U.S. Global Investors€¦ · Indian Rupee Depreciation Not Yet at ... Gold vs. Dollar. ......

www.usfunds.com

U.S. Global InvestorsSearching for Opportunities, Managing Risk

March 200909-143

Frank E. HolmesCEO and Chief Investment Officer,U.S. Global Investors

Gregory WeldonWeldon Financial

David Galland and Louis JamesCasey Research

What’s Driving Gold?

2www.usfunds.com 03/2009 09-143

Frank HolmesCEO and chief investment officer of U.S. Global Investors

Gregory Weldon Founder of Weldon Financial

Casey Research

Weldon Financial

Topics

• Mega-Easy Global Monetary Policy

• Wealth Deflation in U.S. Intensifying

• Global Trade and Export Revenue Deflation = Currency Crisis

• Japanese Yen May Be Next Currency ‘Domino’

• Gold and Silver Technical and Inter-Market Overview

Narrow Money Supply Growth EXPLOSION

Narrow Money Supply and Balance Sheet Growth Appears ‘Unsustainable,’ and Fed is Already ‘Retrenching’

Bank of England has Cut Rates to RECORD LOW, Shifting the Focus Towards Quantitative Easing. Bank of Canada Cut Rates to 0.50%, and Discusses Quantitative Easing

Swiss Money Supply EXPLOSION

Swiss Short Rates Back to Historic Lows at 0.50%

Central Bank of China Cuts Rates to RECORD LOW

Even Japanese Money Supply Growth is Accelerating

Trillions of Lost Net Wealth in US Residential Real-Estate Wipes Out YEARS of Wealth Accumulation and is Compounded by HUGE Equity Withdrawal and Borrowing … at Peak Prices

US Net Worth Posts RECORD Decline in 3Q …Portending Horrifying 4Q Deflation

Debt Levels Remain at RECORD HIGH, Following Years of Parabolic Growth in Post-Gold-Standard Era

Home Prices Accelerating Lower. Five-Year Average is Trending Lower for the First Time in the Post-Gold-Standard Era !!!

Price Deflation Intensifying Beyond ‘Historic’ Levels

Virulent Wealth Deflation in Existing Homes

Soaring, Chronic Unemployment Significantly Deflates Wage Driven Income (and, Reduces Government Tax Revenue)

Unprecedented Period of Personal Income DEFLATION ???

“Consumer Cocoon” … as Consumption Collapses

Savings Rate Begins to Rise … But …

Global Exports Collapsing … Polish Exports are DEFLATING After Violating Multi-Year Growth Uptrend

The Polish Currency Undergoing MASSIVE Devaluation

Sixty Percent of Polish Mortgages are ‘Denominated-in’Swiss Franc … Zloty Devaluation Versus CHF is Problematic

Polish Household Credit Bubble …About to Burst ???

Poland’s Sovereign Credit at Risk …CDS Soars to NEW HIGH

Polish Zloty has COLLAPSED Versus Gold, amid DEEP Deflation in Currency “Purchasing Power”

Indian Rupee Depreciation Not Yet at Levels Associated with Crisis ‘Lows’

Gold ‘Priced-in’ Rupee Flirting with 50,000 Rupee Per Ounce

Japanese Exports Collapse … Have Deflated by (-) $42 billion PER MONTH Since July

String of Japanese Trade Deficits are UNPRECEDENTED in the Post-Gold-Standard Era

‘Room’ for Bank of Japan Rate Cut Stimulus is ‘Limited’ …in Terms of the ‘Zero’ Fed Funds Rate in the US

The Weight of Monetary Stimulus May Fall on The Japanese Yen

The Credit Credibility of the World’s Largest Creditor Nation is at Risk

Higher Interest Rates Would Pose Risk to Gold

Physical Gold has FAR Outperformed the Mining Sector

In Gold They ‘Trust’ … Versus ALL Paper

Gold at New All-Time High Versus ‘Stuff’

Is Gold ‘Signaling’ That Commodities Provide ‘Value’ … or … Is Gold ‘Overvalued’ ???

Crude Oil as ‘Cheap’ as EVER Relative to Gold

Gold Has Outperformed the ‘Industrial-Precious’Metal, Implying a Silver Equivalent Near $20

As Per the Gold-Silver Ratio, Silver Was Recently Trading at $5 on a ‘Gold Equivalent’ Basis

Technical Overview: Gold

Technical Overview: Silver

U.S. Global Investors

The critical drivers for gold are pointing in the same direction.

What’s Driving Gold?

Rotation of Commodities

Sources: Steele and U.S. Global Research

Gold 60-Day % Change (March 1, 1994 through February 27, 2009)

Sources: Bloomberg, U.S. Global Research

Invest cash

Raise cash Raise cash

Invest cashInvest cash

Gold vs. Dollar 60-day % Chg Oscillator (Feb 26, 1999 thru Feb 27, 2009)

Sources: Bloomberg, U.S. Global Research

Gold vs. Dollar

Government Policy Model —Precursor for Change

G7 Countries

E7 Countries

Monetary Policy

U.S. M2 Money SupplyBiggest Economy in the World

Source: U.S. Global Research

China M2 Money SupplyMost Populated Country in the World

Source: U.S. Global Research

The Five M’s for Gold Miners

• Market Cap

• Management

• Money

• Minerals

• Mine Lifecycle

The performance shown is hypothetical and does not necessarily reflect the performance of any U.S. Global Investors product.

DevelopmentInvestment Analysis

2 - 3 Years

876543210

DiscoverySpeculation 1 - 2 Years

ProductionRevaluation2 - 3 Years

REALITY SETS IN

PRODUCTIONDECISION

CONFIRMED DEPOSITBecomes Tier 3

Company

START UPBecomes Tier 2

CompanySH

E“HIGHER RISK”

“LOWER RISK”

Life Cycle of a Mining Share

Source: RBC Capital Markets

-60% -50% -40% -30% -20% -10% 0%

Property Ownership Dispute

Exchange Issues

Major Exploration Disappointment

Political Concerns

Operating Disappointment

Social License Concerns

Feasibility Disappointment

Major Project Delay

Env ironmental Concerns

Managing ExpectationsAvoiding D&D (Delay & Disappointment)

Casey Research

TSX-V vs. IS Stocks

The Gold Rules of Exploration Investing

• Keep portfolio allocations small

• Never fall in love with a stock

• Know exactly why you own each stock

• It isn’t a profit until you sell

• Know your companies

The Gold Rules of Exploration Investing

• Invest in private placements whenever possible

• Limit the number of your holdings

• Use volatility to your advantages

• Watch who you listen to

8 P’s of Exploration Company Analysis

• People

• Property

• Phinancing

• Paper

• Promotion

• Politics

• Push

• Price

U.S. Global Investors€¦ · Indian Rupee Depreciation Not Yet at ... Gold vs. Dollar. ......

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