Gold has fallen again today and is down some 1% but continues to consolidate between $830/oz and $890/oz. Gold should remain well bid given the degree of international macroeconomic and geopolitical risk challenging us as we enter the New Year. The Middle East tensions continue to escalate and oil is up another 2.5% again today to some $50 per barrel again. Silver has outperformed even gold in the last 30 days and is trading very well – up nearly 17% versus gold’s rise of 12%. Real concerns about bubbles in the US Treasury market and further sharp weakness in the dollar will likely see gold have its ninth positive year of returns. Fearful investors have bid Treasuries up to all time record highs with correspondingly record low yields. However, the macroeconomic and fiscal challenges facing Uncle Sam are of such a significant nature that investors will likely learn in 2009 that US Treasuries and government bonds are not the safe haven they perceive them to be. They have significant currency risk and astute observers are even warning of the possibility of a default. In such a scenario, gold will again come to play a fundamental role in the international monetary system and we would likely see gold at least reach its inflation adjusted high of some $2,400/oz in the coming years. Silver is massively oversold – probably more oversold than any other commodity or stock market in the world and yet its fundamentals are arguably as sound now as they were before. Industrial demand for silver is set to fall admittedly but that will be more than made up for by significantly increasing investment demand. Also importantly the supply of silver may fall – silver supply coming primarily from the by product in base metal mines – many of which are failing due to the collapse in base metal prices. Silver’s average price in Q1 08 was some $18 and this will likely be surpassed in 2009. It is important to remember that silver’s average price in all of 2008 was some $15/oz and thus silver is currently trading at some 36% below its average price in 2008. Most importantly, there is less refined silver in the world than gold – a fact that most people simply cannot get their head around and fully understand due to gold being currently some 77 times more valuable than silver. Above-ground Inventory (billions of ounces)

World Population

Year                      Gold         Silver      (Billions)

1940-50                     2           8-10            2..5

1980                     3.5             3.5              4

2005                     5                 1             6

2030(est.)                7              0 -1             8

(Inventory statistics taken from World Gold Council, the Silver Institute, and others, Population data from US Census Bureau) Silver is likely to return back to its recent highs in 2008 above $20/oz and there is a possibility that silver could reach well over the nominal 1980 high of $50/oz in 2009 (as gold has already comfortably done with an average price of $870 in 2009).