October 6, 2004

October 6, 2004


Canada, the northern neighbor of the U.S., land of natural resources and much untrammeled beauty, is the subject of this part of our memo today. In our opinion, Canada is the best situated of all countries to benefit from the current events unfolding in the world today.

Canada does not have a large population, nor is it aggressively militant enough to attract interest from terrorists. It is not economically powerful enough to have numerous jealous enemies, nor is it interested in dominating world economics or politics. It is just happy to cruise smoothly along under the U.S. defense umbrella and never make a lot of enemies.

Canada finds itself in a wonderful position; abundant natural resources, huge deposits of natural gas, oil shale and oil, gold, silver, timber, coal, as well as many other metals and minerals. Canada has many products that are in demand in China and the emerging world, as well as in the developed world.

Is it any wonder then that the Canadian dollar recently broke out to a multi-year high versus the U.S. dollar and seems to us to be ready to continue its ascent versus the greenback?

We like the fundamental and technical attributes of the Canadian currency and continue to believe in its potential for further appreciation.


Gold is returning to favor slowly and steadily and we expect the metals and the shares to retain their strength and add to it in coming months. The period of seasonal weakness for gold has passed and the fundamental background continues to improve. Central Bank sales are not so certain as in the past, and although some central banks will undoubtedly sell, others are notably absent from the list of sellers.

The head of the Russian Central bank recently admitted that gold price is rigged. Further, the primary elements of gold price support are intact; I am referring to the continued and growing U.S. balance of payments, trade and current account deficits. Nothing has changed, and only time has passed. In the not too distant future, gold will once again begin a substantial up move and the gold shares, Canadian and others, will continue to provide profits to wise holders. I am looking closely at smaller producers listed on Canadian exchanges.

I consider Jim Sinclair the world’s premier wise man on the issue of gold and associated financial events. He has been more insightful, sophisticated and knowledgeable than anyone else of whom I am aware. This includes all central bankers and finance ministers past and present. His web site, www.JSMINESET.com, has an astounding array of information and insights.