MY CASE FOR GOLD & SILVER

GOLD:
Gold is a political metal and the case for higher gold price is not really a happy story for Americans. We are now in the fifth year of this spending binge by the federal government. Our economy is a train wreck waiting to derail. And, 2005 was the first year since 1933 in which Americans as a whole had a negative savings rate. Americans spent more than they made for the first time in 72 years.I don’t trust big government and big government is what we have. They can and do tilt the statistics to convey to the public what they want us to believe. The Consumer price Index is a good example of that. The CPI report is supposed to be a barometer of how well the economy is faring. It used to be an indication of inflation, but it doesn’t truly tell us that anymore. The true definition of inflation is the expansion of the money supply and last year alone, the money supply grew by 10.3% and that is the real inflation, not the 2.3% reported by the Government. Our number one objective is to have our investments grow faster than inflation, which was 10.3% in 2005. In 2005, gold appreciated 19.7%, therefore gold was a great hedge on inflation.

Asian banks hold a small % of gold in their reserves: China and Japan roughly hold 1% of their foreign exchange reserves in gold.

1. The public is beginning to distrust major world currencies.
2. America is running record trade and budget deficits.
3. Central banks have said they will diversify part of reserve out of the U.S. dollar into other currencies and gold.
4. China has also said it plans to diversify out of the U.S. dollar. If China allocated 25% in 12 months to gold – it would be equal to all gold held by Central Banks. If China allocates just 5% of its dollar reserves to gold, it would be equal to one year’s total gold production.
5. South African gold production is at an 80 year low.
6. The average production time for gold and oil is seven years.
7. As the middle class in India grows, so does their demand for gold jewelry.
8. Gold Trust ETF to be Listed on the Mexican Bolsa

SILVER:
1. Silver production: 74% of silver result of other mining.
2. Silver is at its lowest value since 1364.
3. Is Digital Killing Silver? Photo silver is recycled over and over. Color film uses no silver. Silver is used for CDs and digital needs a computer requiring silver.
4. China: demand is increasing; Chinese use 1/70th of developed countries, most exports from concentrates not mining. (new highs in Yuan)
5. India: long history of silver demand, sales stay within the country, cannot export silver, bullion imports fell in 2004 (new highs in Rupee)
6. Mexico: November 30th 2004 ALL 31 governors of ALL the states that make up the Mexican Republic sent a communiqué to the Ways and Means Committee of the Mexican House of Representatives to express their unanimous approval of the monetization of silver and urged the Committee to approve a bill which aims to achieve precisely this objective.
7. Bullish Scenario: Superconductivity, RFID chip (30M), Silver ETF, Debt problems
8. Bullion Silver supply stands at 367 Million ounces. (Comex 100 million, Berkshire Hathaway 130 million, Central Fund of Canada 26 million, 111 MOZ)
9. The silver-gold ratio favors silver.

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