Market Summary —
December 2006

The four major precious metals — gold, silver, platinum, and palladium — started strong in December but gave up gains mid-month on news of a strengthening dollar. Gold and silver led the decline, with the per ounce price of gold dipping to a 45-day low of $613.10 and silver spot sliding to $12.37. Platinum also fell sharply, plummeting to a low of $1,099.50. Palladium suffered less from the mid-December downturn, losing less than 3% before finding stable ground near $320. All of these precious metals stabilized during the third week of December and finished the month strong. Boosted by a weaker forecast for the dollar, gold saw the biggest gains, ending 2006 23% ahead of last year. Silver followed gold upward, closing the year at $12.85 per ounce. Platinum finished the year trading near $1,139, rising sharply on higher demand. Finally, palladium spot gained nearly $10 to touch $335 during the final trading session of the year. News of an expected surge in demand for palladium from the auto industry is reported to have driven its final rally.

December Spot Price Summary (U.S. Dollars)
	Silver	Gold	Palladium	Platinum
High	$14.22	$649.90	$337.50	$1196.00
Low	$12.37	$613.10	$322.50	$1099.50
Open	$14.00	$647.90	$331.00	$1181.00
Close	$12.85	$635.30	$335.00	$1139.00

Current Metals Pricing>>

CONTENTS

	Market Summary - December 2006
	Ross Hansen: Déjà Vu in 2006?
	David Morgan: What a Year for Silver And Other Precious Metals!
	Mark Burgess: Applying the Gold/Silver Ratio
	Precious Metals Worldwide

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CHARTS

The following charts display the daily low and high spot price of each metal for the month of December, 2006. Source: Northwest Territorial Mint spot prices as posted at nwtmintbullion.com.

The following charts display the daily spot price range of each metal for the six months ending December, 2006.

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Déjà Vu in 2006? — How Oil, Politics, and the Dollar Shaped the Precious Metals Market — Again
by Ross Hansen

As a new year begins, it's hard not to think about change. We all saw, heard, and read about new political movements, new world leaders, new crises, and new economic developments in 2006. And if you tracked the performance of gold, silver, and the other precious metals over the past year, chances are you saw just how consequential these factors were in influencing the prices of these commodities. But is this anything new? Or is it the continuation of a well-established pattern in the precious metals market? As many analysts have suggested, this past year may well prove the old axiom that the more things change, the more they stay the same.

A quick scan of the headlines from 2006 points to three factors in particular, which played a decisive role in shaping the precious metals market in 2006: the price of oil, political upheaval, and the status of the U.S. dollar.

Oil's Dramatic Rise and Fall in 2006
This past summer, oil peaked at a record price of $78.40 per barrel. In response to this news, gold spot jumped nearly 5% in a single trading session and trended high until the price of oil cooled during the last few weeks of the summer. By the end of August, the price of crude oil had softened considerably, placing downward pressure on gold and other precious metals. As many experts have pointed out, this closely parallels the situation in the early 1980s, when skyrocketing oil prices caused gold futures to surge to $873. As was the case then, shortly after the price of gold soared on higher oil, it lost much of its gains on news of lower oil prices.

A Year Full of Fireworks
Whether it was the outbreak of war between Israel and Lebanon, North Korea's surprise nuclear missile tests, or the increasingly aggressive rhetoric emanating from Tehran, 2006 was certainly a year marked by political upheaval throughout the world. Each of these events (as well as many others) placed positive pressure on the price of gold and the other precious metals this past year. At the beginning of July, for example, the price of gold was hovering near $615 per ounce. As tensions mounted between Israel and Lebanon, gold spot shot up to $675. The price of silver followed, gaining nearly 4% mid-month on the news. A look back at the last several decades reveals that this is a well established trend – precious metals typically rise in value in response to global crises.

The Sinking Dollar
The story over the last several months has been about how poorly the dollar has performed against rival currencies, especially the euro and the Chinese yuan. In fact, the dollar declined 8.1% in 2006 against a basket of six currencies, marking the fourth year of decline in the past five years. This has caused many to look to alternative forms of investment, such as precious metals. Many experts are attributing gold's 23% rise in price over last year to the dollar's weak performance in 2006. During another extended period of dollar decline in the early 1970s, gold also climbed steadily, as investors flocked to its relative stability.

It's clear then that oil, politics, and the U.S. dollar each influenced precious metal pricing this past year. But while shifts up and down in the precious metals market were certainly connected to contemporary issues and events, they seem to reflect patterns seen throughout recent history. How these trends will affect precious metals in 2007 remains to be seen. But, many commodities experts have already stated that the three factors mentioned in this article – oil, politics, and the U.S. dollar – will function as the pivots on which precious metal prices turn in the new year.

Ross B. Hansen
CEO, Northwest Territorial Mint

Ross Hansen is the founder and CEO of Northwest Territorial Mint and has more than 30 years of experience as a precious metals trader and broker.

This post-holiday period offers a great time to review the previous year and look ahead to what will be the significant events affecting the precious metals market in the coming months.

It was again surprising how well silver performed when compared to other precious metal investments. Silver increased by 26% in 2005 and was equal to both the AMEX Gold BUGS (Basket of Unhedged Gold Stocks) Index (HUI) and the Philadelphia Gold and Silver Index (XAU), all without the added risk that stock investing entails. In other words, by simply owning silver itself, you had accomplished a return rate equal to both the HUI and the XAU.

Here is where it gets interesting. At the time this article was written, spot silver was up more than 45% for 2006, the HUI was up 22.6% on the year, and the XAU had gained 11.6%. So for two years now, buying physical silver has been a superior investment choice to taking positions in either the HUI or the XAU. In fact, silver doubled the HUI and outperformed the XAU by a factor of four.

So investors in physical metal, especially silver, really do not have to concern themselves with whether they have kept pace with their gold and silver stock investing friends. For the most part, they have actually done better.

Clearly, the take-home message after analyzing the precious metals market in 2006 is this: ownership of physical silver is the cornerstone of any serious precious metals portfolio.

To learn more about the value of owning real silver and other tangible precious metal assets, I encourage you to come see me at the 2007 Vancouver Resource Investment Conference. I will be conducting two workshops at the event: one open to all attendees and another exclusively for subscribers to the Morgan Report, my monthly newsletter.

This year's event features an impressive lineup of speakers who will address a wide range of topics, including direct investment in publicly-traded resource companies, speculative investing, oil and gas exploration, the global resource outlook for 2007, and much more. If you're able to join us, please stop by and say "hello" and let me know you read about this event in Northwest Territorial Mint Precious Metals Monthly. I hope to see you there.

Until next month,
Get real, buy real,
David Morgan

We highly encourage all of our readers to visit and become familiar with David Morgan's website www.silver-investor.com, the world's leading source for serious investors. Add yourself to his free e-mail list. The first thing you will receive — for free — is the "Ten Rules of Silver Investing," written several years ago for The Global-Investor Book of Investing Rules: Invaluable Advice from 150 Master Investors, published in the United Kingdom. These rules are pithy, timeless, and will pay big dividends to new investors and seasoned professionals alike. You can opt out of the list at any time, but we doubt you will. Being on his list is a way to be certain you can closely follow the silver story and big economic picture.

Applying the Gold/Silver Ratio
by Mark Burgess

In the previous article in this series about the gold/silver ratio, I provided an example to help illustrate the straightforward simplicity of this concept. To summarize for those who may have missed the last few articles on this topic, the gold/silver ratio refers to the quantity of silver (in Troy ounces) required to purchase an ounce of gold. In previous articles, I have pointed out how it's possible to leverage the changing gold/silver ratio to increase the size of your precious metal holdings, thus increasing the overall value of your investment.

In this month's article, I will provide another example, drawn again from my own experience of trading precious metals. Over a ten-month period from June of 2003 to April of 2004, I made a monthly purchase of silver, buying it each month as I watched it rise in price from $5.50 to $8.50 per ounce.

After accumulating a sufficient quantity of silver, I set half of it aside as my "core" investment and have since used the other half to periodically trade for gold, depending on the current gold/silver ratio. Since April of 2004, I have been able to capitalize several times on shifts in the gold/silver ratio. In the last three quarters of 2004, I earned a 24% return; in 2005, my investment grew by 14%; and over the past year, I realized a gain of 19% gain.

How Is This Possible?

As I've mentioned in previous articles, the mechanics behind the gold/silver ratio (and the reason why it can be such an effective strategy) are easy to understand and apply. First, I made my initial investment in silver. I calculated my average cost over the ten-month period mentioned above to be approximately $6.70 per ounce. Then, I set the target values for the gold/silver ratio at which I would trade a portion of my silver for gold. When the ratio reached my initial target value of 50, I traded two-thirds of the silver I owned for gold. I then traded a portion of the gold I had gained for silver when the ratio dipped and converted the silver back into gold when the ratio increased.

I decided that my next ratio target point for the remaining one-third of my initial silver investment would be 40, a fairly low value based on its performance over the past decade. But, sure enough, when the first silver ETF was introduced in April of 2006 and silver spot jumped to a 25-year high, the ratio approached my ambitious target of 40. This provided an historic opportunity to maximize the leverage of my remaining silver. As the price of silver gained relative to gold, applying downward pressure on the gold/silver ratio, I was able to buy more gold (in terms of ounces) with the silver I owned.

Using this simple trading tool, my investment had increased 50% by April of 2006. Even after I factored in the initial cost of my investment, I had realized a net gain of approximately 20% in less than three years.

But the key thing to remember is that not only has the dollar quantity of my investment increased, but so has the quantity of the physical metal I own. With more and more metal, I have greater leverage for future investment. Of course, I could liquidate my holdings for cash at any time. But I am not aware of any other investment opportunities that would offer me the kind of returns I've seen over the last three years. And while volatility bedevils every market from time to time, I can rely on a trading system that is based in common sense and predicated on the proven long-term yields of precious metals.

Mark Burgess has been an active trader of precious metals for over 30 years.

Precious Metals Worldwide
News & Trends from Around the Globe

Gold Up 23% in 2006
Despite considerable volatility across the precious metals market in 2006, the price of gold was up 23% over last year. After reaching a 25-year high in May of 2006, gold spot entered a period of marked instability. Following a turbulent summer, gold finally found support in the $570 range in October, reemerging as a dollar hedge late in the year and climbing to near $650. Gold spot closed just above $510 in 2005. Many analysts predict that gold will continue to climb early in 2007, building off the December 2006 rally and residual uncertainty about the dollar, the U.S. housing market, and concern over the threat posed by Iran.

Dollar's Decline Gives Silver a Boost
The falling dollar certainly gave gold a lift in 2006. And now, many analysts are concluding that silver, which gained 45% on the year, also benefited from the dollar's protracted slump. They claim that a growing number of investors, looking to hedge their stock market holdings and other assets, have flocked to silver as a less expensive alternative to gold. They have stated that the combined impact of investors seeking ownership of physical silver and those who have taken a position in the silver exchange-traded fund is largely responsible for silver's dramatic rise in 2006.

New EU Emissions Standards Expected to Fuel Rise in Palladium
The European Union's Environment Commissioner, Stavros Dimos, announced in December that his department is seeking a 30% reduction in automobile emissions by 2020. Analysts expect that the added pressure on European auto manufacturers stemming from this goal will result in much higher demand across the board for palladium and platinum. Both metals are currently used in the production of catalytic converters and other emission control devices.