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Just as we had surmised would be the opening scenario for 2007, we kind of expected that Gold and Silver would likely bolt out of the starting gates, as soon as the New Year's trading opened, and sure enough thus far, that appears to be happening. No doubt helped by comments from Iran's Rafsanjani, basically declaring to all the World that nothing will stop Iran from developing its own nuclear program. We've used the terminology of Super-Trend, because both Gold and Silver appear to be exhibiting the early signs of possible developing very strong Super-Trends in each market, in particular because Gold has a very large post Christmas opening gap from which it has thus far moved relentlessly higher off of, over the waning days of 2006 and on into early 2007 and Silver appears to be following suit. With both markets starting to accelerate higher in what could turn out to be an enormously positive development for the precious metals markets should Gold surpass $650 and Silver manage to overcome the $13.60 or so level ~ $14.00, a potentially explosive upmove in all metals could ensue that might result in Gold and Silver running to new 26 year highs by the end of January or sometime in the first quarter.      Developing SuperTrends React to Underlying Fundamentals   This is the way Supertrends begin to unfold, often rising out of a fakeout correction such as the one we just had and also because gaps indicate unusually strong buying pressure or a fundamental change of circumstance and, as we already know, the sanctions against Iran were initiated right before Christmas and it appears as if Gold and Silver both reacted by opening and moving sharply higher on December 26 and with the post Christmas execution of Saddam Hussein and the rhetoric of retaliation and threat levels rising along with continued Palestinian unrest, the risk of some kind of crazy stunt or surprise attack on Israel, Europe or United States just ratcheted higher and even though such a scenario may take some time to unfold, our Supercycle and unfolding SuperTrend theory of increasingly higher prices for Gold and Silver, over the next few years and a super-devastating low for the US Dollar is likely to come into alignment until sometime in 2009 ~ 2010 and we could be looking at very substantially higher prices by then in all metals that frankly could leave most investors totally bewildered especially those who are not already heavily invested in Gold today. The evidence is growing for staggering upmoves in metals soon...      Trillion Dollar Killing Revisited   The other part of the Gold-Silver equation, is how the economy may impact both World stockmarkets and the US Dollar and Gold and Silver in the year ahead. There is a new angle to the Trillion Dollar Killing that we may not have fully espoused upon in our recent musings and that is how the rise in the price of Oil has actually enabled the Oil exporting nations to impose a tax on all Energy consuming nations of around One Trillion Dollars per year.   Over the past few years, these super petro-dollars have found their way into US Treasuries and Equities and just recently have begun flowing more intensely into emerging markets causing most of them to soar to new all-time record highs and this is actually creating the near perfect intensifyingly speculative nature of this huge wall of money that is looking for increasingly higher returns and the promise of such returns are likely to draw a larger and larger amount of that money into Gold and Silver and out of US Dollars and that's exactly what we want...       Recycled Petro-Dollars A Boon For Now...   Although, ordinarily the impact of this huge tax hike Trillion Dollar drain on consumer spending power could have spelled disaster for the World economy, such as occurred in 1975 under the Ford (R.I.P) administration, so far it hasn't yet occurred in this era. In part, due to a monstrous recycling of these petro super-dollars back into the US Economy initially and now the whole World's economy, that has continued to fuel almost mega-growth, thus far and has also created tremendous stimulus and growth to the oil exporting nations, in some cases bailing them out of decades long demise where they were dogged by deficits, due to multi-decade, extremely low oil prices.     High Oil Prices Have Helped OPEC Economies Too   By way of example, Saudi Arabia just recorded a $71 Billion Dollar surplus for 2006, enabling it to shed much of its deficit millstone it have had to endure, since past overspending during the series of previous Oil booms, from which it has taken a very long time to recover. Russia's reversal of fortune has been equally breathtaking, with its Saudi sized production and energy exports, it has become one of the fastest growing economies in the World and highest gaining market last year and maybe of all time since 1998. Mexico has also been on fire, with a run-away market that has risen five-fold since 2002 and with an economy that gains one Billion Dollars plus for every Dollar rise in the price of Oil, its fortunes have waxed strongly in recent years as has its foreign reserves grown.     A Sobering Assessment of Future Implications - The Coming Hangover?   And while this wild party may still have some time left in it the grim reality of the burden of a $1,000,000,000,000 Worldwide tax is bound to hit home sooner or later, as the double bubble of Internet and Housing Booms remain a potentially dangerous combination, that could come home to roost sometime in the years ahead, as a gradually worsening set of scenarios, including latently high inflation, begin to bite. On top of all this are the huge liabilities that the greatest generation of baby boomers represent, as they age further, without the safety-net many of them need, could put pressure on markets down the road... Our feeling is that the good times could still run for a while longer, as cyclically, we are still due for much more upside and significant upside could still exist, however nothing is cast in stone and just as a US Dollar is no longer invincible or invulnerable to decline, neither is a rising stockmarket in 2007, a laid-down mesaire. So, our cautious stance as per our recently highly acclaimed Triple-Decade effect and potential future impact is something that should be at the forefront of every investor's mind...     Triple Decade Impact Evidence Compelling - US Dollar Has to Fall Further to Reverse Economic Malaise   The Triple Decade Impact suggests that the in the years ahead could become a time, when Gold and Silver could manifest themselves dynamically higher, in a way that few can contemplate, as they adjust more realistically to the reality of overwhelming US debt and deficits becoming the ever-increasing burden weighing on US currency, as the economy has to finally to pay the piper for past sins of decades of mis-management and massive reflation especially over more recent years. And, while this may seem a daunting prospect for the US Economy it may turn out to be merely the medicine that is needed for the US Economy to adjust to a newer World where its economic power will have a lessening impact in Global terms, as the rest of the World continues to prosper and grow at a potentially faster rate than the US. Ultimately, that is a good thing for the USA. While the US carried the rest of the World over the past 10 years, as Japan and Germany were left out in the cold... In just the same way, as Canada and Australia and UK currencies were cut in half, Mexico's peso was decimated, and yet their economies have benefited tremendously in recent years and their currencies have followed suit, recovering much of their losses in the process. Just as Japan went through its intense currency pain falling from 1.26 to 0.68 and interest rates were cut to zero, such similar therapy can only bode well for the US, as its own wake-up call that its never ending deficits cannot continue to expand ad infinitum, could, by virtue of its re-adjusted currency, including a revaluation of the Chinese Yuan, bring things more in line and these new found benefits, including the New World Economic Order, this time including Japan and Germany, could carry the US through its metamorphosis from being the only engine driving World growth, to our recently espoused view of the World economy, akin to a 200 car or country train, with 5 major engines led by the US, China, India, Japan and Germany all pulling together, as they are all doing so unprecedentedly in the synchronized Global economy of today and the US in spite of its domestic led slowdown, is being carried aloft by a record Global growth rate, of between 5% and 10% in many countries.     Global Growth Trend is Very Strong - But for how much longer?   That is the predominant reason why Global and US Equities have been making new all time highs over the past few months and why this could continue for a good while longer. However, if the US Economy heats up too much this coming year, there is a chance that Bernanke could be forced to raise rates even further during 2007 but we would see this as likely only a temporary measure that might be inspired by a panic reaction to rising Gold prices.   In the meantime, in the event of a Global slowdown, interest rates could start coming down fairly rapidly and that is something we foresee happening, either sooner or later depending upon how things transpire and really as far as we can see, this is pretty much a win win situation for Gold and Silver. If interest rates do have to be raised it will likely be a re-run of 1978 ~ 1980 and could also be seen as a futile attempt to defend a plummeting US Dollar, should that be the case, or if rates are lowered the same could occur as what befell Japan in the latter part of the 1990's that ultimately led to a plummeting Yen and eventually near zero interest rates and then later Japan becoming a source of cheap capital, that helped kick-start and maintain the current Global recovery.     US Dollar Versus Chinese Yuan or Renminbi   Another major theme that could ultimately lead to a more balanced monetary World, and could help to maintain current or even higher levels of US growth and some increase in US competitiveness or even a possible reversal of the US trade deficit, might be seen in the US Dollar versus China's already rising Yuan. This is likely to become an even more dominant theme in the years ahead, with the eventual attendant benefits as described above. The sharp re-adjustment of the US versus the Euro-currencies in recent years has really put the US at an advantage and is one reason why US employment is at an all time high and along with its economy and markets is the envy of the World, versus Old Europe's perennially high unemployment and lagging although recently improving growth.     Anticipated Growth Versus Actual   In summary, the sharp and sustained rise in Equity markets and prices Worldwide, is likely to lead to a boosting of economic growth in 2007 and since stockmarkets are anticipatory by their very nature, as the economic news gets better and economies deliver on the promise of what markets have been forecasting, equities could suffer...   Could we still see a continuation of this multi-year expansion and consequent equity boom beyond what most investors are anticipating? We have alluded to the possibility of the Fed successfully engineering a mid-decade slowdown for some time now, so a soft landing or better, no landing could be the best of all Worlds and given the unprecedented synchronized Global expansion essentially puts us in uncharted territory nothing can be ruled out. The argument of the moment is: The Fed should already be lowering rates to maintain growth, while others state the Fed may need to maintain these high rates to stave off inflation. Perhaps the most intuitive approach, should be that the Fed adopt a pre-emptive policy to reduce rates in anticipation of slower growth in the years ahead.     Danger of High Interest Rates: A Stranglehold on the Economy   After all they started raising rates in 2004 consecutively for two years straight in anticipation of stronger growth and inflation and those numbers were manifested in the first quarter of 2005 at 5.6% with increasing inflation...   And, even though such an approach might be seen as throwing caution to the wind, common sense dictates that sooner or later the economy will slow and secondly, maintaining such high rates clearly acts like a brake on the economy, but what may not be so clearly understood is that rates have actually risen hundreds of percent from their lows near 1%, something that has not happened in decades and which derailed the Triple Decade Impact of near uninterrupted growth and basically created a decade of near hyperinflationary increases for Gold and Silver.      Need to Heed Japan's Lessons of the Past   In a way, the same thing happened with Japan's Central Bank following the collapse of their bubble back in 1989. By the early to mid-nineties, they thought they were out of the woods and ended up raising rates too high and then paid the price, as their economy imploded and not even lowering rates to near zero could save them. What has gone largely un-reported is how the US and World Economy can withstand what has in essence been a near five fold increase in rates and the steepest rise in interest rates in a generation and what impact this could have longer term especially on housing which is already a severely wounded bull just as the economy was back in 2000 when Greenspan over-raised rates and over-killed the economy. The economy is holding up and bearing up under the strain of what today are relatively speaking sky high rates versus just a few years ago, but for how long can this be sustained as those rates remain static at a minimum 5% plus. For a long time, we have hypothesized that just as markets tend to give buyers a second and often third chance to buy cheap or on pullbacks, so too rates would offer at least one more chance to procrastinators who failed to seize the opportunity last time around to re-finance their homes at dirt cheap rates, may still get another chance or two in the years ahead. While it could seem folly to blindly lower rates today, Bernanke knows that he cannot strangle economic growth too much or it will come back to haunt him should he have to re-initiate a new growth cycle and since the Fed's mandate is to maintain maximum possible growth with acceptable levels of inflation maintaining high rates could be detrimental.     An Economy Delicately Poised   As Churchill famously stated: Those who do not learn from history's mistakes are doomed to repeat them and arguably no-one knows that better than Ben Bernanke, who has vowed that he would never allow a depression of 1932 proportions to eventuate. But stranger things have happened and the mission-creep from an overzealous campaign against what we see as inevitably higher inflation, no matter what, barring a depression, he might as well throw in the towel and start lowering rates right away, as he will more likely be damned if he does and even more damned if he doesn't. The Oil exporters have already imposed a huge Trillion Dollar Tax hike on the World at large rich and poor alike, that is akin to a multiple rate hike in of itself. All we can say is: Knowing what happened in Japan and with current risks to housing how it could materially effect the economy should housing prices erode further, the boldest of moves and perhaps the smartest, would be to act pre-emptively and begin lowering rates immediately to stave off, what may be unforeseen consequences a year or two down the road. The real potential of double whammy housing and stockmarket contraction over a protracted period would not be a very welcome development for the American people and the rest of the World either and it would likely underscore the validity of our Triple Decade Impact theory, which basically dictates that after 25 ~ 30 years of growth and prosperity, a different and more difficult and potentially hyperinflationary period could lie ahead: That could last a while, like about 10 years or so... Funny how that fits in with the shorter end predictions of a 15 ~ 25 year commodity bull market forecast 7 years ago by Quantum Fund co-founder Jim Rogers (just about the most successful fund ever) and he's not the only one who is cautious on the longer term future... Peter Thiel, one of the most successful new hedge fund managers, feels the same way and therefore Ben Bernanke should take heed of these warnings.      Gold and Silver's Favored Future   Notwithstanding any of the above, the longer this expansion continues, most likely the better it will be for Gold and Silver and also high growth niche situations that we periodically focus on such as all-weather equities or the kinds of equities that are driven by powerful new Global demands such as alternate energy issues and suchlike. With Gold and Silver already in focus with their so far impressive start to 2007 many are asking the big question:   Will Gold make new all time highs in 2007? With an increasing number of significant Gold and Silver issues recently setting new all time highs, that might be puzzling to investors as to why this is happening. But just as Exxon Mobile set new all time highs in December against a backdrop of Oil prices sharply off their highs, the average Oil price for 2006 has remained at very high levels and thus values Exxon XOM and its reserves very highly. Exactly the same with Gold and Silver issues. Even though we are some way off the years highs in both Gold and Silver, resource issues rich in Gold and Silver are reflecting the very high average prices for Gold and Silver for the year at around $640 and $13, essentially not far from 26 year highs. The fact that we have closed the year near their all time highs in many Gold issues, has to bode exceptionally well for 2007 and suggests that physical Gold and Silver prices could rise substantially higher over the next several years as they have consolidated over 8 months. Any breakout over recently established highs could see an explosive upside move in precious metals during 2007. Trade Well From the Desk of Savant

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