Sovereign debt is the new pressure point of the banking crisis. Right now the focus is on Greek bonds but Greece is really just a proxy for the Euro which is being tested by speculators betting that Euro members will fail to find a convincing solution to the common problem of unstable economies. Expect the old guard, led by Germany and France, to figure out a new financial architecture to save Greek, Spanish, Portuguese, Italian and Irish bonds from speculators.

The attention then will switch to sterling and finally to the biggest debtor in the world the reserve currency the Dollar. While I expect the Dollar to strengthen in the short term against the Euro this has more to do with the perceived weakness of Europe's main currency and less to do with Dollar strength. When the extra US Government spending is stripped out of its GDP which, for the calendar year 2009 was just 0.1%, the US economy contracted by 7%.

But as regular readers will know I still expect that the strength of the US recovery will surprise. Its economy grew 5% in the last quarter but its Government debt is unlikely to be cleared by raising taxes on economic resurgence. You simply can't massively increase money supply without debasing your currency despite what central banking alchemists tell you about reversing the effect in time to avoid inflation. That's why prices remain strong for precious metals, especially gold, trading yesterday at $1080 per ounce (that's about €788) and silver trading at $15.30 (a little over €11) per ounce. Of the two popular metals, silver appears best positioned in the short term. So why have gold and silver have done better than shares over the past three to ten years?

• Each acts as a store of value, a reserve currency that is bought on fears of inflation, uncertainty and international tensions
• Silver mining is under pressure to keep up with demand including for industrial uses in photography, solar panels etc.
• Both should act as a partial hedge against high inflation on the one hand and a depression on the other. In the last high inflation decade silver rose 25 times from a floor of $1.50 in 1970 to fifty bucks an ounce ten years later.
• The world endowment of silver estimated at 12 billion ounces in 1900 is thought to have declined to less than two billion ounces today.
• Since the collapse from silver's previous high in 1980 as the world entered a prolonged low inflation phase, silver has traded on average at 40 to 1 compared to gold –that's a price of $27 based on yesterday's gold price. Instead, at $15.30 per ounce it looks undervalued since it takes 70 ounces of silver to equal to one ounce of gold.

But be warned taking a position in gold or silver is not for the faint-hearted or for money you can't afford to see plummet in value. Both are well positioned to respond to either another depression or very high inflation, but the price of gold and silver could fall sharply if we experience the perfect economic landing – steady growth, a strengthening dollar ,a reducing US deficit, little price inflation and affordable commodity costs.

You can get into either gold or silver by purchasing a minimum of $10,000 (that's about €7,300) Perth Mint Certificates from Dublin-based GoldCorp or you can simply invest in gold and silver funds that trade on the London Stock Exchange through any stockbroker like on-line, TD Waterhouse, who charge just €20 per trade.

This is not a green light to dash to your jewelers – that's called shopping!