Publisher’s Note:

It’s my pleasure to introduce you to the newest member of our Gold World team. His name is James West, and his track record rivals that of gold guru, Greg McCoach.

Like most of our editors, James’ background is quite colorful.

Having spent the bulk of his early life pursuing the dream of a professional athlete in first snowboarding and then skiing, an avalanche that left him stranded in the back country just behind Banff, Alberta’s famed Sunshine ski resort. That resulted in frozen feet, pre-empting any future pursuit of Olympic dreams.

With his Olympic dreams dashed, James focused on his other passion, investing in the exclusive world of junior natural resource stocks.

He wrote his first recommendation in November 2002 – a tiny, but emerging stock called Midway Gold Corporation (TSX.V:MDW), a Nevada focused junior then trading at $0.70. By the 3^rd of March, four months after his recommendation, investors cashed out at $1.88 for a quick gain of 169%!

But he didn’t stop there.

In January 2004, readers of Resource World Magazine were rewarded with a recommendation of Brazauro Resources (then called “Jaguar” Resources), trading at $0.37. By April 30^th the stock surged to $1.80, providing investors a return of 386% in just 4 months!

In November of 2004, he issued a buy recommendation for North American Tungsten Corporation, then trading at $0.17. . By June 16th of the following year, exuberant investors sold at $1.80, for a gain of 959% in just 7 months!

He recommended Norsemont Mining in May of 2005 at $0.78. It immediately took off and for investors who sold on January 16, 2006 at $4.44, a mind-blowing 469% gain in just 9 months!

In March of 2006, MBMI Resources was awaiting permits on its Philippines-based nickel projects. James put out the recommendation with the stock trading at $0.43. In just 18 months, the stock peaked at $4.70 for a gain of $993%.

Those are the kinds of gains that change lives. And now, James is a permanent part of the Gold World.

Join me in welcoming him to the team.

-Brian Hicks

Gold Bears Need Glasses
By James West

Every time the gold price goes for a dive, annoying little bears come out of the woods to sing the inevitable chorus of “I told you so!”

Then when the fundamentals driving gold’s inexorable march into the $1,000+ range resume, their strident calls diminish to whispers and they scamper back to their dens to hibernate until the next natural corrective cycle occurs.

One would think that these poor sods might finally learn from their errors and tire of continually losing credibility among their readers. But then, as long as there’s somebody to defend an opposing and controversial view, there’s a publication to provide a venue, simply to capitalize on the publishing tenet that “controversy sells papers.”

Those of us who have become bullish on gold for logical, long-term reasons need to shake off the numbing effects of these naysayers and review the fundamental factors that started the current bull market for gold in the first place.

It is important to take a macro view of things when it comes to gold, because evaluating gold’s peregrinations over anything less than a multi-year period is certain to result in flip-flopping statements and ideas.Let’s see which, if any, of these macro economic indicators have altered in favor of a reversal in the overall price direction of gold.

How about supply and demand?

During the first quarter of 2007, global gold demand reached $17.4 billion, 22% higher than the same period in the previous year and more than double the same period four years ago. On June 7, the World Gold Council reported a 31% increase in the demand for gold from last year. This is due to consumer demand in China, India, and the Middle East for gold coins and gold jewelry.

Demand from China and India for both oil and gold, combined with tensions in the Middle East, have some analysts predicting higher price trends for both commodities. Analysts are pleased to see that after an almost year-long hiatus the Asian gold jewelry demand has once again become robust, particularly in India with the onset of the traditional wedding season.

In the Middle East, sales of gold in May 2007 were up 38% over May 2006.

Top gold consultants Gold Fields Mineral Services stated in a presentation in May that they were expecting prices over $700 in the second half of the year with the return of significant investor demand.

They went on to say that they expected all-time highs of $856 per ounce to be tested in 2008. While GFMS does believe that we will see a slight mine supply increase this year compared to last, they still think that overall supply (central bank sales, scrap sales, mine supply) will be lower again in 2007, the third year in a row.

For most of the past two decades, South Africa, the US, Canada, Peru and Australia have been at the top of the gold mining world in terms of annual production. It is probable that peak production for gold was achieved in 2001 at 2,645 tonnes (more than 85 million ounces).

That year, these five countries produced 1,330 tonnes and made up 50% of global production figures. By 2006, global production has fallen to 2,470 tonnes (79+ million ounces) with these five countries producing 1,095 tonnes, comprising 44% of global production. Only one country, China, has had any sizeable appreciation in mine production figures over the same five years, seeing production increase from 196 tonnes to 247 tonnes in 2001-2006.

Because of this, some are now calling commodities “a permanent asset class,” meaning oil, gas, gold and timber are now a part of every portfolio.

According to a report by US Global Investors . . .

“Institutional investors in particular are taking a hard look at an asset class once deemed too risky. Goldman Sachs estimates that more than $90 billion was invested in commodities last year, up from less than $10 billion in 2000.

“The California Public Employees’ Retirement System, the nation’s largest pension fund, set aside $500 million last year for a pilot investment program to help it decide whether to create a natural resources and commodities asset class within its holdings.

“Those who venture into commodities investing will find that price swings, while sometimes substantial, are not entirely unpredictable. When foreseen, a price swing can provide an opportunity to strengthen a position or seek out previously overlooked alternatives.

“The growth of global population and economic development has driven up demand for commodities, so there is now an abundance of opportunities. This rapid growth is most notable in China and India, the world’s two largest countries. At the same time, the supply of certain commodities has been restricted by production constraints and environmental regulations, and threatened by political conflicts. These factors increase the likelihood that prices will rise.

“An investor need not build an oil tank farm or store bullion in the basement to get exposure to commodities. Alternatives include buying indices that track commodity futures, or stock in mining companies or other resource producers.

“2006 offers a good illustration of how investors can succeed in the commodities markets. While iconic pillars of the sector like gold and oil stalled in late spring, overall sector growth was sustained by the strength of base metals like copper, nickel and zinc, and agriculture products.

“The best-performing industry within the sector last year was metals and mining. The Toronto Stock Exchange Metals and Mining Index finished the year up 69 percent, with industrial metals leading the way. Nickel was up 150 percent for the year and zinc rose 120 percent.”

So I think it’s safe to say, with the return of investor demand and traders towards the end of summer, that the bears will be on their way out and gold will test new highs.

Last Thursday’s massive selloff in the Treasury bond market seems to indicate that hard-core enthusiastic bond investors have at last capitulated, as stronger American economic data makes interest rate cuts by the Fed unlikely.

Bond investors will likely move to more dynamic asset classes, and large institutional investors are likely to diversify at least some of their holdings into gold.Now what about the US current account deficit?Still growing, by all accounts.

Unless you listen to Edward Lazear, chairman of President George W. Bush’s council of economic advisors.

“We could still make 2.7. Obviously it’s harder if you have a 1.3 first quarter,” he said in reference to the Bush administration’s 2.7% target for GDP growth.He also said that the US authorities are keeping a close eye on the growing US current account deficit, but the deficit is not a problem at present.

“In the recent past it has not been a problem. It’s actually been up to this point a source of our strength,” he said.Now I don’t know about you, but when the captain of the U.S. economic ship waxes so delusional, you know the inmates have taken over the asylum. And the bears will be heading back to the woods.

Good investing,

James West

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