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

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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

Gold

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


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

$109

DiscoverySpeculation 1 - 2 Years

ProductionRevaluation2 - 3 Years

REALITY SETS IN

PRODUCTIONDECISION

CONFIRMED DEPOSITBecomes Tier 3

Company

START UPBecomes Tier 2

CompanySH

ARE

PRIC

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


Recommended Reading

www.wiley.com Promotion Code: VA276


All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.

The AMEX Gold Bugs Index (HUI) is a modified equal-dollar weighted index of companies involvedin major gold mining. The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies. The Reuters/Jefferies CRB Index is an unweightedgeometric average of commodity price levels relative to the base year average price. The Goldman Sachs Commodity Index is a composite index of commodity sector returns, representing an unleveraged, long-only investment in commodity futures that is broadly diversified across the spectrum of commodities. Standard deviation is a measure of the dispersion of a set of data from its mean. The more spread apart the data, the higher the deviation. Standard deviation is also known as historical volatility.

The following securities mentioned in the presentation were held by one or more of U.S. Global Investors family of funds as of 12/31/08: Newmont Mining Corp, Western Goldfields, New Gold, Kinross, GLD.

The opinions of our guest presenters are theirs and do not necessarily reflect those of U.S. Global Investors.

Disclosures


www.usfunds.com1.800.US.FUNDS

www.weldononline.com

www.caseyresearch.com

Thank You For Attending Today’s Webcast.

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