FAIR VALUE FOR GOLD PRICE

Probability Fair Value for Gold is currently:
Current Probability of 1250 gold by 2012 10%
Current Probability of 1388 gold by 2012 28%
Current Probability of 1550 gold by 2012 62%
Current Probability of 2000 gold by 2012 84%
Current Probability of 2500 gold by 2012 24%
Current Probability of 3000 gold by 2012 03%

Current Silver Fair Value is $25 ($21) as an Investment and $18 ($16) as a Commodity.

Looking ahead, we see a mixed to positive picture for Gold but NEGATIVE for Silver by Q2 2012! 2.BY SPRING TO FALL 2012 THE SILVER BUBBLE IS LIKELY TO BURST (85%+ Probability).

Characteristics of a Bubble:
1. Price Insensitive
2. There is no price "investors" are willing to sell
3. Like Tulip mania, when investors sold all their assets (homes, business) for a tulip, so do some "investors" today.

Comments:
* •Gold/XAU ratio 9 well above classic buy signal of 5.
* •Gold/Silver ratio of 44 is too low – P3 target 58-64. (H1 2011 we reversed at 32 for a P1 target of 44-48). 10/1 = 54.
* •Short term Gold: Seasonality shifting positive (less relevant factor).

THREE VIEWS OF GOLD over next 18 months*


1. Range bound $1500 to $2000
2. RALLY to $2000 - $3000
3. Return to VALUE: $1380*

* •Hold Gold as a hedge.
* •Gold remains cheap insurance against both declining US dollar and inflation.
* Gold and precious metals can perform well in either an inflationary or deflationary environment.
* •Strong Investment Demand is driving precious metals. But remember: Investors can become fickle. Remember how Oil dropped from $147 to $38? Silver bugs especially beware!

2012 GOLD TRADING RANGE $1340 to $2360.

2012 SILVER TRADING TARGET $21-$28 or lower ($16-$18).

Gold is a commodity, currency, inflation measure & crisis metal
Q4 2011 Gold FV: $1388
Commodity FV: $1089
Currency FV: $1340
Inflation Metal FV: $1200
Crisis FV: $1920-$2000