Inflation is subdued in the developed world as demand and production capacity remain slack, but inflation poses a real challenge to emerging markets. China’s inflation in November climbed to a 28-month high, and some suspect that the country’s inflation could be rising faster than reported. India’s food inflation has also emerged as a fiscal and political issue for the country’s leadership.

Meanwhile, the string of sovereign debt crises in Europe may lead to more handwringing about the viability of the euro, as Germans voice their resentment at being forced to bailout less fiscally responsible EU member nations.

When one considers these simmering problems, the recent pull back in gold doesn’t appear to signal the end of rising prices of the metal. I expect the price of gold will continue to climb in the coming months, though at a much slower pace.

Setting aside the argument over whether physically-backed exchange-traded funds (ETF) are a scam–I believe they’re on the up-and-up–many gold investors remain concerned about confiscation, a situation in which the government could seize assets without compensating owners. It’s happened before in the US; in 1933 President Franklin Delano Roosevelt signed Executive Order 6102 that required people to sell their gold to the government at the price of $20.67 per ounce. Citizens were allowed to keep up to $100 worth of gold.

I’m not concerned about this scenario. If the country’s economy deteriorates to the point at which confiscation would be a real possibility, I’d focus on outfitting a survival shelter rather than managing my portfolio. Nonetheless, it’s partly in response to these fears that ETF Securities has launched two funds that allow investors to geographically diversify their physical gold holdings.

ETFS Physical Swiss Gold Shares (NYSE: SGOL) was ETF Securities’ second physically-backed metal fund to launch in the US, following closely on the heels of ETFS Silver Trust (NYSE: SIVR) in 2009. With an expense ratio of 0.39 percent, the fund sports a slightly lower cost than SPDR Gold Shares (NYSE: GLD), which comes with price tag of 0.40 percent. That being said, both funds are significantly more expensive than iShares Gold Trust (NYSE: IAU), which charges an expense ratio of 0.25 percent.

ETFS Physical Swiss Gold Shares’ main selling point is that its bullion is stored in Zurich, Switzerland, a country famous for its fiscal stability and respect of property rights. Switzerland is a preferred destination for investors anxious to keep their assets safe from the clutches of the government.

But in the wake of the UBS tax evasion scandal, the Swiss government has agreed to give US tax authorities the details of almost 4,500 accounts believed to belong to tax-dodging Americans. Some view that as a chink in the armor of Switzerland’s famous bank privacy laws and the first step toward establishing more invasive investment regulations.

In order to offer investors a greater choice of where their gold holdings are physically stored, ETF Securities last week launched ETFS Physical Asian Gold Shares (NYSE: AGOL). This ETF is identical to Physical Swiss Gold Shares except that the gold will be vaulted in Singapore rather than Zurich.

Singapore is an excellent choice for this type of fund. The Southeast Asian city-state is politically stable and boasts a tightly regulated and transparent market.

Those investors who seek geographic diversification for their physically-backed gold investments should consider these two ETF Securities funds. Otherwise, you might as well stick with SPDR Gold Shares or iShares Gold Trust; there’s little difference in the performance of these four funds.

What’s New

In addition to ETFS Physical Asian Gold Shares, three new funds were launched last week.

Charles Schwab continued to build out its ETF lineup with the launch of Schwab US REIT ETF (NYSE: SCHH) and Schwab US Mid-Cap ETF (NYSE: SCHM), bringing Schwab’s total number of ETFs to 13.

I used to be a skeptic about Schwab’s ETFs, but they’re winning me over with their focus on low costs. There’s nothing unique about either fund in terms of the indexes they track or the methodologies they employ. But their rock-bottom annual expense ratio of 0.13 percent is among the lowest in the industry, and the cheapest ratio for REIT- and mid cap-focused ETFs. It also bolsters my argument that expenses will fall industry wide as more players compete on cost.

These low-cost funds are an excellent choice for investors, particularly for existing Schwab clients that can take advantage of the brokerage’s commission-free trading. But with a stable of only 13 funds, I wouldn’t swap brokers just to save a few bucks in fees.

The final new entrant is one that I don’t have much use for. However, other investors may find the offering intriguing.

Rydex Investments added to its stable of equal-weighted funds with the launch of Rydex MSCI ACWI Equal Weight ETF (NYSE: EWAC). The fund has equal exposure to 45 country indexes, 24 of which are in developed nations (including the US). The remaining 21 indexes track emerging-market countries.

I prefer to tailor my country exposures based on my outlook for each nation’s economy. But the fund’s equal weighting has merit because it eliminates capitalization bias. Market capitalization-weighted funds tend to emphasize expensive names to the detriment of undervalued companies. It’s a strategy that constrains returns and consequently I believe there’s a bright future for equal-weighted funds.

Winter Respite

Join me, Benjamin Shepherd, Elliott Gue, Roger Conrad and David Dittman at this year’s World MoneyShow Orlando, February 9-12, 2011 at The Gaylord Palms Hotel & Convention Center. Join more than 9,000 investors and traders seeking the knowledge, wisdom, and tools to profit in the constantly changing markets. You’ll discover outperforming sectors and industries in the year ahead, and much more!

Visit The World MoneyShow Orlando to register FREE today, or call 800-970-4355 and mention priority code 020815. You’ll gain the insights you need to make profitable investment decisions at the largest and most important investor gathering in 2011!