Supply - In recent years, demand has been met by significant central bank and producer forward selling. These sources of gold should decline soon. The reasons are:

Producers, on average, have now sold forward about 3 years of production - this is unprecedented. We don't think they will sell forward any more. Instead, the scenario will be that they will either curtail sales altogether (they can hold off selling for a year and still be sold forward 2 years of production!), or begin to buy back hedges...i.e. buy gold to cover their shorts in a rising gold market. Some South African producers have sold forward 80% of their mine reserves. The impact of short covering could be huge. Back in 1993, just one mining co. (LAC Minerals) coverage of a large hedge caused the gold price to vault up during its big rally.

America, which was selling several hundred thousand ounces of gold per month a year ago has almost sold all of its reserves. Russia has done the same thing. Also, the West has been printing so much currency, that to sell any more gold, (i.e. decrease the amount of gold backing their currencies), would be dangerous and would risk significant currency devaluation particularly in times of uncertainty. So we don't think the central banks will be as eager as before in selling gold to the market

Dollar - The record US deficit is threatening the value of the dollar. If the Government defaults, it can influence the World's confidence concerning the dollar. If it does happen you can not imagine how high the gold will go.

Technically, gold has broken out in the London market, one of the worlds oldest and most prestigious.

• Very easily traded Asset.
• Much less vulnerable to exchange controls than money.
• An indestructible hard asset.
• There is other interesting relationships to note, when the price of oil rises, Gold rises.
• Gold is a hedge against inflation, and the price of Gold is an indicator of inflation. When Gold goes up, inflation will be on the rise too.
• Legal Tender Gold Coins are not subject to VAT.
• Coins are Capital Gain Tax Free.