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0920 EST Monday March 27 2006

Good Morning: The fear of a World running out of resources may be part of the reason Gold, Silver, Platinum, Palladium and Copper have all soared so much within recent days and the same outlook for Crude Oil and the Energy Complex may have helped to propel this sector higher also. Facts are the growing supply demand imbalances in many metals are beginning to bite and their impact is being increasingly reflected thru higher prices. We have on many occasions now compared 1976, which saw the beginning of massive rises in Gold and Silver prices over the next four years with today, 30 years later, in a 2006 that looks very much like a deja vu re-run in the making that could see prices in 2010, that might be beyond most investor's imaginations. Remember, during 1976 Gold was an innocent enough looking $125 or so, before it soared 7 fold to $875 over the next 3 plus years, meanwhile Silver rose from $4.25 to $50 a nearly 12 fold gain for that metal.

For a long time last year, it was somewhat perplexing for many, to fathom how and why oil prices were rising so steeply and often on both seemingly good as well as bad news. Generally, when a bull market keeps climbing relentlessly, there is an ultimate explanation, event or even series of events, that sooner or later are manifested and those events turned out to be Hurricanes Katrina and Rita and to some extent other disruptions such as Nigeria and Iraq, that were not expected to be such a problem. When markets such as the Energy Sector last year and precious metals over the past 9 months or so are moving relentlessly higher, there is something coming to justify it, that may not be readily apparent today and the fact is, these markets could rise relentlessly for years, just as Gold and Silver did in the late 1970's and even though the US Dollar may not yet be reacting, record US Trade and Current Account Deficits may well also be looming problems.

Plus with potential for another coming Global Energy crunch, the more it begins to dawn that there will likely be such an increasingly giant chasm between supply and demand, especially if the World usage starts consuming towards 85 to 90 million barrels per day, or even the 100 million barrels per day expected to occur within the next 20 years. Right now, the producing nations are pumping virtually all they can and even though the Saudis would like to think they can increase output by several million additional barrels per day, experts are seriously questioning that and instead, are coming to the conclusion that World production is pretty much maxxed out at current levels and that any supply disruptions going forward, could likely impact prices rather dramatically and a continuing rise in the fear factor of same could also.

Perhaps one of the smartest moves the Bush Administration made was to top up the Strategic Petroleum Reserves to around maximum capacity of 700 Million barrels plus, especially since most of it was done at much lower prices than those of today, but the problem is that the Chinese may be about to start increasingly stockpiling their own reserves, along with the European Community and many others also. That alone could be enough to create an increasing tightness in supplies that many analysts and suppliers may not have factored in. Then on top of that, there are some fields that are declining in output or nearing the end of their productive lives such as in the North Sea region.

On the plus side, there is the growing importance and contribution from Tar Sands, but the big question is, can new discoveries and new fields due to be brought on line, keep up with the growing demand over the next few years and what impact will any disruptions have on the already near record high prices of Oil today? Not even the promise of Ultra Clean Fuels from coal will begin to kick in before the end of the decade, an opportunity that has been totally squandered and unlikely to get seriously started soon even if we're already four years overdue.

And so, the Gold and Silver markets are already looking ahead to their own production demise, where the reliance of the deep producing mines of the past can no longer be relied upon ad infinitum. The growing demand from Billions of new consumers is likely to have a huge impact on supplies in the coming years and by the time the Olympics roll around in Beijing by 2008, Gold medals may be at record prices.


Four New Record High Closes Friday

In spite of the modest pullback in the major indices, in a particularly encouraging new development, at least four of the broadest indices set new all time record high closes Friday, including the S&P 400 MidCap, the S&P 600 IJS, the Russell 2000 and the Value Line Index.

The fact that these original or early trendsetters that have been making new alltime highs now for nigh on two and a half years and are once again leading the way higher, can only be construed as an increasingly promising and optimistic development as should they be joined again by the Banking Index, Dow Jones Composites, Dow Jones Transportations and Utilities and ultimately the Dow itself, it would have be increasingly bullish, just in the sheer numbers of indices hitting new record highs and many other indices hitting multi-year highs.

We really are in an extraordinary time where World Bourses for the most part are either at or near multi-year highs or new all time records and so the Synchronized Global Economic Boom and Stock Market Advances are without historical precedent en masse and momentum.

As we commented Friday, we felt that the US Dollar was approaching a fairly critical level that could decide whether this is the Dollar's last stand, or whether we are in a whole new bull leg for the US unit. And that it seemed to us, that were it to break down from here, that could be it for a very long time. On Friday, the US units suffered a decisive and sharp downward break... Anything much lower could be terminal.

Trade Well
From the Desk of Savant

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