There are many reasons to expect the prices of gold and other precious metals to remain strong or even climb higher this year. And to take advantage of that potential increase, there are some interesting stocks to consider for your clients.

The price of gold thrives on economic and financial markets’ uncertainty — and there’s plenty of that. There is no clear evidence that the U.S. is on a sustainable growth path. There’s also much fear of further sovereign debt problems in Europe. (See page 30.)

The price of gold also tends to climb when the U.S. dollar weakens, which is what most economists expect over the medium term. However, that may not be as clear a trend this year because concerns about sovereign debt problems may well cause a see-saw effect, with the euro and US$ rising and falling against each other.

As a result, most portfolio managers favour some gold investments, believing that gold share prices don’t fully reflect the recent US$1,375-an-ounce bullion price. Here’s a look at some of the favoured stocks:

> Barrick Gold Corp. Bob Lyon, senior vice president of AGF Management Ltd. in Toronto, is impressed with Barrick’s moves in the past 12 to 18 months. The firm has bought back its hedge book, so that it is now getting all the benefits of rising gold prices. Barrick also has spun off some higher-cost assets into African Barrick Gold PLC and has refocused on a smaller number of lower-cost mines. Barrick is also involved in a couple of ventures that will significantly increase its output, starting in late 2011 or early 2012.

> Premier Gold Mines Ltd. This firm has two projects in Ontario, in which it is getting good drilling results, says Chris Holden, portfolio manager with Investors Group Inc. in Winnipeg. One project involves drilling beneath previous gold mines to find additional reserves.

> Silver Wheaton Corp. Darren Lekker-kerker, portfolio manager with Fidelity Investments Canada ULC in Toronto, believes that the price of silver may rise by more than gold this year, as its price is at an historical low compared with bullion. He likes Silver Wheaton because it doesn’t hedge the price of silver and its production is expected to double by 2013. IE