As the Dow Jones registered new records day after day, with a little help from the Fed,

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Preston Rice
5 years ago
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1 May 2013 As the Dow Jones registered new records day after day, with a little help from the Fed, the precious metals markets faced an accelerated downward movement during the last few months, with a little help from the Fed. This downward trend ended in a crash of precious metal-related shares in mid- April. That these movements are the result of financial repression, is evidenced by statements from the former Assistant Secretary of the Treasury under Ronald Reagan, Paul C. Roberts. In an interview, he described why controlling the price of gold is so important to the U.S. The value of the dollar is threatened... they ve got to establish in people s minds that the dollar is the only safe place, not gold. Investors, savers and those who sought protection against the insane money creation of the past two years, are facing the very frustrating situation that it is precisely them that have lost money. This is creating great confusion. However, as the old JP Morgan said at the beginning of the 20th century, gold is money, all else is debt. Gold price still in rising trend +82% 16 mos 19 mos +162% 22 mos -29% % 60-22% The correction has lasted over 20 months, and has brought the price of gold down 29%. Despite this, the rising trend is still intact. After previous similar corrections, the price of gold rose 82% and 162%. Same purchasing power as 2,000 years ago Money systems come and go, but gold still has the same purchasing power as two thousand years ago. This is the reason why central bankers hate gold. Actually, they hate competition. Gold is the only money that they cannot create themselves. Gold has been the only constant factor over which (central) bankers have no control, for thousands of years. www.

A ball pushed too far below the surface of the water eventually can only move up The money that they could create, lost 80% of its purchasing power versus gold over the past twenty years, and 95% in

2 A ball pushed too far below the surface of the water eventually can only move up The money that they could create, lost 80% of its purchasing power versus gold over the past twenty years, and 95% in the last hundred years. This is why the flight to gold and silver has to be countered. Especially after Cyprus, savers worldwide were rudely awakened. In the same way as happened shortly after the Lehman crash, the price of gold was pushed down. Is it wise to invest in precious metals given that the markets are so obviously controlled? The answer is yes, because the price of gold has risen in value for the last 12 consecutive years. Despite all the opposition. Because gold has no counterparty risk, and cannot be printed, it will eventually be the only money that will survive this global currency devaluation with its purchasing power fully intact. For a Roman aureus gold coin, weighing just under eight grams, the Romans could buy four hundred liters of cheap wine. Nowadays, eight grams of gold is worth a little under 300 Euros. That gets you 150 bottles of cheap wine. There is, therefore, no reason to sell gold (or silver positions) at this time. During corrections we are presented with an opportunity to buy more ounces for less money. We continue unabated in accumulating as many ounces in the ground at the lowest prices possible. We do not believe we have a lot of time remaining. Gold attacks displayed graphically The price of gold fell on Friday 12th April 2013, because of enormous amounts of sell-orders during U.S. trading hours. Page 2 May 2013

3 Cyprus shook even the most naive of savers Cyprus The fact that initially even depositors with funds less than 100,000 Euros would suffer from the Cyprus bailout, shook even the most naive of savers. The flight to safe havens immediately accelerated. Bullion dealers worldwide reported that demand for bullion tripled instantly. A nightmare scenario for monetary authorities. The flight from paper to hard assets had to be curbed, in a similar way as was done after the Lehman collapse. Following the Cyprus rescue, market observers saw the pressure on precious metals mount and end in the attacks of Friday, 12th and Monday, 15th of April. At exactly the same time of day, two days in a row, huge amounts of gold and silver futures were dumped. In just two trading days, 1,000 tons of paper gold were sold, more than 30% of the annual world mine production. This pushed the price of gold below the major triple bottom of $1,540, leveling out more than $200 lower. The screenshot shows the enormous volumes used to push the gold price lower. This should have been the final blow in the War On Gold. Manipulation He who thinks that this manipulation is of recent conception, is mistaken. As early as 2002, Willem Middelkoop, founder of the Commodity Discovery Fund, wrote a trilogy for IEX about the manipulation of the gold market. The mainstream media, however, have only recently started reporting on the subject. Now that we know that financial repression, rather than fundamentals, caused the recent price movement, we have nothing to fear. A ball pushed too far underwater eventually can only move up. Meanwhile, the boomerang has returned, hitting the manipulators in their own faces. The crash of the gold and silver prices was the start of an unprecedented worldwide gold rush. Reports came from various countries that for every seller there were nine bullion buyers. The unprecedented physical demand seems to be the element that is now turning the tides. Just as the control over the gold and silver prices by the London Gold Pool came to an end in the late sixties of the last century, demand for gold bullion could once again lead future pricing. In the silver markets, we already seeing that the most common silver coins are only available at 40% premiums. This could very well be the beginning of the long overdue separation of paper and bullion prices. The highly regarded Canadian investor Eric Sprott earlier this year predicted a default of the COMEX silver futures before the end of He expects an instant doubling of the silver price once this occurs. If the current demand for bullion continues, a default is a very real possibility. Shanghai sold out Because less than 1% of the speculators in the U.S. demand physical delivery of their gold ounces, this market is relatively easy to manipulate through overloading it with waves of sell orders for paper gold. Since a couple of years, future contracts can also be traded through the Shanghai Gold Exchange for parties active in the local Chinese gold market. Unlike on the U.S. COMEX, as much as 10% of the gold contracts traded in Shanghai result in physical delivery. And guess what? In recent months, more physical gold is delivered in Shanghai than all the gold mines worldwide produce during the same period. Over the past 12 months, deliveries in Shanghai amounted to more than 2,500 tons of gold, while world mine production is around 2,800 tons. Oddly enough, this fact has not been published anywhere in the mainstream media (MSM). Page 3 May 2013

More physical gold is delivered in Shanghai than all the gold mines worldwide produce In late April, the Shanghai Gold Exchange was forced to report that its vaults were empty.

4 More physical gold is delivered in Shanghai than all the gold mines worldwide produce In late April, the Shanghai Gold Exchange was forced to report that its vaults were empty. Customers were told they had to reckon with a delivery time of at least several weeks, as additional supplies from London and Switzerland were being awaited. Producers in those countries are having to cope with greatly increased pressures on the existing production facilities, particularly since the demand from other parts of the gold market has also increased. Those who argue that hundreds of tons of gold ETF positions were sold recently, are correct. But analysis shows that these sales were mainly a consequence of falling gold prices, and not a cause of them. To put things in perspective, the estimated 300 tons that were sold by the ETFs only cover a few weeks of current Chinese demand. The announced sale of 10 tons of gold by Cyprus therefore makes no impact whatsoever on this extremely liquid market. This latter sale, however, was highlighted as the prime reason for the recent crash of the gold price by the MSM. In order to fill the huge demand from the rest of the world, Western central bank gold reserves will now need to be deployed. This sheds a completely different light on the fact that Germany has been told to wait seven years for repatriating the 300 tons of gold it stored in the U.S. World Gold Mine Production (WGP) vs. Shanghai Gold Exchange (SGE) physical deliveries The Shanghai Gold Exchange is now delivering more gold per month than the total gold mine production Page 4 May 2013

5 Silver-related positions already 25% of our portfolio Four-year cycle Analysis shows that there is a cycle bottom (and top) every four years. We saw gold mining stocks, the HUI index, bottom out at the end of 2000, in late 2004, in late 2008 and in late From this, we could extrapolate a next major top around After previous similar corrections, gold stocks recovered at least 300% within three years, each time. Selling now might be a mistake of historic proportions. HUI index bottoms every four years +417% +310% % The four-year cycle in gold mining shares is clearly visible. After each low, the basket of gold mining stocks (HUI index) increased at least 300% within three years. The expected increase may well coincide with news from China that they have accumulated vast amounts of gold to add to their official reserves. (Read about this in the previous Quarterly Update). We heard last month from a very reliable source that China intends to make its Renminbi a freely tradable currency within five years. On completion, this would remove all obstacles for the Chinese Renminbi to become a new world currency. Until now, no foreign central bank would buy Renminbis and add them to their central bank reserves. This will now change. To achieve their currency ambitions, China first wants to crank up its gold reserves to an internationally comparable level. As was set out in our last quarterly update, analysts expect China to announce they possess between 3,000 4,000 tons of gold (now stands at just over 1,000 tons), within a year. Page 5 May 2013

These factors may lead to a great scarcity of natural resources Demand The production of precious metals and other commodities remains under great pressure, as it is becoming increasingly difficult

6 These factors may lead to a great scarcity of natural resources Demand The production of precious metals and other commodities remains under great pressure, as it is becoming increasingly difficult to build new mines on time. Silver production, for example, increased only 1% last year. Gold production is just 2% above the 5-year average. With the collapse of part of the Bingham Canyon Mine in Utah, an important part of U.S. copper production and approximately 10% of U.S. silver production has come to a standstill. Several other new mining projects, primed to give a substantial boost to global silver production, have been affected by delays. It seems highly improbable that the production of key commodities will rise significantly in the coming years. As a result of the increasingly difficult conditions in the financial markets for exploration companies, exploration for new natural resources is also threatened to come to a standstill. Gold Sentiment Indicator (y-y% change) In the past decade, gold has not been this oversold. These factors combined may lead to a great scarcity of natural resources, especially after Mine production in gold, silver, platinum, palladium and uranium, is already having great difficulties in keeping up with demand. This summer we intend to investigate the market fundamentals of various metals in further detail. However, it is already clear that zinc production especially, is set to decline greatly after The closure of a number of major zinc mines also affects future silver production. 70% of silver is produced as a by-product of lead and zinc mines. After decades of having to fill the deficit in the silver market with the sale of silver from above-the-ground stocks, the situation will become critical in the coming years. At present, silver-related investments already account for 25% of our portfolio. We are therefore investigating how we can profit the most from these expected shortages. Page 6 May 2013

Outlook for the fund is now better than ever Market circumstances Many of the share price declines in recent months were due to the fact that investment funds in our sector were forced to sell shares

7 Outlook for the fund is now better than ever Market circumstances Many of the share price declines in recent months were due to the fact that investment funds in our sector were forced to sell shares to free up cash, as a consequence of the many redemptions by their investors. These sales took place in a market with few buyers, creating a negative spiral. The lower valuations of the funds led to additional outflow of capital, causing further cash needs the following month. This has helped drop the value of many companies below their cash values or book values. We have not seen this in 30 years. Many of these shares should rise % to get back to their average long-term valuations. The relatively high levels of insider buying of shares, similar to those seen in 2008, are confirmation we are near to a bottom in the market. During the first quarter, we have continued to strengthen our positions in producing companies at the expense of exploration companies. Copper mine halts production Because of the collapse of part of the Bingham Canyon Mine in Utah, a significant share of U.S. copper production has come to a standstill We have always been of the opinion that the authorities (i.e. the Fed), would continue to support the equity markets since they first started doing this after the crash of In addition, we expected a surge in demand for bullion would put a solid foundation under the gold price after the Lehman crash. Both scenarios turned out to be correct. What we didn t anticipate was that a strong correction in the gold and silver markets would lead to a crash in precious metal-related stocks. However, this situation gives us the opportunity to continue to gather as many ounces in the ground as possible, at fire sale prices. The outlook for our fund is now better than it has ever been the previous five years. Willem Middelkoop Page 7 May 2013

8 All information contained in this newsletter is provided by Commodity Discovery Management Ltd, the Manager of the Commodity Discovery Fund, based on information believed to be current and reliable. This newsletter is not intended as advice, but is for information purposes only. Despite the fact that the greatest care has been taken by the compiler, Commodity Discovery Management BV accepts no responsibility for decisions made based on this information. The information contained in this newsletter should therefore be regarded as indicative. If you are considering participating in the Commodity Discovery Fund based on the information provided here, we urge you to take proper note of the Offering Memorandum, the Essential Investor Information and other documents and information which are all available on the website of the Commodity Discovery Fund, The documents referred to on the website can be sent upon request. The Commodity Discovery Fund is an investment company (mutual fund fonds voor gemene rekening) under Dutch law. Commodity Discovery Management BV, the Fund Manager, is licensed by the Netherlands Authority for the Financial Markets (AFM) and is included in the register of the AFM. Past performance does not guarantee future results. Page 8 May 2013

Time to Mine for Gold Mining Opportunities?

SPECIAL GOLD REPORT Time to Mine for Gold Mining Opportunities? Have gold miners hit a bottom? Is there an attractive entry point? What are the drivers for a rebound? Since many gold companies plummeted