Gold has never been just an ordinary metal. In fact, it's one of the rarest metals on Earth -- scientists believe that all of the gold ever mined could fit underneath Paris' Eiffel tower, forming a cube of just 60 yards on each side.

Gold's rare status has afforded the yellow metal a unique place in the history of civilization. For at least the past 6,000 years, through the rise and fall of countless great empires, man has used gold as a medium of exchange -- a sort of universal currency. This has been just as true in modern times as in ancient empires -- the U.S. used gold to back up the dollar until as recently as 1973, pegging the price of gold at $35 per ounce.

And while the U.S. has been off the gold standard for more than 30 years now, gold has not lost its status as a store of wealth. Nor, in fact, has gold lost its reputation as a hedge against inflation -- a way for investors to protect themselves against the falling value of the dollar or loss in purchasing power due to inflation. In times of economic uncertainty or when inflationary pressures build, investors the world over tend to buy gold bullion and related gold mining stocks as a hedge. Also, thanks to gold's status as a currency and universal store of wealth, the yellow metal often rallies when the U.S. dollar falls in value.

Gold and silver stocks are a logical choice for investors looking for a portfolio hedge during uncertain times. That said, it's worth highlighting a few key negatives about the gold and silver mining industry:

Gold mining is a commodity industry. Since gold miners must sell their gold at prevailing market rates (or must enter into contracts to sell gold at predetermined prices in the future), there is no way to establish a competitive advantage or secure any sort of product differentiation. Commodity industries like this one are usually exposed to extreme cyclicality, and it is extremely difficult for firms to gain an edge over the competition.

Many of the lowest cost, easiest-to-mine reserves have already been exploited over the past several decades. As a result, miners are increasingly being forced to expand into more politically unstable markets or to employ more technologically advanced mining techniques to mine precious metals. This has led to rising costs.

Gold miners in some countries, such as South Africa, have had trouble keeping their costs down and have remained unprofitable or only marginally profitable despite a significant rise in commodity prices. The reason is that gold is priced in dollars but they incur costs, such as wages, in their local currencies.

Mutual funds offer broad diversification for investors interested in playing the gold industry. Even better, many of these funds have exposure to mining stocks listed in countries like South Africa and Australia -- these markets can be tough for individual investors to access. What's more, mutual funds specializing in the industry are usually actively managed, and many of the best fund managers are well equipped to know which miners offer the biggest benefits in terms of potential production growth and new finds. In the table below, we've listed a few of the best-performing gold and silver-focused mutual funds.

As for individual stocks, there are a plethora of small, fundamentally weak miners with unproven reserves -- these companies are collectively referred to as the "junior golds." Many such stocks have no revenues and are more or less exploration firms with shaky prospects.

Investors are better off sticking with the industry heavyweights, or at the very least, investing in miners with some proven production potential. In the table below we've listed a handful of the larger and more respectable gold and silver mining firms. 

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