The third quarter saw a 9% year-on-year drop in gold demand to 916 tonnes, representing a value of about US$ 38 billion.

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1 Goldletter I N T E R N A T I O N A L the international independent information and advice bulletin for gold and related inves tments December 2017 Gold Market Outlook Marino G. Pieterse, publisher and editor Bitcoin mania affects investment status of gold With the World Gold Council having reported an 8-year low in gold demand as ETF inflows slowed sharply, it is the booming bitcoin demand which hurts the gold market severely in the second half of this year. As a result, my expectation that the gold price, with a price target of $ 1,400, would benefit from ongoing global political unrest in Q is not to be realized. Having reached a high of $ 1, on 8 September, the gold price weakened to a low of $ 1,240 on 12 December, a drop of 7%, compared to a price of $ 1, at the end of November The third quarter saw a 9% year-on-year drop in gold demand to 916 tonnes, representing a value of about US$ 38 billion. With the world total y-o-y of demand having dropped 3% from tonnes in Q to tonnes in Q3 2017, jewelry demand in India fell by 25% y-o-y to tonnes derailed by regulatory interventions, against China having backed its declining rend by a growth of 13% to tonnes, regaining its top position in demand globally. Investment demand was down 18% y-o-y from tonnes in Q to tonnes in Q Bar and coin demand increased y-o-y from tonnes to tonnes. While in India demand dropped from 40.1 tonnes to 31.0 tonnes, China showed an increase by 57% from 41.0 tonnes to 64.3 tonnes. Total global holdings of gold-backed ETFs grew just by 18.9 tonnes in Q compared to tonnes in Q Total AUM at end September was tonnes, representing a value of about US$ 97 billion - the highest since October last year. The fall in demand in gold-backed ETFs can not only be judged in connection with soaring stock markets benefitting from low interest rates, and president Trump s tax plan well received by the financial markets, but in particular is accounted for by the Bitcoin euphoria. With a rise in price in the 12 moths to November 30 by 1.773%, this brings the market value of the Bitcoin to nearly $ 170 billion, enhanced by 169 hedge funds that have invested in crypto currencies, up from 55 in August. Goldletter International 1 December 2017

2 The latest news is that the Bitcoin has received legitimacy as an asset you can trade, made possible following approval by the US Commodities AND Futures Trading Commission (CFTC), has begun trading on the major CBOF futures exchange in Chicago on 10 December 2017, allowing investors to bet on whether Bitcoin prices will rise or fall. As a result, the value has surged in the run-up to its futures debut, which saw it rise another 17% to above $ 18,000. It has to be recognized however, that the Bitcoin is not recognized by any country s central bank and has no universal recognized exchange rate. This actually means that in contrast to gold ETFs as a price-related financing instrument, I don t consider the Bitcoin mania as a serious monetary-based investment instrument, and gold ultimately to benefit from the Bitcoin mania to come to an end at today s record price level. Precious and base metals / oil and uranium prices (in US$) - period gold price related to total metal market complex 14 Dec. Year-end Change % Year-end Year-to-Year Year-end Year-end Year to Year Year-end / / to date (change %) (change %) Year to Year 2013/2012 (change %) Gold 1,251 1, , ,199 1, , Silver Palladium 1, Platinum ,210 1, , Copper 6,723 5, , ,359 7, ,915-7 Lead 2,473 1, , ,853 2, ,035 8 Nickel 11,140 10, , ,935 13, , Zinc 3,183 2, , ,167 2, ,035 3 Brent oil month price range: H $ (12/12/2017) L $ (21/06/2017) 2008: H $ (7/7) L $ (5/12) Uranium (U3O8) spot (11 Dec.) month price range: H $ (6/2/2017) L $ (14/12/2017) Long-term pre-fukushima 2011 (H) source: Goldletter International US Federal Reserve s rise of interest rates by 0.25% to a range of 1.25% to 1.5%, does not impact 10-year interest rate On 13 December 2017, the US Fed has raised interest rates by 0.25%, the third rate rise in 2017, which was widely expected. The shift in policy comes as the US economy gains strength. Officials boosted their economic forecasts and the Fed now forecasts a 2.5% growth in GDP in 2017 and 2018, due in part to planned cash cuts. The Fed said it anticipates three further increases in rates in 2018, unchanged from the previous forecast. The decision to raise interest rates, takes the Fed further away from the ultra-low rates put in place during the financial crisis of to boost economic activity. A majority of officials said that they expect interest rates above 2% will be appropriate next year. US economic output has increased at an annual rate of more than 3% in recent quarters, while the unemployment rate fell to 4.1% last month the lowest rate since Goldletter International 2 December 2017

3 The Fed s policy makers expect somewhat stronger growth than they did in September, that reflected a view of the committee that the reforms would stimulate consumer spending and business investment. But there has not been a change in what the Fed s policy makers think for the longer-term prospects. The middle of that range for long-term growth is unchanged at a rather modest 1.8%. Despite the acceleration in economic growth, members of the Federal Open Market Committee (FOMC) said they expect interest rate increases to remain gradual in part, a sign of ongoing concern that inflation has remained below the Fed s 2% target. The FOMC forecasts that the PEE inflation rate in the US will average at 1.6% in 2017, then increase to 1.9% in 2018 and stabilize at around 2% over This equals expected interest rates of at least 2% in Overview gold price versus HUI-Index Gold price Change Change in % in % 2017 December 14, , December 1, , November 1, , September , September 8 (high) , August , July , June , May , April , March , February , January , December , Volatile gold equity markets in 2017 As a result of the drop of the gold price by $ 100 or 9% from this year s high of $ 1,351 in early September, the HUI-index, which represents the world s major gold producers, lost 17% compared with its year s high of and now at stands at approximately the same level as at year-end This indicates that the gold equity markets have been very volatile in 2017, with both many plusses thanks to new discoveries and minuses often due to geopolitical tensions in emerging countries. As reflected in my shortlist of gold investment recommendations, it nevertheless showed a gain of 12.9% as at the end of November. ECB decides interest rate on the main financing operations will remain unchanged at 0.00% On 14 December 2017, the Government Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facilities and the deposit facility will remain unchanged at 0.00%, 0.025% and 0.40%, respectively. The Government Council expects the key ECB interest rates to remain at their present levels for an extended period, and well past the horizon of the net asset purchases. Regarding non-standard monetary policy measures, the Government Council confirms that from January 2018 it intends to continue to make net asset purchases under the asset purchase programme (APP), at a monthly pace of 30 billion, until the end of September 2018 or beyond if necessary, and in any case until the Government Council sees a sustained adjustment in inflation aim, of the outlook becomes less favorable. The economic expansion in the euro area is projected to remain robust, with growth stronger than previously expected and significantly above potential. Real GDP growth is projected to slow gradually from 2.4% in 2017 to 1.7% in 2020, as the effects of a number of factors supporting growth slowly fade away. In the EU, inflation is forecast to rise from 0.3% in 2016 to 1.8% in 2017 and 1.7% in Inflation in the euro area has recently picked up as the past drop of energy prices has recently given way to an increase. Having been very low over the past two years, inflation is now set to reach higher levels in 2018 and 2019, though still short of below, but close to 2% over the medium term. Overall, the European Commission expects inflation in the euro area to increase from 0.2% in 2016 to 1.8% in 2017 and 1.4% in Goldletter International 3 December 2017

4 Technical assumptions about interest rates, exchange rates and commodity prices Compared with the September 2017 projections, the technical assumptions include significantly higher oil prices in US dollars, but only minor changes to the exchange rate and other financial assumptions. Short-term rates refer to the 3-month EURIBOR, with market expectations derived from future rated. The methodology gives an average level for these short-term interest rates of -0.3% for 2017 and 2018, -0.1% for 2019 and 0.1% for The market expectations for euro area 10-year nominal government bond yields imply an average level of 1.1% in 2017 and 2018, 1.4% in 2019 and 1.7% in As regards commodity prices on the basis of the path implied by future markets, the price of a barrel of Brent crude oil is assumed to increase from US$ 54.3 in 2017 to US$ 61.6 in 2018, and to decline to US$ 58.9 in Considering the volatility of the commodity markets, I don t consider these predictions to be reliable as proved by regular adjustments throughout the years and undoubtedly also to be expected in future years. As an illustrative recent example in comparison with the September 2017 projections, oil prices in US dollars are 4.8% higher in 2017, 17.2% higher in 2018 and 11.0% higher in The prices of non-energy commodities in US dollars are assumed to rise substantially in 2017 and somewhat more moderately beyond. The same consideration applies to bilateral exchange rates, which are assumed to remain unchanged over the projected horizon at average levels, which implies an average exchange rate of US$ 1.13 per euro in 2017 and of US$ 1.17 per euro over , compared with US$ 1.18 in the September 2017 projections. The effective exchange rate of the euro against 38 trading parties is broadly unchanged from the September 2017 projections. Investment comments: Comparing economic growth, inflation rates and bilateral exchange rates, this confirms my view that the current exchange rate of the US$ per euro will probably go down to the already reached high for the dollar of US$ 1.04 in December Based on the estimated growth by the Fed for the US economy of 2.5% in 2017 and 2018, compared with GDP growth expected by the European Commission at 2.2% for the euro area and 2.3% for the EU economy in 2017 and at 2.1% in 2018 and 1.9% in 2019 for both the euro area and in the EU, this would justify a recovery of the dollar against the euro. A strengthening dollar not a stimulus for higher gold prices and together with slowing demand and emerging countries, and gold in particular not having a monetary function in China and India, in contrast to the 21 signatories to the 5-year Central Bank Gold Agreement since September 1999, these basic factors are in principal negative for the outlook for gold, enhanced by the Bitcoin mania. However, as commented in my earlier Market Outlooks, I do not expect fundamental aspects but intensifying global geopolitical tensions to dominate the price of gold in 2018, up to a level of at least $ 1,400, in conjunction with a 20% higher target for the HUI-index at 210. Goldletter International 4 December 2017

5 CALENDAR OF MINING EVENTS Goldletter International, Uraniumletter International and Rare Earths & Strategic Metals Letter International being Media Partner 2018 January nd Global Gold Dore Forum Dubai, United Arab Emirates January Mining Investment West Africa Accra, Ghana February 5-8 Investing in African Mining INDABA - Cape Town, South Africa February Mining Investment South America Buenos Aires, Argentina March 4-7 * PDAC International Convention Toronto, Canada March Mining Investment Asia - Singapore April 4 6 Mines and Money Asia Hong Kong April Mining Investment Botswana Gaborone, Botswana May * Russia & CIS Mining Summit Moscow May-June 30 1 WAMPEX West African Mining & Power Conference, Accra, Ghana June DRC Mining week Lubumbashi, Democratic Republic of Congo June ZIMEC 8 th Zambia Int. Mining Conference Lusaka, Zambia July * China Gold Congress Beijing, China October 8-9 The Mining Show Dubai November Kenya Mining Week - Nairobi, Kenya *Marino G. Pieterse speaker at this event Goldletter International 5 December 2017

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10 Media Partner events in 2018 Goldletter International 10 December 2017

11 Goldletter International a publication by Metal Commodities Investment Platform, the Netherlands Marino G. Pieterse, Publisher and Editor Information and investment comments are independently and thoroughly researched and believed correct. No guaranty of absolute accuracy can be given however. Investment decisions are fully made for own risk tel.: Chamber of Commerce marino.pieterse@metalcommodities-ip.com