Dear Jim,

I find myself even more bullish on gold than usual at this juncture. Although we have been bullish on gold for many years and have been very grateful for your wisdom and guidance on gold and many other areas, today I see a confluence of positive fundamental factors for gold from many regions. These are fundamental building blocks to help reach technical price objectives that you have outlined.

May I start with Europe and later write on other regions .

Although I understand that gold may have short term technical resistance at some higher levels, the fundamental background for gold and the argument for much increased demand for gold from Europe is stronger than it has been in decades.

We believe that a new wave of demand for gold is developing in Europe and will create substantial rises in price. Things look increasingly difficult for the European bond markets and European banks after the recent stress tests of European banks.

Even with very loose terms, 10 banks failed. More distressed debt will have to be sold by these and many other borderline stressed banks. Further, the paper they hold has not yet been marked down in value as it should be. This argues for further distressed debt sales. European investors seeing the problems in their banking system are opting for gold and will continue to make gold an ever larger part of their portfolios. With a de-levering and unstable banking system, any wise European will need to increase the proportion of gold in his/her personal investment portfolio. Professional investors from Europe are under even more pressure to add the stability and protection of gold to portfolios. This process of gold acquisition has been underway and we believe that it will accelerate.

In addition to holding gold and gold shares we are short European banks for those clients that sell short. We expect many more days of crisis on European sovereign debt before the euro loses some members who cannot take the pressure of remaining in the Euro and meeting the requirements for economic austerity that Germany will expect. Gold is of course the best instrument for investors to protect themselves from a decline in the value of the Euro, the Euro community and the sovereign debt crisis in that continent.

Respectfully yours,

Monty Guild
www.GuildInvestment.com