Precious metals are lovely to look at and lovely to hold, but investing in these metals and their exchange traded funds (ETFs) may also prove to be quite profitable.

In the third quarter, gold demand showed a healthy gain totaling 1,1334.4 tonnes, up 18% compared to a year earlier, according to EconomPic Data. This translates to a 51% rise to $31.8 billion which was an all-time quarterly high.

Where Did the Demand Come From? The increased demand came after the sharp drop in gold prices. The demand came from investors with 137.5 tonnes (56%) relative to year-earlier levels, jewelry rose 8%, but industrial/dental demand dropped 11%. Gold for jewelry has dramatically diminished but gold hoarding and ETFs are noted to be up dramatically.

Will It Last? Can the gold rally sustain itself, though? Gold, platinum and other precious metals may be poised to rebound after the federal funds rate has fallen to record levels and speculation in precious metals have been gaining momentum on government plans to bolster the economy.

  • SPDR Gold Shares (GLD): up 3.5% in 2008

ETF GLD performance

  • PowerShares DB Gold (DGL): up 0.4% in 2008

ETF DGL performance

Platinum On the Cheap. Another precious metal, platinum, has dropped down to around the price of gold, which is historically cheap, reports Pham-Duy Nguyen for Bloomberg. Platinum futures for April delivery have been floating around $1,000, the highest since Oct. 15 and sharply off a record high of $2,308.80, reached on March 4.

  • iPath DJ AIG Platinum TR Sub-Idx ETN (PGM): up 1.1% in the last week

ETF PGM performance

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.