounce.

They (including the folks at Casey Research) are saying that it wouldn't surprise them if gold and silver corrected somewhat this summer, especially if oil and natural gas prices correct.

My colleague Puru Saxena wrote me from Hong Kong early Friday morning. His words included:

In summary, don't be surprised to see oil correct in the days ahead and I can promise you that the media will be very quick to proclaim the end of the "oil bubble". However, if my assessment is correct, such a correction will be a fantastic buying opportunity in oil futures, options and top-quality companies in the oil and gas sector.

Concerning the precious metals, Purus, who writes the very respected newsletter Money Matters, which I highly recommend, said the following: "Summer months are usually a weak period for metals so continue to use the ongoing correction as a buying opportunity in this sector."

To see gold consolidating met the expectations of James Moore, of TheBullionDesk.com. "With investor risk appetite showing a slight improvement and having posted aggressive gains last week, it comes as no surprise to see the metal correct," Moore wrote.

"To avoid a deeper correction, gold needs to establish a base above the $953 to $955 chart level, but given the backdrop of rising inflation and recessionary pressures and increased financial-market jitters, we anticipate investors will view dips favorably, with the metal ultimately set to rechallenge $1,000," Moore added.

And Burton R. Schlichter, of New World Trading, believes that gold is building support, saying that "speculators and traders still have a 'buy the dip' attitude."

Bottom line: There are a lot of reasons currently that gold and silver might go up dramatically over the months and years ahead. The dollar's continued weakness seems inevitable and the ongoing monetary and finanial crises in the western world isn't going away any time soon.

Even if the "worst case scenario" doesn't unfold, what is happening now and the trends that are ongoing now should make investing in precious metals and companies that produce precious metals a very rewarding experience.

P.S.: One of my mentors and a newsletter editor himself told me yesterday that Hecla Mining (HL) is still one of the most under-valued silver producers today. Just thought I'd pass that on.

PPS: Looks like some lucky investors will get to buy Yamana Gold (AUY) under $14 a share. That would be under 14 times projected earnings, and here's a company with almost no debt and a profit margin of over 20%. Bargains are so sweet!