Readers who have been with me for a while know how staunch an advocate I am of investing in gold and gold-related stocks– and have been for quite some time.

Although the book I published in 1999, Defying the Market, focused heavily on my prediction of the bursting of the dotcom bubble (which proved to be accurate the following year) I was careful to include a section titled “Get Ready for Gold,” in which I described the yellow metal as a “must-have investment.” The average price of an ounce of gold in that year was $279.

Needless to say, readers who have followed my advice on gold from then right up to the present time have been very glad they did.

Along the way, I’ve taken pains to keep readers updated at points where key changes in the gold market have occurred, so they can react appropriately. And this is one of those points.

Specifically, it involves some of the very big miners – and this goes for silver and copper, as well as gold. It happens that just as Exxon and Chevron and other major oil companies are having a difficult time increasing production (as we discussed last week), so are the major miners.

The fact is that companies like Barrick Gold Corp (ABX), Newmont Mining (NEM) and Newcrest Mining (NCMGY) are going to find the going ever-tougher; ditto for copper companies.

Keep in mind here a fundamental principle I’ve noted a few times in this column, during guest appearances on TV shows and in my books:

The production and supply of each resource is strongly related to the production and supply of all the other resources. This inter-relationship among resources virtually assures that the inability to substantially increase oil production, for example, or water production for that matter, will mean the inability to add to production in many other areas as well.

So to get back to the situation with gold at the present time: since I’m still very bullish on the yellow metal (as well as silver, and copper) but believe that performance of the big miners is going to lag the price of the metals because of the production difficulties cited above, I am advising readers to invest in the physical metals themselves.

For this purpose I prefer ETFs dedicated to holding the physical commodity; for copper, the equivalent ETNs. Obviously, this means I do not share the strong feelings some investors have expressed concerning the reliability of these “paper” vehicles vs. personally holding your own store of the physical metal. But I would not criticize anyone who does feel this way, and if you insist on directly possessing and storing physical gold and silver, by all means do so.

I should also mention that the possibility of making money on gold miners does continue to exist, but for that you’re going to have to look at some of the small ones: the so-called juniors. This is a subject we cover frequently and extensively in our flagship newsletter, The Complete Investor.

* * *

Moving to another topic…Ironically, what’s keeping the world in check right now is the European debt and liquidity crisis. Were Europe not declining (and remember the European economy is close to 30 per cent of the total world economy) who knows where oil, copper and silver would be trading now? And who knows if we would have any more world-wide growth than we have today?

So, other than commodities, where does this leave us? Another area where we have had at least a partial change of heart has been the pharmaceuticals. No, I’m not going to contradict what we said two weeks ago; it remains the case that as far as the neurological diseases are concerned, which is the category of diseases that costs the economies of the West far more than any other category (approximately $1 trillion), the field is virtually barren as far as prospective new drugs.

There are some plays here which might be the exception (emphasis on ‘might’). And once you get past neurology and into other areas (and we’ve been doing quite a bit of work here recently) it turns out that the drug companies are coming up with new potential cost savers from the point of view of achieving greater economies in health care, and also new health givers/enhancers from the point of view of individuals’ health.

What especially intrigues us is that some of the new generation lipid type products that control cholesterol could also move the needle in diabetes type 2 as a metabolic disorder. Perhaps one reason why drug companies aren’t getting as much credit for developing new cholesterol-related drugs is the flameout that occurred with Pfizer (PFE) when it tried to take Lipitor, the biggest-seller of all time, and combine it with another drug that would raise good cholesterol as opposed to just lowering bad cholesterol. That drug turned out to be a bitter disappointment, to say the least.

Again, for further details I refer you to The Complete Investor.

This is a tough sector; it’s never been easy, and this is probably tougher than most. But it’s a sector that’s also desperate for solutions. And in trying to find the right solutions, if you look in the right spots you’re likely to end up with more than enough profits in your pockets.