GF338[1] Gold Report

8/3/2019 GF338[1] Gold Report

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Gold Forecaster 337 Page 2

Next Week in Gold

With the consolidation pattern maturing with rising highsand rising lows, expect the gold price to make a sharp movehigher. As markets react, the trigger may be deeply significantnews or confirmation of the bad news we already know. Theoverall state of the developed world financial system is poor,

so it need not take a major drama to propel the gold pricehigher. Asia is now happy to buy at the $1,600 to $1,660.

The remaining leveraged positions are much smaller thanbefore the fall from over $1,800 and will not cause nearly asmuch downward pressure on the gold price as before if thenews is bad for gold (which we think unlikely). A further sell-off will be sharp, deep, and short-lived. With the gold price sooversold, expect any breakout in the gold price to see a largenumber of either new investors or re-investors coming into amarket that is, at best, thin.


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0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

40,000,000

45,000,000

2004 2005 2006 2007 2008 2009 2010

38,000,000

40,000,000

42,000,000

Aug-11 Sep-11 Oct-11

Short-Term NY Gold ETF

GoldForecaster.com

Gold ETFs As of the 6th October 2011 we have seen only 2.74tonnes of gold sold fromthe God Trust and from the World Gold Councilssponsored gold ExchangeTraded Funds. The bulk ofthat was outside theU.S.A.While New York

nearly always starts theday by selling off gold, wecan see that the physicalgold sales have slowed toalmost a halt in the last

week.

This is significant because it matches the lackof physical sales elsewhere. Indeed Asiandemand, as we said earlier, is surging now.Developed demand and more importantlysupply is holding the gold price back and willcontinue to do so, so long as mnainstreaminvestors continue to show confidence intheir financial system. This has been on the want since 2008 and will continue to be sountil the fundamental ailments of thedeveloped world financial system gounresolved.

Investors in the SPDR now hold 1,693.69 tonnes.

Forecast MatrixShort-Term Mid-Term

[3 6 Months]

Gold[spot price]

Supports

ResistancesAction

$1,525-$1,550, $1,600

$1,764, $,1,700 $1,650Upside bias, choppy trading

$1,750-$1,900+

Metal Stocks[HUI]

SupportResistance

Action

520-525575-625Upside bias -- Volatility

Bullish600+

US Dollar[US $ Index]

SupportResistance

Action

74-7678-80 area, 82Neutral, toppy

Upside bias74-82


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Central Bank

Sales/Purchases - As of the 30th September 2011

Central Bank Gold Agreement2009 - 2014

Selling

RemainingAnnounced

SalesFrom Oct 2009

Year 1Oct 2010

Year 2

Signatories 2009-2014 Sales

Total Announced Sales 205.35 9.66 1

Russia 0 109.76 102.9

Bangladesh 0 0 10Philippines 0 23.4

Saudi Arabia 0 180

Thailand 0 15.6 27.0

Belarus 0 4.8 2.6

Venezuela 0 7.5

India 0 200

Sri Lanka 0 10

Mauritius 0 2

Mexico 99.2 104.7

Bolivia 7

South Korea 25Total Purchases 0 558.96 215.0

Notes to table:1)This now includes the unannounced sales.

2)We have extended the Table to include meaningful purchases outside the agreement.3)Germanys sales are for coins, which we do not regard as part of the announced sales for the purposes of this report.4)The remaining sales for individual countries will be corrected once the three monthly figures are available. The total is the most accurate figure,

but will then be adjusted too.

From February 5th to September 30th 2011, gold and gold receivables (asset item 1)remained largely unchanged with the exception of small amounts of coin tradingbetween the European central banks. These sales are not in the spirit of the Central

Bank Gold Agreement.


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VietnamLesson in Failing Money

The Vietnamese government is to allow six institutions to sell up to six tonnes of gold from theirstock to increase supply in the domestic market. Partly private DongA Bank, Asia CommercialBank, Techcombank, Eximbank , Sacombank and SJC will buy and sell gold at the same pricequoted by SJC.

In March 2010 the central bank ordered Vietnamese gold traders to close offshore tradingaccounts in a move to restrict gold transactions to help stabilise the domestic currency, the dong.

The State Bank of Vietnam granted quotas to banks and gold trading companies to import at least13 tonnes of the metal in August and September to cut the premium.

Domestic prices remain far higher than international prices and hit a record gap of 4.3 million

dong ($206.4) a tael above the world price on Sept. 26, according to domestic gold tradingcompanies. (One tael is equivalent to 37.5 grams or 1.21 troy ounces) The wide gap has beenputting pressure on the dong, which weakened to 21,550 per dollar on the unofficial markets on

Wednesday, or 3.6% below the weak end of the central bank-mandated trading band. The dongtends to fall against the dollar in the unofficial markets whenever there is a high premium becausespeculators accumulate the greenback to smuggle gold to take advantage of the premium, traderssaid.

SJC was selling a tael at 44.12 million dong($2,120) in Hanoi, around 1% lower than a day

earlier.


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Why Gold Isnt $2000yet

Why isnt the Gold Price going through $2,000 now?The gold price went over $1,900 and looked as though it was going to mount $2,000, but since then hasfallen back to $1,600 and is in the process of consolidating around the lower $1,600 area. It was expectedthat it would have moved a lot higher faster, but that hasnt happened,yet.

In the face ofItalys downgrade to A2 by the ratings Agency, Moodys summary that,

There has been a profound loss of confidence in certain European sovereign debt markets, andMoodys considers that this extremely weak market sentiment will likely persist. It is no longera temporary problem that might be addressed through liquidity support, and several euro-areagovernments are increasingly affected by the loss of confidence.

The downgrading was expected as are further downgrades for the different Eurozone members. Whyshouldnt the gold price be on its way through $2,000 to higher levels?

The DownturnThe news over the last few weeks has sent global financial markets down heavily as a slow recoverymorphed into a downturn and, at best, a flat economic future in the developed world. These falls have beenaccompanied by tremendous worries that there could be a major banking crisis that will cripple theEurozone economy as a whole, not just the debt-distressed nations. In France, growth is now at zero; inGreece its somewhere south of a 5% dip in growth, well into recession. Greater austerity simply adds to thefall in government revenues, defeating their purpose of reducing their deficit. All of this implies an ongoingshrinkage of the Eurozone economy. This hurts investor capacities in all financial markets and wealth

throughout the Eurozone. Cash becomes king as investors flees markets to a holding position, waiting formuch cheaper prices before re-entering markets at lower levels.

The path to deflation is then made. Deflation in its early stages causes tremendous de-leveraging. Thats theselling of positions to pay off loans taken to increase positions. It may come about because of investorprudence, banks calling in loans, stop-loss triggers and margin calls (where the level of debt againstpositions becomes too high and forces sales). This often (and particularly in the case of precious metals) hasnothing to do with the fundamentals of the market. Its simply the position of investors. This happened inthe precious metal markets as well. This is why gold and silver prices fell.

De-leveraging

As was the case in 2008 and often through history, the process of de-leveraging is a short-lived one, evenwhen its savage. Downward pressure on prices disappears once an investor has sold the positions.Leveraged positions are the most vulnerable of investor-held positions and can make up the froth or surf inthe markets, which cause the volatility levels to increase when drama strikes. In 2008, these positions werehuge because there had been two and a half decades of burgeoning markets that encouraged greater risk-taking. Since then, while leveraging has taken place, it has been less and rapidly removed when dramas hit.

In 2008 we saw a similar drop in prices from $1,200 to $1,000 [20%], which equates to the fall from $1,910to $1,590 [16.9%]. In 2008, the precious metal prices then slowly rose as buyers started to come in from allover the world. It took over a year for prices to recover back to $1,200.

Change in Market StructureToday the shape of the precious metal markets is quite different and particularly that of gold. In 2008,central banks were sellers; today they are buyers. In 2008, the Chinese gold markets were small. Since then


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theyve grown to such an extent that theyre soon to overtake India. These are two dynamic features thatgive demand a totally different shape to 2008. More than that, the impact of the developed world, long-term, has diminished quite considerably. It now represents less than 21% of jewelry, bar, and coin demand.The emerging world, as a whole, represents over 70% of such demand now.

The bulk of the worlds physical gold that comes to the market is dealt at the London twice daily Fixings.The balance thats traded outside the Fixings is the most short-term price influential amounts, producingthe swings that resemble the waves on the seashore. Its these traders and speculators that often persuadelong-term buyers to stand back and wait for the prices to swing to the point that persuades them to enterthe market. The drop from $1,900 had this effect on investors. Now that the fall has happened, we see asurge in demand from the emerging world to pick up the slack in the market. Weve no doubt that centralbanks are buying the dips as well.

So once the selling from the developed world has stopped (emerging market demand waits for this beforebuying, allowing the fall to extend further) in come the buyers happy that theyre entering the market at agood time. Because of this change in market shape, expect the market to take far less time to find its balanceand allow demand to dominate.

2012 Recession Battle

The I.M.F. has just warned that the developed world willenter a recession in 2012. Will that be negative for the goldmarket? We dont think so. The world has seen the recoverypeter out, the sovereign debt crisis arrive, and now sees theI.M.F. recommend that the Eurozone banks be recapitalized.

What does this mean for precious metals?

Cast you minds back to the recapitalization of U.S. banks under the TARP measures whereby the Fedbought the toxic debt investments of the banks againstfresh money. When we say fresh we mean just that,newly created money in the trillions. This did lower the perceived value of the dollar inside and outside the

U.S. The effect on gold was palpable as it rose back through $1,200 and onto new highs.

Already were hearing rumors of an E.U. government ministers plan to walk the same or similar road. Withthe recent past in mind, were certain that will lower the perceived value of the euro and see euro investorsseek places to cling onto the value of the euro. This time round, expect markets to discount these actions inthe same way. The downturn will therefore be fought with new money creation in the same way the U.S. didit from 2008 on.

Second Time RoundTheres a significant difference between 2008 and now. In 2008, the credit crunch was new to investors andshocked the markets into overreactions. In 2011, were not shocked, but expectant of what lies ahead. In

2008, the developed world economy had considerably more resilience than it does now, so the situation ismore serious and less likely to be believed as the panacea for the developed worlds economic crisis.

Because the gold and silver prices rose so strongly after that time and in the face of those solutions, thesame will be expected today. In 2008, confidence in the financial system as well as in the monetary systemappeared unassailable, but not this time. While the developed world (outside of the gold ETFs in the U.S.)has not been the main driver of rising gold prices, this time we would not be surprised to see their resilientconfidence in their world snap and a frantic search for safe-havens follow.

If we see a repeat of the 2008 breakdowns in the near future, theyll slaughter remaining confidence in themonetary system and the ability of its governments to set matters straight. What then for gold and silver?


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Gold and Silver & Round 2 of the Credit CrunchBankers and governments will never willingly welcome gold back as a fully functioning and accepted part ofthe developed worlds monetary system. That would be seen as a defeat for them and the banking systemthey so carefully developed over the last forty years. The only reason theyll accept it, is because they haveto. Therell be no alternative to such a move.

Weve seen banks forced to use gold as collateral of late to increase the availability and cost of inter-bankloans as they face liquidity dramas of their own, on their own. Last year, we saw 600 tonnes of gold held by

the Bank of International Settlements as swaps for foreign currency loans. These have now been repaid. Sogold has seen an active place in day-to-day dealings in the money systems of the developed world. If thecrises worsen or confidence among the banks deteriorate further, such a role will have to be recognized andmay filter into government/banking relationships apart from acting as important reserve assets in thecentral banking system.

Once central banks are pushed into that position, they will want to control the main, gold markets. As it is,emerging nations have recognized the importance of gold by buying it for their reserves in the last 2+ years.It seems pretty clear that when they do itll be a quick, almost overnight, capture of the market.

In 1933,when the U.S. central bank confiscated U.S. citizens gold, they waited two years before devaluingthe U.S. dollar by 75% from $20 an ounce of gold to $35 an ounce of gold. If they do take control of the

developed world gold market and their citizens gold, theyll seek a mechanism to support the huge moneycreation exercises weve already seen in the last two years, and expect to see more of this. Part of theexercise will be to ensure a gold price that will reflect the past, present, and future money creation neededto restore growth and confidence in the monetary system that they run.


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Inflation, Money Circulation =Gangrenous Liquidity, Rising GoldPrice

DefinitionsAccording to the Oxford Dictionary,

Inflation the general increase of prices and fall in purchasing value of moneyDeflation reverse or reversal of inflation

Stagflation state of inflation without the corresponding increase of demand and employment

A situation arises where the quantity of money is not as important as how far its circulation reaches. Itslowly becomes insufficient to buy the needs and wants of the population at the periphery of the economy.

For instance in stagflation, there may be money around but its not producing the economic flows that itshould. This can also be tied to the extent of the circulation and the velocity of money itself. There may be

sufficient money around but is becomes locked up in Treasury bonds and not lent into the economy tostimulate economic activity (such is the case now). Asset prices rise in this environment and further makeinadequate the money for purchasing such assets.

Alternatively, the reduction of money can happen in situations, like today, when mortgages are at an alltime low of 3.94%, but through fear of falling house prices (reducing creditworthiness) potential job lossesand the consequential need to save for the rainy day, house buying drops off. Every situation produces areduction in the available supply of money and precipitates liquidity crises. This is from where the majorthreat to monetary stability comes. In our global world, with its plethora of national currencies, a non-nationalasset becomes protection against inflation, deflation, and stagflation across the globe.

Why should this be good for gold? Gold is both an international asset and international cash. Its the

combination of these qualities (and the liquid nature of gold, in the most difficult of situations) that set itapart from paper money and other assets. Its these qualities that will force the monetary system to bringgold back into the global, monetary system in one way or another.

Normal InflationToday in every country across the world, there is inflation even when a country is in recession. When wehear the reports on inflation changes, we usually hear just one rate affecting the currency zone we live in. Inreality there are several types of inflation, each driven by a different set of forces.

The serious food inflation being suffered by much of the world has reached 70% in some parts of the world.This is a result of demand and supply pressures. The pressures on the poor are the most worrying from this

source of inflation. Some households spend a large percentage of their income on food, so such rises have aserious impoverishing impact on their lives. In the developed world, where a much smaller percentage ofdisposable income is spent on food, such inflation is not as pernicious. To the investment world, thedifferences show the impact on the ability to invest, the shortage of liquidity for citizens everyday lives.Where its possible, this type of inflation can be managed by increasing the amount of food grown soincreasing supply and lowering local prices.

Take a look at oil and other energy inflation. The fact that the oil price is easily managed by oil producersmakes any inflation from this source manufactured to suit the needs of those people. As the world runs onoil, price rises affect everyone to a greater degree. Oil prices reflect the sum total of global demand. China,where economic growth is bringing the poor (i.e. low oil-utilizing population) into a world where oil takes agrowing part of their lives, is seeing rapidly increasing demand. As half the world falls into this category, we

foresee demand from that source growing almost exponentially. The developed world may be going through


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a falling demand phase, but this could fail to lower prices as the emerging world is more than compensatingfor such falls.

Energy InflationWorse still, in the majority of nations oil, demand represents a major import to every nation. The foreignexchange needed to pay for this has to come from the income from exports (except in the case of the U.S.,where they have run a trade deficit for several decades through the printing of new money, which is aleading U.S. export). Oil price inflation is of a different nature as it affects profitability of business andtherefore the economic performance of nations themselves. Falling oil prices have a stimulatory impact onnations as money rises in oil purchasing power, when oil prices fall. Again, we see an impact on generalliquidity.

Oil price inflation is considerably more pernicious, for oil payments represent a draining of money from anation because oil payments leave the developed world and arrive on the shores of oil producers, suckingwealth out of those oil importing nations. The same happens with cheap imports. Consequently, wereseeing a draining of wealth from the West to the East. The only way to stop this is to lower oil demand andraise the prices of imports (i.e. Protectionism). In todays global economy, this is proving no alternative.

The burden on smoothing out the three liquidity problem makers inflation, deflation and stagflationfalls

upon the shoulders of the countrys central bank.

Central Bank Money ManagementIn terms of ensuring price stability, central banks have to balance the needs of their economy with themoney supply available to it. Price stability is achieved when they succeed in balancing the two; however,with governments adding to their burdens by passing some of the responsibility for growth and economicstimulation onto them, they find that theyre forced to bend the rules of price stability, and often.

In the present economic climate, with a recession impending or underway, central banks across thedeveloped world have turned to quantitative easing (significantly increasing money supply through moneymarket and Treasury market operations) to increase money supply and overall liquidity to encourage the

banks to find it easy to lend and give the economy the liquidity it needs to grow. This hasnt worked nearlyas well as had been hoped, for the deflationary forces and slowing growth have discouraged bank lending businesses and consumers have not sought this extra money. As a result, it has found its way intogovernment bonds and bills against central banks using somewhat toxic assets as collateral.

There are two possible solutions:

The first is to allow the very painful, politically unpopular, recessionary/depressionary forces toshrink the economy, forcing growth in economic activity, to be followed by greater monetarydemand from that growth to bring about a growing economy. Today that would not be politicallyworkable.

The second is to rapidly increase the money supply to stop any stagflationary or deflationary

shrinkage of the economy.

A Different Type of InflationThere is an analogy that may be useful to the reader. The human body needs blood to feed and nurture it.The body requires a certain volume of blood, going at a certain speed and circulation to the outer reachesand capillaries of the body. Interfere with these processes and the body loses its health. The Fed is thesupplier of money and can to some extent influence the speed at which it travels. When the circulationslows, the Fed can add quantities of money to speed it up (i.e. quantitative easing). By lowering interestrates, its hoped that the circulation is improved, and the speed at which the money travels regulates thenurturing ability of that money. But it takes government to exercise the body so that it makes its bloodsystem healthy. When government fails to exercise, the blood systems come under pressure.


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apart from paper money and other assets. It cannot be overprinted. Its price does not fall in deflation. Atthe start of deflation, it can be used to create liquidity when other asset prices are falling (such as we haveseen in the last fortnight) but once the most dire of liquidity needs are satisfied, holders of gold cling onto itas its price either holds or rises while other asset (i.e. equities and commodities) prices fall. It becomes avalue anchor for the wealthy.

If (as has happened in the past) liquidity crisesbreed inflation, then gold prices rise as the valueof money decreases. Thus gold becomes anasset, as well as money, protecting the holderagainst the three horsemen that strikecapitalism deflation, inflation and stagflation.

Future Gold PricesAt the moment were seeing the gold and silver prices consolidate.Silver is building a floor between $28 and $32. Gold is building itsnew floor between $1,600 and $1,650. The shape of the chart is telling

us that the consolidation has an upside bias targeting $1,870 in thenear-term.

But of greater significance is a ground swell that is building up, pointing to far higher peaks and far greatervolatility, reminiscent of the early 1970s. Certainly, should anything go wrong with the fine balance o f pricestability between increasing liquidity and deflation, then expect to see a fundamental change in thebehavior of money in general and in particular, gold and silver. The two will reflect the instability that willinfest the paper money world.


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OilOil slipped back to $76 at one point in the week before recovering to finish at 86.34. Like manyof us, oil producers are waiting for events to unfold. Libyan oil is at over 1.5 million barrels aday and weve heard no talk of cutting production. Its more than likely that oil producers want

the oil price lower if only to stimulate developed world economies.

Its becoming clearer that they may lose short-term, but would sell far more if a recovery didactually happen. Its a difficult formula to balance, weighing the gains of stimulating the

Western world against growing demand from the emerging world. But a key concern of oilproducers is the value of the currencies used to pay for the oil. If one takes the oil price overthe last three decades, then one can see why its at current levels.

The oil price is now a reflection of the sum total of the globaleconomy.

Its more than likely that, should emerging demand prove resilient and overwhelming westerndemand, then oil producers will engineer the oil price to maximize income from the emerging

world, irrespective of the developed world. Thats when politics wade in.


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US DollarU.S.A.This week, the U.S. government was emasculated again. The Presidents Jobs bill failed to pass into law. Tooutsiders, the image of the rich versus the poor is emerging as Republicans fight tax increases on thewealthy and the Democrats try to protect spending on the needy. Inside the U.S., the perceptions seem to be

quite different. Were now at the beginning of confidence failing in Capitalism as the bulk of the lowerclasses are not benefiting from the system. If these movements grow they will undermine the strength of theU.S.A.

But of greater significance to gold investors is the failing confidence in the banking system. Theantagonisms that have built up since 2008 against bankers have worsened as the financial disadvantage ofthe poorer citizens has been illustrated. Unless these moves are addressed quickly at government level, theywill become fuel in deeper divisions in the U.S. With the middle and poorer classes carrying the weight ofnumbers (and votes) expect the money issue to become a very unpleasant election issue in the future.

Of more importance to gold investors is the impact the growing political divisions will have on thegovernment deficit, interest rates, Treasury markets, and inflation in the future. The battleground is the

monetary system, which is not designed to hold up under such pressures. Whether the exchange rateagainst other currencies wavers or not, confidence in the dollar also means confidence in the systemsbehind it. Its this weakening thats constantly favoring gold worldwide. At some point in time, a thunderingherd of investors will turn to gold, but ahead of that day the numbers as a percentage of investors willremain low.

Back into NegativeInterest Rates?History has shown thatnegative interest rates arenot uncommon. Were seeing

them now and marketsappear happy to live with it.

(Thanks to Bullion Vault) Inthe US, for example, realinterest rates on government bonds were negative for aquarter of the years between1945 and 1980. The averagereal rate in those years wasminus 3.5%, and it was aslow as minus 9% in the years

immediately after the war.

The findings for the UKare even starker nearlyhalf the years during theperiod saw negative realrates, which forliquidation years averagedminus 3.8%.

World War I and Depression debts were importantly resolved by widespread default and explicit

restructurings or predominantly forcible conversions of domestic and external debts in both the now-advanced economies, as well as the emerging markets. Notorious hyperinflations in Germany, Hungary andother parts of Europe violently liquidated domestic-currency debts.


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Global Currencies & GoldEurozone and Global Debt CrisisCurrency debasement benefits financial, banking, and sovereign government interests in the short term atthe expense of citizens particularly the frugal savers and those on fixed incomes such as pensioners and

social welfare recipients. In the long term, society as a whole suffers from virulent inflation andhyperinflation as it can lead to the collapse of governments and societies as paper assets and currencies losetheir purchasing power. Gold and silver protect against this risk.

E.C.B.European Central Bank President, Jean- Claude Trichet, fronting a policy decision for the final time, saidthe E.C.B. will resume covered-bond purchases and reintroduce year-long loans for banks as the sovereigndebt crisis threatens to lock money markets.

The E.C.B. will spend 40 billion ($53 billion) on covered bonds starting next month and will offer bankstwo additional unlimited loans of 12 and 13-month durations, Trichet said after policy makers left the

benchmark interest rate at 1.5%. He also said theyll continue tolend banks as much money as they need inits regular refinancing operations at least until July 2012.

The new purchases will have the capacity to be conducted in the primary and secondary markets and willbe carried out by means of direct purchases, Trichet said. They will start in November and are expected tobe fully implemented by the end of October 2012.

GreeceGerman Chancellor Angela Merkel said that Europes rescue fund will only be used as a last resort to savebanks, and investors may have to take deeper losses as part of a Greek rescue. Time is running out toestablish if [bank] recapitalization is necessary, Merkel said. If a country cannot do it using its ownresources and the stability of the euro as a whole is put at risk because the country has difficulties, thentheres the possibility of using the EFSF, the European Financial Stability Facility, she said. Using therescue fund is always tied to certain conditionality.

Signals that European politicians may step up efforts toaid banks and push investors to accept bigger losses aspart of a Greek bailout reflect international pressure toend the debt crisis and domestic opposition toexpanding rescues. Moodys Investors Service followedits three-level downgrade of Italy on Oct. 4 by warningthat euro-area nations rated below the top AAA levelmay see their rankings cut.

The United KingdomThe Bank of England unexpectedly expanded its bond-purchase program to 275 billion [$421 billion] from200 billion after keeping its key rate at a record low of 0.5%. Inflation is at 3.0% in the Eurozone and 4.5%in the UK. Thus negative real interest rates continue which continues to make non-yielding gold attractive.Negative real interest rates have been a key driver of higher gold prices and will likely continue to be.

Despite deepening inflation, theres speculation that both banks will reduce interest rates, if not today, thenat the next meeting. This would likely put further pressure on both the euro and the pound and see goldmake further gains against both currencies.


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Moodys Investors Service cut the senior debt and deposit ratings of 12 U.K. financial institutions,concluding the government would be less likely to provide support for them if they becamefinancially troubled.

Lloyds TSB Bank Plc, Santander UK Plc and Co-Operative Bank Plc had their ratings lowered onestep by Moodys, while RBS Plc and Nationwide Building Society were cut two levels. Seven smallerbuilding societies were cut from one to five levels. Clydesdale Bank was confirmed at A2, with anegative outlook.

Its pretty much avote of no confidence in European officials. Either the virus is already in the U.K. so theyhad to respond, or they dont believe the problem will be sorted out. This is a warning to us all that theEurozone debt crisis and its contagious effect on the rest of the world is far closer than we thought.

Should even an inkling of this happen, gold and silver will become the most popularand respected of investments on the planet.

Prime Minister George Papandreous Cabinet also passed 6.6 billion of austerity measures last night to cutthe 2012 deficit to 6.8% of gross domestic product, missing the 6.5% goal previously set with the EU,International Monetary Fund and European Central Bank, known as the troika.

The danger is that the more the austerity the greater the recession and the lower the cash flow to repay thedeficit. Its a Catch-22 situation.

Chancellor Merkel stated last week that investors may have to take deeper losses as part of a Greek rescueas she signaled Germanys readiness to join efforts to recapitalize banks. 50% cuts were talked of but thismay rise as high as 70%. This will be so damaging to the banking system that were rapidly approaching thescene when, time is running outto establish if recapitalization is necessary. Merkel said that if needed,there will be an adjustment in investors share of a 159 billion ($212 billion) second aid package forGreece, pending a report by international auditors on Greeces finances due before a meeting of Europeanfinance ministers next month.

Signals that European politicians may step up efforts to aid banks and push investors to accept bigger lossesas part of a Greek bailout reflect international pressure to end the debt crisis and domestic opposition toexpanding rescues. Policy makers increasingly want to build a large solvency buffer. Banks in core Europeneed to be recession-proofed and banks in the periphery depression-proofed. There is no secret at all thatEuropean authorities and the European Commission are all working together on a plan to bring moreofficial capital, more public-sector capital into the banking sector. But will it restore confidence in the euroand its debt crisis? There are few who believe it will

U.S.A. WorriedThe Federal Reserve Bank of New York may ask foreign lenders for more detailed daily reports on liquidityas the U.S. steps up monitoring of risks from Europes sovereign debt crisis. Regulators held informal talks

with some of the largest European lenders about producing a fourth-generation daily liquidity or 4Greport. The reports may cover potential liabilities such as foreign-exchange swaps and credit-default swaps.The U.S. has already increased the number of examiners embedded in these banks.

U.S. Treasury Secretary, Timothy F. Geithner, has warned that failure to bolster European backstops wouldthreaten cascading default, bank runs, and catastrophic risk for the global economy.

U.S.-based money funds, which buy short-term commercial paper, have been shunning securities issued bysome banks based on the continent, and European Central Bank Governing Council member Yves Merschsaid Sept. 28 that liquidity shortages pose the main risks to the regions banking system. Euro-zone banksand other institutions were more than $350 billion in debt to the Feds emergency-lending facilities at onepoint during the 2008-2009 financial crises.

U.S. prime money-market funds cut their exposure to eurozone bank deposits and commercial paper, orshort-term IOUs, to $214 billion in August from $391 billion at the end of last year


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A Run on GoldShould this happen, we cannot say how many banks will find themselves in a similar position. This almostcertainly will precipitate an investment charge into gold in the Eurozone and possibly, the U.S., simply toprotect as much of the value of their euro investments as possible.

We believe that a Greek default is inevitable. The key question is when this default will occur and how it willbe managed. Greek bonds have tumbled, and insurance against default has soared as markets put theprobability of insolvency at more than 90%.

We warn subscribers who are unhappy facing extreme volatility to stay on thesidelines because even gold and silver will suffer volatility; however, having

watched goldfloorthis week, expect such volatility to be to the upside!


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Gold: U.S. Dollar Spot PriceResistance:

$1,800-$1,850, $1,764,$1700 area

Supports: $1,525-$1,550, $1600 area

Next Week:Stabilizing around $1,600-$1,650. Volatility coming off record extremes butremains as liquidity falls.

Short Term:Gold is drifting towards a strong resistance area, 1700-1750 which mayprovide difficulty as the market settles down from the recent rally then pullback. Volumes arelight, liquidity lower meaning the volatility will continue choppy trading with an overallupside bias, trend forming. Good support below should the market need to consolidate a bitmore ($1500-1550)

The gold price has a big technical support zone in the $1,500-1,600 area. Look for the gold priceto trade around $1,600-1,650 area for the time being before it regains its footing and starts to

build on new momentum. This could take weeks.


20/26


Gold Stocks: HUIResistances:

550 area, 570-575, 575-625

Supports: 520-525

Next Week: Upside bias

Short-term: Gold stocks on a rally here with a few upside targets to look out for if the gainscontinue. 550 area (200DMA) then a break of that level brings 570-575 into play. A bigresistance zone above up to 615-625, should gold stabilize and equity markets remain firm, then

we could see this rally drift up into this area.

Should fear and panic hit the buyers and send them in retreat, we could see some damage break our 520-525 support zone. A break brings a 5-10%+ quick technical sell-off.

After the big gold/silver price pullbacks, the likely course is weeks of choppy trades, bringing swings up anddown with the general trend going higher. Very attractive fundamentals risk/reward, which will continueto attract capital as Q3 earnings are released in the next weeks.

Producing gold stocks will benefit the most with many juniors also making quick comebacks as risk (riskiestgold stocks junior, exploration stocks) was sold off the fastest and as fear turns into greed, which will rallythese tiny companies as well.

Stick with market leaders before this sell-off ensued (PVG.to, ANV, etc). Theyre most likely to rally the firstand limit your downside risks.

Gold stocks are showing the first signs of a HUGE breakout! The upside here is quite significant, thevaluations in many gold stocks relative to the gold price at extreme levels. Simply put, gold stocks need tocatch up to the higher gold price and this could mean the HUI moving past 610 to 900-1,000 in the comingyear. Big opportunities ahead with a cautious eye needed on the general equity markets should another sell-off drag gold stocks partially, or just initially, lower with it any such pullbacks remain excellentopportunities as a multi-year breakout is underway!


21/26


Gold Stock NewsCaza Gold Drilling Intersects 0.54 Grams per Tonne Gold Over 83.1Meters at the Balleza Gold Project on the Moris Property in Chihuahua,Mexicohttp://news.goldseek.com/FeaturedPR/1317736522.php

Caza Gold Corp.s has received assay results from the first four holes of the recently completedBelleza Projects 12 hole program at their Moris propertys in Chihuahua, Mexico. A total of 3,519meters were drilled in August and September. The table of results in the news release shows thatso far all four holes have recovered potentially surface mineable grade and thicknesses, with the

best hole announced in the headline. This drill program tested about 300 meters of strike lengthwithin a total 7 km long mineralized structure that hosts numerous prospective bulk tonnageepithermal vein type targets. The Balleza project is within Cazas 16,209 hectare Moris Property,

which is located adjacent to Hocshchilds Moris Mine and about 10 km west of Aurico GoldsOcampo Mine, and has excellent infrastructure for an exploration stage project.

Batero Gold Appoints Dr. Darryl Lindsay as Chief Operating Officerhttp://news.goldseek.com/FeaturedPR/1317737386.php

Batero Golds newly appointed CEO Dr. Darryl Lindsay is a geologist with over 20 years ofexperience developing major South American porphyry projects from discovery to feasibility withgroups such as SRK Consulting, CODELCO, and others. Most recently Dr. Lindsay was responsiblefor designing and implementing social and environmental programs in relation to operatingpermits for Corriente Resources, whose Mirador copper porphyry in Ecuador was acquired in 2010for $678 million by the Chinese owned Tongling Nonferrous Metals Group (CRCC Tongguan).

Galore Advances Exploration Program at Dos Santoshttp://news.goldseek.com/FeaturedPR/1317823211.php

Galore Resource is preparing to begin a ground magnetic geophysical survey to help identify drilltargets at their Dos Santos exploration project in northern Zacatecas, Mexico. Galore has theoption to earn 100% of Dos Santos, which has two prospective projects with large underexploredareas along the contact of igneous and sedimentary rocks at El Alamo and Los Gemelos. Trenchingat El Alamo found 54 meters of 0.97 g/t gold, and a vein at Los Gemolos assayed 34.3 g/t goldacross 1.7 meters near an artisanal mine and mill. Dos Santos is located in the historic Conceptiondel Oro mining district adjacent to Goldcorps Camino Rojo deposit, and is about 35 km from the

major miners Penasquito mine

Gold Resource Corp. Increases Q3 Production by 87% - Approx. 25,200Gold eq.http://news.goldseek.com/FeaturedPR/1317961403.php

Gold Resource Corp. announced that their El Augila Project in Mexico forecasts Q3 metalproduction ending in September has increased by 87% from the previous quarter, Q2 2011. Themine began commercial production in July, 2010 and has now reached an annual production rateof over 100,000 AuEq ounces per annum. They are on target to produce about 75,000 ounces

AuEq in 2011 and are ramping up to their designed production rate of 140,000 ounces AuEq per

annum in 2012. This new quarterly production record is attributed to increased head grades at theArista Mine, plus optimizations at the mill that have increased recovery, and is a quantity thatestablishes Gold Resource Corp. as a significant gold producer.
http://news.goldseek.com/FeaturedPR/1317736522.phphttp://news.goldseek.com/FeaturedPR/1317737386.phphttp://news.goldseek.com/FeaturedPR/1317823211.phphttp://news.goldseek.com/FeaturedPR/1317961403.phphttp://news.goldseek.com/FeaturedPR/1317961403.phphttp://news.goldseek.com/FeaturedPR/1317823211.phphttp://news.goldseek.com/FeaturedPR/1317737386.phphttp://news.goldseek.com/FeaturedPR/1317736522.php


22/26


Gold Resource Corporation Declares Monthly $0.05 Dividendhttp://news.goldseek.com/FeaturedPR/1317849842.php

COLORADO SPRINGS, CO -- Gold Resource Corporation (NYSE Amex:GORO) declares itsinstituted monthly dividend of $0.05 per common share for September payable on October 24,2011 to shareholders of record as of October 17, 2011. Gold Resource Corporation is a low-cost goldproducer with operations in southern Mexico.

Gold Resource Corporation commenced Commercial Production on July 1, 2010 from its El AguilaProject's operations in the southern state of Oaxaca, Mexico. This is the fifteenth dividend in asmany months of commercial production and ninth of 2011. This dividend increases the totaldividends declared since commencing Commercial Production to $0.53 per share to date ($0.35for 2011), returning over $28 million to the owners of the Company, its shareholders.

Northern Gold Reports Results for Seven Garrcon Deposit Drill Holes-Intersects 202 Meters at 0.33 g/t and 55 Meters at 0.97 g/t http://news.goldseek.com/FeaturedPR/1317824553.php

Northern Gold Mining has released 7 more holes from their Garrcon deposit in Ontario, for a totalof almost 9,000 meters in 30 holes. The cross section below and table of assays in the news showthese infill holes continue finding long intervals of surface mineable gold grades similar tosurrounding holes. Geostatistically, this continuity and tighter hole spacing should help increasethe resource confidence and category.

More cross-sections of drill holes at the Garrison deposit similar to the one included below can befound on the companys website:http://www.northerngold.ca/files/Garrcon-Cross-Sections.pdf
http://news.goldseek.com/FeaturedPR/1317849842.phphttp://finance.yahoo.com/q?s=GOROhttp://finance.yahoo.com/q?s=GOROhttp://finance.yahoo.com/q?s=GOROhttp://news.goldseek.com/FeaturedPR/1317824553.phphttp://www.northerngold.ca/files/Garrcon-Cross-Sections.pdfhttp://www.northerngold.ca/files/Garrcon-Cross-Sections.pdfhttp://news.goldseek.com/FeaturedPR/1317824553.phphttp://finance.yahoo.com/q?s=GOROhttp://news.goldseek.com/FeaturedPR/1317849842.php


23/26


Eurasian Minerals Identifies Bedrock Sources of Gold Mineralizationand Adds to Property Position at Koonenberry Gold Project, Australiahttp://news.goldseek.com/FeaturedPR/1317922848.php

Eurasian Minerals Inc. announced they have discovered gold in an outcrop at their prospective early stageKoonenberry Gold Project in Australia. This 2,360 square kilometer property contains numerous goldoccurrences along a 100 km long belt of favorable rocks. A rock chip sampling survey has found 8.71 g/tgold in a vein outcrop that contains visible gold. The companys geologists have noticed that rocks at thisgreen field exploration project have some geological similarities to the nearby Victorian Goldfields, whichhave produced over 80 million ounces of gold from many famous historic mining districts such as Ballaratand Bendigo.

Eurasians Koonenberry project is located in the Province of New South Wales near the eastern edge of theBroken Hill Block. This nearby rock unit hosts the world class silver and lead mines built by Broken HillProprietary Co. Ltd. in the late 1880s. Today BHP Billiton is the worlds largest diversified mining company.
http://news.goldseek.com/FeaturedPR/1317922848.phphttp://news.goldseek.com/FeaturedPR/1317922848.php


24/26


Gold Stock PortfolioSymbol Entry Price Current Price Return

ANV 5.43 37.34 588% Strong Long-Term Buy

AU 39.79 41.16 3% Long-Term Buy

FCX 45.7 36.03 -21% Long-Term Buy

GFI 16.94 15.32 -10% Strong Long-Term BuyGG 30.92 47.62 54% Strong Long-Term Buy

GOLD 17.21 101.37 489% Hold

NG 11.07 7.07 -36% Long-Term Buy

Juniors & Exploration StocksSymbol Entry Price Current Price Return

BAT.v 2.55 2.39 -6% STRONG BUY - REPORT (June, 2011)

BRD.to 1.58 1.13 -28% Strong Long-Term Buy

EST.v 0.65 0.67 3% Strong Long-Term Buy

FAU.v 0.40 0.36 -10% NEW BUY - Junior Gold Producer

GORO 1.20 19.38 1515% Strong Long-Term BuyMD.v 1.75 1.5 -14% Strong Long-Term Buy

MRO.V 0.85 0.46 -46% Strong Long-Term Buy

NGM.V 0.40 0.315 -21% Strong Buy - Report Pending

PVG.to 9.80 9.95 2% Strong Long-Term Buy

TLR 0.68 0.69 1% Strong Long-Term Buy

TMM.v 0.75 2.9 287% Strong buy on pullbacks


25/26


Consultation & Restructuring Service

For the last few years, Julian Phillips has been a consultant with the Gerson LehmanGroup based in Austin Texas. During this time he has spent many hours educating anddiscussing a full range of topics on Gold, Silver and Platinum with some of the worlds

leading institutions, from Wall Street to Hong Kong, from the U.K. to South Africa.

This service will now be offered to subscribers at the rate of $250 for a 30 minuteconsultation and $450 for a one-hour consultation. To take advantage of this opportunity, please follow thesteps below.

1. Prepare and forward a list of questions to him the day before the consultation via

2. [email protected]

3. Julian will then accept the questions, unless beyond his knowledge.

4. The consultation will answer the questions received and give additional information so time isutilized most effectively.

5. Payment must be made prior to a consultation throughwww.GoldForecaster.comvia the paymentplatform.

6. Send an e-mail arranging the time for a consultation [he is based in the same time-zone as Paris[GMT +2 hours].

7. Once arranged and confirmed, phone him on + 27 11 849 4205He reserves the right to reject anyrequest for a consultation.

Structure yourself against Exchange & Capital Controls beforethe major disruptions.

Great efforts are being made to hold up the USD$, markets and the system, but there is still time to takeaction to protect your investments from the reach of drowning governments and markets.

We at GoldForecaster.comare well experienced in the means to lower ones exposure to Capital Controls

in ones country. Please contact us for this service through the [email protected] ifyou wish see if we can assist you to avoid the dangers of Capital Controls. It is a service we offer outside thenewsletter and will be handled on an individual basis to ensure privacy. It is a fee-based service.

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26/26

* Legal Notice / DisclaimerThis document is not and should not be construed as an offer to sell orthe solicitation of an offer to purchase or subscribe for any investment.Gold Forecaster - Global Watch / Julian D. W. Phillips / Peter Spina,have based this document on information obtained from sources itbelieves to be reliable but which it has not independently verified; GoldForecaster - Global Watch / Julian D. W. Phillips / Peter Spina make noguarantee, representation or warranty and accepts no responsibility orliability as to its accuracy or completeness. Expressions of opinion arethose of Gold Forecaster - Global Watch / Julian D. W. Phillips / PeterSpina only and are subject to change without notice. Gold Forecaster -Global Watch / Julian D. W. Phillips / Peter Spina assume no warranty,

liability or guarantee for the current relevance, correctness orcompleteness of any information provided within this Report and will notbe held liable for the consequence of reliance upon any opinion orstatement contained herein or any omission. Furthermore, we assumeno liability for any direct or indirect loss or damage or, in particular, forlost profit, which you may incur as a result of the use and existence ofthe information, provided within this Report.

* DisclosureThe owner, editor, writer and publisher and their associates are not responsible for errors or omissions. The author of this report is not aregistered financial advisor. Readers should not view this material as offering investment related advice. Authors have taken precautions toensure accuracy of information provided. Information collected and presented are from what is perceived as reliable sources, but since theinformation source(s) are beyond our control, no representation or guarantee is made that it is complete or accurate. The reader acceptsinformation on the condition that errors or omissions shall not be made the basis for any claim, demand or cause for action. Past results are notnecessarily indicative of future results. Any statements non-factual in nature constitute only current opinions, which are subject to change. Theinformation presented in stock reports are not a specific buy or sell recommendation and is presented solely for informationalpurposes only. The author/publisher may or may not have a position in the securities and/or options relating thereto, & may makepurchases and/or sales of these securities relating thereto from time to time in the open market or otherwise outside of the tradingtimeframe listed above. Nothing contained herein constitutes a representation by the publisher, nor a solicitation for the purchase orsale of securities & therefore information, nor opinions expressed, shall be construed as a solicitation to buy or sell any stock, futuresor options contract mentioned herein. Investors are advised to obtain the advice of a qualified financial & investment advisor beforeentering any financial transaction.

GF338[1] Gold Report

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Transcript of GF338[1] Gold Report