The 18th century author Oliver Wendell Holmes suggested not to put your trust in money, but your money in trust. What about gold and silver? Can you trust gold and silver to be the safe haven they’re supposed to be?

2011 has been a turbulent year for precious metals, gold and silver in particular. Silver spiked to a new nominal all-time high on April 25. Gold outlasted silver and recorded a new nominal all-time high on September 6.

Time has a way to obliterate unpleasant memories, but let’s take a moment to revisit the frenzy that was so prevalent at silver and gold’s all-time high.

Silver Frenzy

For two days in late April, the iShares Silver Trust (NYSEArca: SLV) was the most heavily traded ETF in the world and investors were even willing to pay a premium to own SLV over physical silver.

On April 25, the day silver topped, the Wall Street Journal wrote in a front page article titled “Silver rush spreads to stock market” that: “Investors have turned to precious metals amid worries about inflation and the weakness in the U.S dollar. The metals are increasingly considered attractive as a permanent store of value that doesn’t diminish like paper currencies.”

Since then, the “permanent store of value,” silver, is down 43% while “diminishing paper currency” (the dollar) is up 9%.

Contrary to the silver rush, the ETF Profit Strategy Newsletter warned on April 10 that: “Silver seems to be in blow off mode just as oil was in the summer of 2008. Chances are that similar to oil, prices will collapse once up side momentum is exhausted. Picking a top is treacherous but silver is definitely overbought and may collapse at any moment.”

Gold Frenzy

The gold frenzy in September followed the same template as the silver top. The SPDR Gold Shares (NYSEArca: GLD) became the largest ETF in late August with $78 billion in assets and the gold rush was on.

At the time, gold was viewed as the ultimate safe haven against inflation, deflation, European defaults and whatever other problem you can think of. The August 24 ETF Profit Strategy Newsletter, however, looked at gold prices from a different angle and warned:

“Even though gold is the logical fear trade, price action is also dictated by liquidity. At some point investors will have to sell holdings to pay off debt or answer margin calls. Commonly the most profitable asset is sold first. Gold has been the best performing asset for a decade and a liquidity crunch could produce sellers en masse.” Gold prices are down 18% since their September high.

Silver Outlook

The chart below shows silver prices for 2011 along with some simple but effective trend lines. It’s funny that a digital crayon can prove more powerful than the combined power of Wall Street’s analysts.

Based on a simple resistance line, the October 30 ETF Profit Strategy Newsletter stated that: Silver is getting close to resistance at 36 – 36.4. The outlook for silver is bearish as long as prices stay below 36 – 36.4.”

Since then silver has broken through a number of support levels. If current support fails, silver will drop into a technical vacuum with no real support levels for quite a while.

Gold Outlook

Hope for gold was high at the beginning of the month. Here are some headlines from December 2:

Investopedia: “5 best bets for buying gold”
Motley Fool: $7000 gold is closer than you might think”
Reuters: “Gold bull run to extend to 2012 on resilient demand”

The same day, the ETF Profit Strategy Newsletter identified this short opportunity: “Gold prices are butting up against a trend line that originates from the September high. This is a low-risk opportunity simply because the risk is well defined by the trend line. Traders may go short gold with a stop-loss at 1,760 for gold futures or 171.1 for GLD. ”

The chart below shows various gold trend lines, including the upper yellow trend line that acted like resistance of a bearish triangle. Of importance to gold is also the 150-day SMA, which has provided support for gold about a dozen of times since January 2009. The August 31 ETF Profit Strategy update suggested that a test of the 150-day SMA (a $250/oz drop) is next.

CNBC aptly summarized goldbug’s frustration this way: “In just three months, gold has gone from the trade that works in every kind of market to the trade that doesn’t work in any market.”

Gold has found support at the final support line. It is now possible that gold will come back to test one of those trend lines.

Gold, Silver, Euro & U.S. Stocks – All in the Same Boat

If you look at gold, silver, and the euro and compare them with U.S. stocks, you’ll find that U.S. stocks are the best performer.

Considering the backdrop of bad news, this is remarkable and ominous at the same time. In fact, there are a number of red flags.

1) U.S. stocks are strongly correlated to the euro. The euro (NYSEArca: FXE) dropped from 1.49 to 1.28 while the U.S. dollar (NYSEArca: UUP) rallied. January tends to be a seasonally weak period for the euro. A weak euro is bad for commodities (like gold and silver) and U.S. stocks.

2) The U.S. stock indexes are fragmented. On Wednesday the Dow (DJI: ^DJI) rallied to new recovery highs (highest since July 21). The S&P (SNP: ^GSPC) and Russell 2000 (NYSEArca: IWM ) did not get past its October 27 high and the Nasdaq (Nasdaq: ^IXIC) didn’t even make it past its December 5 high.

3) 50.5% of investment advisors and newsletter writers polled by Investors Intelligence are bullish again. This is the highest reading since July. Event though this doesn’t mean stocks can’t go any higher, it suggests that stocks are in a counter trend rally.

The ETF Profit Strategy Newsletter provides a common sense, short, mid and long-term forecasts for stocks, gold and silver along with simple but effective ETF profit strategies.