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Learning from History to Reform Wall Street

In his weekly address, President Obama applauded the House for passing financial reform legislation and called on the Senate to continue working toward meaningful reform that stands up for consumers,  sets clear rules of the road for businesses and investors and restores a sense of responsibility and accountability to both Wall Street and Washington.

Dear Members,

For the last six months, we have been a big supporter of gold, silver and resource stocks. Since March, during the historical bottoming of the markets, we told our readers to follow the smart money and load up on resource plays:

"The big players in the investment business have all come to play ball on the resource sector's home court. Do you want to be sitting in the nosebleeds when the game begins or do you want a spot in the starting line up?" - Playing Ball with Resources April 5, 2009

At that time, we were shunned by many. We were told the bottom hasn't arrived; that the uncertainties in the markets were too great to be placing any bets. To add insult to injury, we were told by some analysts that investing in these plays  - especially the juniors - was plain stupid, as financing for these companies was improbable.

To some degree, they were right. Many companies folded during that time. But those who made it past the few rough months...Well, just take a look at the one exchange dominated by resource and mining plays, the TSX Venture:

TSX Venture Chart
Take a look at the two companies we have continually supported:

Teck Resources (TSX: TCK.B)

Teck Resources Chart

Ivanhoe Mines (TSX: IVN)

Ivanhoe Mines Chart

Just imagine for one second that you had invested in either of these companies. Well the big money has. Over $45 billion were put into mining and resource plays at that time. For example, our mention of Kinross Gold when it was nearing its 52-week low of $16.52 has since bounced back to hit highs of over $25.

Needless to say, we are still confident and bullish on resource and mining plays moving forward.

There's no doubt that uncertainty remains prominent in the markets. Looking at the numbers alone, the stock market really shouldn't be at these levels and many are already preparing for a correction.

But think about it this way. If the bubble was to burst once again, there could be another opportunity to participate in the starting line up of another resource bang. If it doesn't, there is still plenty of upside potential in this sector, especially in gold and silver-related plays. (see the Report that Shocked the World)

Follow the Smart Money

We always like to follow the smart money and the big players when making our investment decisions. This year, we followed the smart money that was pouring into the resource sector when all else had failed and the results speak for themselves.

We are not about to change that approach.

Some of the world's best money managers have already taken large positions in gold. Big names like John Paulson, Paul Tudor Jones,  and George Soros, are among the many already invested gold. The list of smart money and big-time hedge fund managers investing in gold runs deep.

They're not alone.

Life insurance companies are doing the same. Northwestern Mutual Life Insurance Co., the third-largest U.S. life insurer by 2008 sales, has bought gold for the first time in the company's 152-year history to hedge against further asset declines according to a report from Bloomberg.

Goldman Sachs, probably the biggest player of them all, is predicting that gold will shoot past $1,400/ounce by 2011 on the basis that central banks are becoming net buyers of gold, that gold ETFs are continuing to buy substantial volumes, and that real estate prices will remain depressed.

Right now Central banks are drastically curtailing their sales of gold and many are continuing to buy large quantities. For the first time in 22 years, these banks are net buyers of gold. According to a report by precious-metals research firm GFMS, for the first time since 1987, central banks around the world bought more gold in the second quarter than they sold. They are also bound by an agreement that imposes limits on sales.

Never Forget China

China, whose foreign currency reserves holds $2 Trillion with only 2% in gold (vs. a 10% worldwide average), is still looking to buy large quantities - especially on the dips.

The Chinese are seeing the value of their foreign currency reserves lose value every day and are doing everything in their power to keep their Yuan down. If China makes the logical move to increase its gold reserves and reduce its fiat currency exposure to even just the worldwide average, gold prices could move substantially higher.

China's state-owned Assets Supervision and Administration Commission (Ji Xiaonan, the Chief) said, "we recommend China increase its gold reserves to 6,000 metric tons within three-to-five years and possibly to 10,000 tons in eight to 10 years."

According to the calculations of David Rosenberg, Former Chief North American Economist at Bank of America-Merrill Lynch in New York:

"...if China were to lift their gold reserves to 5,000 tonnes, which is equivalent to about two years of global production, that shift in demand would boost the gold price by $800/oz to around $2,000 ($1,978) based on our models. If China moves towards 10,000 tonnes, well, that would end up taking the gold price to $2,623/ounce if our calculations are in the ball-park."

China isn't the only country continuing to buy gold. India just recently bought 200 metric tons of gold from the IMF, at $1,045 an ounce.

Even small countries such as Sri Lanka and Mauritius are buying large quantities of gold.

Where is the Gold?

While everyone is chasing gold to protect themselves from a falling Dollar, producers aren't keeping up. Gold production was down 3% last year, and it was flat in the most recent quarter. Although mining companies are spending more on new production, especially in China and Russia, that is not enough to offset dwindling output from mature mines. Don't forget China has drastically increased its gold production outputs making it the largest gold producing country.

Aaron Regent, CEO of the worlds largest gold producer Barrick, said that global output has been falling by roughly one million ounces a year since the start of the decade. Total mine supply has dropped by 10% as ore quality erodes, implying that the roaring bull market of the last eight years may have further to run. He continued to say that, "Production peaked around 2000 and it has been in decline ever since, and we forecast that decline to continue. It is increasingly difficult to find ore."

There are simply too many concrete reasons why gold and precious metals will most likely continue their run.

The Opportunity

In the short-term, gold could have its dips (as with every tradable investment) fuelled by a declining stock market which we believe should not be where it is today. If the stock market drops, the Dollar will more than likely rise sending gold down with it.

In the end, however, gold should prevail as inflation kicks into high gear within the next 5 years.

The road to the top will not be a straight line so it only makes sense to take advantage of the inevitable corrections.

Buy on the dips, and sell on the bounces.

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Featured News:
Stornoway Announces Revised NI 43-101 Mineral Resource Estimate for Renard Contained Carats More Than Tripled; Deposit Still Open - Click to Read
Zacks Investment: Unemployment Shocker and the Market

Click to PlayNovember's Employment Situation report was much better than expected. Discover what it means and how to invest now. 

Click the video to play.

More Zacks videos:

> New Top 5 Sectors
> Value Stock Picks - December 7, 2009
> Aggressive Growth Stock Picks - December 8, 2009
Featured News:
Ivanhoe Mines Announces Construction Budget of US$758 Million For Development Work in 2010 at Oyu Tolgoi Mining Complex in Mongolia - Click to Read
Casey Research

A Hot Future for Geothermal

Co-Written by Marin Katusa & Marc Bustin, Editors of Casey's Energy Report

Marin KatusaCapturing energy from the earth's heat is pretty easy pickin's for geologically-active areas of the world like Iceland, Indonesia, and Chile. In some locations, hot fluids are so near the earth's surface that heat from naturally-occurring hot fluids can be directly circulated through buildings for heating. Iceland, in particular, takes advantage of this low-hanging energy fruit.

However, in most areas of the world where geothermal energy is captured, the heat is used to generate electricity.

Conventional Geothermal Energy

Unlike some of the more common alternative energies - hydro, solar, and wind - geothermal is impervious to weather conditions. This independence means it provides excellent base load electricity.

Currently all commercial geothermal electricity is generated by so-called conventional systems, whereby naturally- occurring hot water or steam is accessed at comparatively shallow depths in areas of very high geothermal gradient. Wells are commonly drilled to depths on the order of 2 km. The water or steam they produce is used to spin turbines that in turn generate electricity.

The success and sustainability of a geothermal reservoir...

Click Here to Continue Reading

More Casey Research Articles

> How to Predict the Price of Gold
> Canadian Gold Juniors Soar - Should You Buy Now?

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Technical Trading with Harry Boxer

Click to PlayHarry Boxer has more than 40 years of Wall Street investment and technical analysis experience, including eight years on Wall Street as chief technical analyst with three brokerage firms.

Watch the video as he walks you through his
technical analysis on China Marine Food Group, JAZZ Pharmaceuticals, Lithua International, Netlist, Kandi Tech Group, Asia Info Holdings, and a whole bunch of other stocks. To see more videos, Click Here.

Harry BoxerLike his analysis?

Click Here to receive a Free 15-Day Trial to Harry Boxer's Real-Time Technical Trading Diary for Equedia members.
Featured News:
Alamos Gold Inc. Signs Agreement for the Purchase of Agi Dagi and Kirazli Gold Projects in Northwestern Turkey - Click to Read
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Timmins Gold Makes First Gold Pour at San Francisco Mine - Click to Read
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Northern Gold Hits 56.1 Metres of 2.14 g/t Gold Including 3.4 Metres of 16.9 g/t and 1.2 Metres of 36.6 g/t on the Garrison Property East of Timmins - Click to Read
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In This Issue
Stornoway Announces Revised NI 43-101
Unemployment Shocker and the Market
Ivanhoe Mines Announces Construction Budget
A Hot Future for Geothermal
Gold Wheaton Completes Gold Purchase Agreement
Technical Trading Videos with Harry Boxer
Alamos Gold Signs Agreement for the Purchase of Agi Dagi and Kirazli Gold Projects
Equedia Newest Feature: Embed!
Timmins Gold Makes First Gold Pour
Equedia Tips- Markets Tab
Northern Gold Hits on Garrison Property
Build Your Network
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Forward-Looking Statements
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Disclaimer and Disclosure

Regarding Historical Data: All resource estimates presented in this report for Silvermex other than their  San Marcial project are historical and were prepared before the introduction of National Instrument 43-101 - Standards of Disclosure for Mineral Projects ("NI 43-101").

Historical resource estimates may not be relied upon until they are confirmed using methods and standards that comply with those required by NI 43-101. The potential for the exploration target to replicate the historical resource, or to reach the indicated range of tonnages, is conceptual and is based on historical reports, which cite approximately lengths, widths, depths, grades and projections of the historical resource. Readers are cautioned that a qualified person has not completed sufficient exploration, test work or examination of past work to define a resource that is currently compliant with NI 43-101 for historical resource estimates in the Silvermex Reports. We further caution that there is a risk that exploration and test work will not result in the delineation of such a currently compliant resource. Neither Silvermex nor its personnel treat the historical resource estimate or the historical data as defining a current mineral resource, as defined under NI 43-101, nor do they rely upon the estimate or the data for evaluation purposes; however, these data are considered relevant and will be used to guide exploration as the Company develops new data to support a current mineral/resource estimate in accordance with the requirements of NI 43-101.

For more information on Silvermex Resources, investors should review the Company's registered filings that are available at www,sedar.com.

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