www.pmtrading.

com

IS MY WIFE CHEATING ON ME?

If our wives tell us: Honey, I will be having a girls night out every couple of weeks with my friends; do we as men believe this means she is looking to be unfaithful? Do we believe that all the fundamental reasons for us being together have suddenly changed? Or do we simply conclude that she may just actually want to spend some times with her friends? APRIL 2013 The current gold markets are no different. People are panicking and although I can understand speculators dumping their futures contracts, I am hoping that the long term investors that bought gold for fundamental reasons review the whole situation before making a hasty decision.
COUNTRY TONNES

DARE 2 SHARE GOLD REPORT!

OFFICIAL GOLD HOLDINGS*

% OF RESERVES VALUE (USD BN)

Am I saying that investors should buy more gold or that there isnt going to be further corrections? Absolutely not. What I am saying though is take some time to remember the fundamental reasons behind your initial love for gold and evaluate if these have now changed for you.

Cyprus Greece Italy Portugal

13.9 111.9 2451.8 382.5 281.6

61.9% 82.0% 71.3% 89.6% 28.2%

$ $ $ $ $

0.6 4.9 106.4 16.6 12.2

HAVE THE FUNDAMENTALS CHANGED?

Nobody knows exactly what caused this sudden panic in the market. The most common reasons given are Chinas disappointing GDP figures (7.7% instead of 8%), some say it was due to the FOMC indicating an end to QE, some blame it on Cyprus which indicates a trend that countries in distress may have to sell their gold to get support from the ECB. But all these questions focus on the past when in fact we should be asking ourselves what does this imply for the future? As we always indicated, in times of crisis, gold is the preferred currency. It isnt a coincidence that the ECB focused immediately on Cyprus gold as collateral, But what does this imply for the other countries in distress? Wouldnt it be unfair to impose this on Cyprus and not on Greece, Spain, Portugal or even Italy? It is this risk that the market is anticipating which has put a lot of selling pressure on gold, however nobody is asking the most important question of all: AND THEN WHAT?! I dont think many people realise how big the proportion of countries reserves are in gold and ironically how little they are worth when compared to their debt. The tables to the right analyse this on the basis of a gold price of USD 1,350/oz and draw 3 important conclusions: 1) 2) 3) With the exception of Spain these countries have over 60% of their foreign reserves in Gold The gold they hold which is such a large part of their portfolio only covers 0.9% to 5.6% of their debt Gold may be the last bullet in their ammunition with no alternative long term solution in sight

Spain

* World Gold Council

PUBLIC DEBT TO GDP 2012 (ESTIMATED BY IMF)*

COUNTRY PUBLIC DEBT TO GDP 2012 GDP (USD BN) VALUE (USD BN)

Cyprus Greece Italy Portugal Spain

87.3% 170.7% 126.3% 119.1% 90.7%

$ $

24.7 319.5

$ $

21.55 545.48

$ 1'860.7 $ 248.2

$ 2'350.68 $ 295.49

$ 1'437.1

$ 1'303.34

* IMF, World Economic Outlook Databse

GOLD PUBLIC DEBT RATIO

COUNTRY GOLD PUBLIC DEBT GOLD/DEBT RATIO

Cyprus Greece Italy Portugal S pain

$ $ $ $ $

0.6 4.9 106.4 16.6 12.2

$ $ $ $ $

22 545 2'351 295 1'303

2.8% 0.9% 4.5% 5.6% 0.9%

Contact Us pmtradingAG

The question therefore remains: AND THEN WHAT?

Bahnhofstrasse 9 6341 Baar Switzerland

The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of the company. In addition, the accuracy, timeliness or completeness of any provided information, cannot be controlled or guaranteed.

Tel: +41 (0)41 760 20 82 Email: Christian.wehbe@pmtrading.com

www.pmtrading.com

I AM SICK AND TIRED OF HEARING ABOUT GOLD!

I believe this is the thought that some of my friends have but dont dare tell me. The worst is I understand it. Governments have been printing money like mad but yet there is no inflation. We say were in a crisis yet the equity markets are at new peaks. Gold is supposed to be a crisis hedge yet over the past 12 months it has been correlated with risk. So right now 4 words sum up the frustration of the gold investors out there: SHOW ME THE MONEY! Unfortunately there is little I can say to appease these frustrations and believe me I am amongst the most frustrated. This is when it helps to go out for a walk, clear my head and look at the basics. Not economical basics but human basics. Although the above are all correct statements I am not sure they are accurate. Yes the Dow is trading at new highs surpassing its pre-criss levels, but let me ask you this: How many of your friends have bought a new Porsche in the past 24 months? Or how many Christian Louboutin shoes did your wife buy last year (if any)? Do you spend extra time when choosing the hotel for your holiday to find the best deal? Do you cringe sometimes when you get the bill for an expensive dinner? All these are factors that tell me things arent quite as rosy as they seem to be. In 2005 when things were booming none of these were issues, let alone a concern for anyone. Yet today in midst of an equity bull market, people havent felt this tight in at least a decade. The worst is, here were only talking about the upper middle class and the wealthy, which only represents the minority of our society. For everyone else the situation is far worse and nobody would dare say times are good. So in my opinion the equity markets of today have completely disconnected with reality. As for the gold markets they have also lost their sense of reality We all know that the futures markets are leveraged up approx. 100 to 1 versus physical, well what we are seeing now is the washing out of these speculators as one stop-loss after another is getting executed. This appears as a negative in the short term but is a clear positive for the future gold price as we realise there is only 1/100 th in existence of what is actually being traded through the markets today. Are we saying you should take this opportunity to buy gold? In our opinion this is not the right moment unless you are looking to average out your purchase cost over a longer period of time. Right now its that time your marriage where you let your wife enjoy her time with her friends out, without worrying that she is abandoning you and instead invite the boys over for a game of poker. Gold is never a huge proportion of a persons portfolio. Often it is an allocation of 1-5% of an investor and should act as an insurance. The insurance hasnt triggered yet as things still need to get far worse. We need this paper gold out of the system which has in essence printed gold. Once this is complete then gold can return to its fundamental value and ironically enough wont be correlated with risk as much anymore. This was the unfortunate effect futures contracts and paper gold had on the gold price. I understand that all this may give very little immediate relief to our readers especially since the price is likely to go lower than the current levels. However, what we are asking our investors and friends is to contact us should this volatility make you nervous. In the end nobody knows what is truly going to happen, but we should all make a decision and form an opinion. In my opinion the fundamentals havent changed and the ECB only proved how important gold is as a commodity in times of crisis. As for the risk of inflation we will gladly cover that again in an upcoming letter, but it still breaks down to the same point I covered last year. All the inflation is sitting as bank reserves at the Fed. In essence of the USD 2 trillion that were printed through QE1 and QE2, the reserves at the Fed just happened to simultaneously increase by USD 1.6 trillion. In other words banks preferred increasing their reserves with the Fed instead of lending it to the market. This has now been sitting there and represents 70% of M1! So once banks start lending, it will be at the cost of inflation and very high interest rates. But this is for another day and for now please dont hesitate to call or write to me directly to discuss any topics related to the current crisis, or even if it is to say: SHOW ME THE MONEY! As always yours truly,

Chrigi

The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of the company. In addition, the accuracy, timeliness or completeness of any provided information, cannot be controlled or guaranteed.