Gold Forecaster - Global Watch
Gold as a Currency... Exchange Traded Funds in 2006

Julian D.W. Phillips
January 5, 2006

Excerpts from the current double-large "Gold Forecaster - Global Watch."

Gold as a currency!
We have seen gold move from a discredited relic, through to linked to the €, on to a separate currency itself. This is not a short-term condition but a re-establishment of gold in its role as money, defining trust between all, even enemies. For the last 60 years the world has been expected to trust paper currencies as money. This has been in the interests of Government and Bankers as it heightens the level of flexibility amongst money and gives control over money [including money owned by you] to banks and to government. This system works, only so long as governments and banks act in such a way as to give the same reliability to paper money as is inherent on gold. Once it fails to do so people begin to lose confidence in it and those who manage it. We are experiencing this fall in confidence right now and will do so as long as governments and banks undermine such confidence, globally!

In India we have the complete definition of gold used as a store of wealth and as an alternative money. There, individuals have never developed trust in the Rupee, because the government and its official, supported by the banks, constantly seek to exert their power and government over it in a manner unacceptable to the Indian community as a whole. Is this where gold is headed in the future in the global monetary system, where nations have interests not friends? Such a trend will exponentially increase volatility and the value of the gold price!

Exchange Traded Funds in 2006
Earlier this year we forecast that the amounts invested in the Exchange Traded funds would rise as the gold price rose. This has proved to be the case. Surges in buying have accompanied the times when the gold price jumped. We forecast this pattern would persist for the foreseeable future. As an example it is reported that streetTRACKS Gold Shares Trust increased its holdings in the last week, as the gold price rose by 18.58 tonnes of gold. Over 12 tonnes of that increase was reported Tuesday and Wednesday (12/27-28). This is more than the gold sold by the Central Banks of the Central Bank Gold Agreement.

The latest statistics from the Exchange Traded Funds show confirm this. The five gold funds [the four developed under the Gold Bullion Council's efforts and Barclays iShares] currently hold 347 tonnes of gold in trust, up 70 tonnes in the last three months, in line with the moves in the gold price. Indeed, the growth in gold held by the E.T.F. s well describes the level of brand new investment interest in gold. At close to 10% of newly mined gold levels these volumes will tip the balance of demand over supply just by themselves!

We forecast ongoing growth in these quantities to far higher levels, perhaps even doubling in the next two years. Institutional demand not only in the United States, but across the globe can now enter the gold market as it has never done before. The ceiling on the volumes that could come from this source is far greater than we imagine. To emphasize the point, please note that this demand was not in the market in the 1970's or '80's. It is brand new! They come with one notable feature, which must be borne in mind in future; they will be far more price-sensitive than traditional investment demand.

In our latest issue, we have made our forecasts for Gold, Silver and Platinum and our favored Gold and Silver and Platinum shares for 2006.

January 05, 2006
Julian D.W. Phillips

321gold Inc