Outlook for 2012

As 2011 wound down to its final days, traders tended to dump currency alternatives in favor of the flexibility of actual cash, as Europe's debt crisis dragged on. Precious metals, one of the hottest trades in commodities for much of the year, continued to lose favor. Sil­ver touched a 13-month low and plati­num fell to a fresh two year nadir.

Gold, which months before seemed unstoppable after setting a series of re­cord highs, sank to within $100/oz of the breakeven point for 2011, ending up 10% for 2011 at $1565.80.

Many observers expected the correc­tion to continue. But, that thinking was far from unanimous.

A rally in 2012

Gold prices will rally again in 2012 to reach $2,000 to $2,500 per ounce ac­cording to Sabine Schels, commodities strategist at Bank of America Merrill Lynch. Demand is still strong and gold is still seen as a safe haven, Schels said. "We see no let up in investor interest. Exchange traded fund levels continue to hold up." Gold will also benefit from a continued need for central banks in emerging markets to diversify their holdings, she said.

Peak over $1900?

Goldman Sachs analysts expect gold to average $1,810 over 2012 and to peak at over $1,900. The firm says little on the macro front has changed, going into the new year, with low interest rates and ongoing eurozone concerns likely to keep demand for gold high.

Citigroup is more bullish and in­creased its 2012 gold price forecast to an average of $1,950.The upgrade reflects the impact of global financial tension, expected to continue for the next 12 months.

A Positive View

Deutsche Bank sees gold drawing key support from negative real interest rates. Bank's "strongest conviction is

Barclay's anticipates a rebound in physical investment demand in 2012.

Purchases Doubled

Central bank gold purchases in the third quarter of 2011 were more than twice the gold purchased by the central banks in the second quarter, and almost seven times the amount bought a year earlier.

Totaling 148.4 metric tons, the gold buying by central banks was the most purchased in a quarter since the banks became net buyers in the second quarter of 2009, according to a World Gold Council report. Before 2009, central banks had been net sellers of gold bul­lion for about two decades.

Purchases by developing countries have been increasing in recent years as these nations diversify their holdings, in part as a reaction to the sovereign debt crises affecting traditional reserve cur­rencies.

Source: The Wall Street Journal

A platform for electronic trading of gold and silver has been launched in the Middle East Gulf region's lucrative pre­cious metals market.

Gold Arab Emirate (Gold.AE) pro­vides 24-hour, secure web-based bullion trading. Licensed by Dubai Multi Com­modities Center, Gold.AE provides spot trading of gold and silver bullion rang­ing from 1 ounce to lkg.

Source: TradeArabia

HSBC raised the silver price fore­cast for 2012 to $34, with an expecta­tion of strong investment demand and a growing interest in silver ETF's absorb­ing as much as 50 million ounces in

2012.

Source: Interactive Investor.co.uk

Bullion Redemption

Diversifies Portfolios

Research by New Frontier Advi­sors identifies gold as a diversifier and foundation asset in the portfolios of euro-based investors, especially in a time of heightened investment and currency risk.

The study found an optimal stra­tegic allocation to gold for euro­based investors ranged from 2-3% for low risk portfolios to as high as 10% for portfolios with a majority in equity assets. Gold adds significant diversifying power due to its low or negative correlation with most other assets. The study was commissioned by the World Gold Council.

Source: World Gold Council

Lexam VG Gold is encouraged by exploration results in the Buffalo An­kerite Project in the world-class Timmins gold camp in Ontario, Can­ada. Exploration, focused on expand­ing the project zone, yielded positive results including a finding of 12.69 grams per tonne over 4.1 meters.

In addition, recent drilling in the established Fuller Deposit gold zone has indicated a near surface, gold mineralized target. Historically, pro­duction at the Timmons Mining dis­trict has an average grade of 6.75 gpt, and produced 70 million ounces of gold.

A rare 1787 gold Brasher doubloon has sold in the U.S. for $7.41 million, one of the highest prices ever paid for a gold coin.

Minted by Ephraim Brasher, a gold­smith and neighbor of George Washington, the coin contains 26.66 grams of gold — slightly less than an ounce. Worth about $15 when it was minted, the gold content value today would be more than $!500.

The Brasher doubloon is considered the first American-made gold coin denomi­nated in dollars. The U S mint in Philadel­phia first began striking coins in the 1790's.

The doubloon as purchased by a Wall Street investment firm, according the Blanchard and Co., the coin and precious metals company that brokered the deal.

Source: Chicago Sun Times

Barrick Gold's two gold discoveries in Nevada represent the State's biggest min­ing story of the year, said Alan Coyner, ad­ministrator for the Nevada Division of Minerals. In September, Barrick found es­timated resources of nearly 3.5 mil­lion ounces of gold at its Red Hill and Goldrush claims, a few miles south­east of the company's flagship Cortez operation.

There are currently 20 major min­ing operations in the state. The cur­rent mining boom in Nevada far outstrips any historic gold mining boom in the state. More than 240 mil­lion ounces of gold have been mined in Nevada since the 1980's accord­ing to the state's geologist, Jon Price. Nevada mines produced 5.3 million ounces of gold in 2010, at a total value of $6.54 billion.Source: Northern Nevada Business Weekly

Mining Stocks Lag

traded $50 an ounce higher than in London.

China's demand has been surging as Chinese buy more gold jewellery and gold bars. Mr. Kendall predicted overall Chinese Imports of 470-490 tonnes for the year, up from 245 tonnes last year.

Source: Financial Times

Silver prices have been volatile in recent months as a slowing global economy has hurt industrial demand for the metal. On the upside, due to the unstable economy, HSBC analyst James Steel believes investor demand for silver as a safe haven asset could be on the upswing heading into the New Year. "Coin and bar demand is a growing component of the silver mar­ket," Steel said. "Demand for these products reflects widespread retail in­vestor concerns about inflation, eco­nomic uncertainty, fiscal profligacy and European sovereign-debt risks.

"Silver prices will reflect the inter­play of many factors. The single bull­ish factor will be renewed investor demand."

Source: Forbes. corn

A research team from the EPFL in Switzerland, with support from Swiss watchmaker Hublot, have created a very hard high-quality gold. The new gold is both extremely hard and 18-karat gold, said Andreas Morten­sen, a metallurgy professor at the EPFL. Hublot filed for a patent on the new gold composite. The EPFL team used baron carbide, a ceramic that's one of the hardest materials in the world. Harder to the touch than other gold, the new gold looks and feels dis­tinctive. It has a darker hue.

Arizona State University profes­sor of materials science, Nikhilesh Chawla said, "they have come up with a very nice material that has the luster of gold but has the strength of other, stronger metals. It tries to give you the best of both worlds.

Source: Discovery, corn

Short Takes

EU Debt Crisis Quiets Markets

The ongoing European Union debt crisis appeared to hold the gold and silver mar­kets hostage as traders and investors waited for developments and trading stayed near steady levels in the closing month of the year. Most markets were not straying far from unchanged, with trading moving in a narrow range.

Source: Forbes. corn

Silver to Shine in 2012

If history is about to repeat itself, in­vestors should be paying more attention to silver. In the later part of the 1970's pre­cious metals bull market, gold gained over 700%, but it was silver that soared

1400%.

Silver is the second- most-useful com­modity, with over 10,000 uses. According to the Silver Institute, . Silver's industrial applications accounted for almost half of silver's demand in 2010. But that may not be the case anymore. "What's going to drive the price of silver is investor de­mand," says Mike Maloney, author of "Guide to Investing in Gold and Silver: Protect Your Financial Future." "When gold gets too expensive for the public, they switch their preference to silver. This is what happened in the late '70s and early '80's. Silver lagged gold, and then ex­ploded when gold got too expensive."

This is supported by figures published by The Silver Institute. Investment de­mand as a portion of total demand for sil­ver has grown for the past two years and accounted for a quarter of total demand in

2010.

Source: Interactive Investor.co.uk

Not Safe in Panic?

By mid-December, gold was down 9.8% for the month. The sell-off had cut $171 off the price, leaving bullion at $1,574.60 a troy ounce —lowest closing price since July 12. Worries about Europe's fail­ure to find a solution to its sover­eign-debt had pushed the euro below $1.30, and had investors selling gold in favor of other bunker assets — nota­bly U.S. Treasuries and the U.S. dol­lar.

"The big picture really shows me that gold is trading as a risk asset," said Adam Grimes, chief investment officer at Waverly Advisors, LLC. Gold's decline is driven by various forces, analysts said. Some investors wanted to lock in gains — gold was still up 11% for the year — and the ris­ing dollar puts downward pressure on gold futures. There is also the con­cern that gold may not provide pro­tection if the rest of the market is ducking for cover.

Companies To

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