3 April 2006 Precious Metals Wolfgang Wrzesniok-Rossbach

Last week the four major precious metals saw another round of spectacular gains On the Internet: before on Friday profit taking took its toll. Like in recent week’s silver was clearly

the frontrunner, still driven by the hype that has its foundation in the discussion Õ about an upcoming silver-Exchange Traded Fund in the United States. Auspicious start for Eland Platinum Despite Friday’s late losses, which were probably related to the end of quarter, all Õ Fine Jewellery: Palladium, finer than metals ended above the previous weeks close. Palladium booked with a plus of platinum, less expensive than white gold less than one percent the smallest gain, silver managed to rise more than seven Õ PGM mining: Who says you can't raise percent, it was therefore clearly leading the precious metals pack. capital in South Africa? Platinum New all-time high, followed by profit-taking; Trend ÎÔ Õ Mining investors eye Indonesia but more work needed Platinum started last week on the lows at $1,046 an ounce. It rose almost uninterrupted until Friday morning, when it changed hands at $1,092 an ounce Õ Largest gold deposit in China and thus on a new all-time high. The extend of the recent gains (100 dollars in discovered three weeks!) in combination with a total absence of any ‘strategic’ industrial Õ AngloGold eyes Goldfields interest left the white metal vulnerable to profit-taking. The end of the first quarter was therefore a good excuse for fund managers to start selling in order to secure Õ Gold passes $A800 an ounce some of the massive profits. When the market finally turned on Friday there was Õ Interview: World gold trust eyes Asia for nobody left on the buyer’s side and the platinum value dropped like a stone. After Gold ETF launch only two hours it traded nearly three percent lower at prices just above $1,060. The metal closed finally at $1,068, despite the losses still 24 dollars above the Õ Zimbabwe doubles gold price as New York close seen one week earlier. deliveries dive Platinum hasn’t really had a life of its own in the last weeks and there are no signs Õ Dubai opens first Mideast silver futures that this could change quickly. Therefore the next moves will largely depend again Õ Silver boom helps Wheaton on what commodity prices do in general and how precious metal rates fare in particular. Õ Silver 'freight train' picks up more speed Palladium Breaking above 2004 high, unable to defend gains, Trend ÎÔ Õ Grupo Mexico has potential for $6 bln acquisition Palladium went through an extremely volatile week. Initially it followed the other metals higher, reaching $342 an ounce on Wednesday. While the other white Õ Strikes could undermine resources metals paused only on that day, palladium suffered already a first severe set-back, output falling even slightly below Monday’s opening at $327. When the other metals Õ Commodities boom raises fears continued their ascend, palladium wasn’t left behind though. Speculative buying Õ took it beyond the 2004 high to a new top level of $348.50. When the silver started Oil dips from $67 peak to look southwards, palladium was the first one to follow: The metal dropped nearly 30 dollars to a low of $320, before recovering again towards the close.

PT US$/oz €/oz €/gram Rhodium Where have all the buyers gone. Back at 4000, Trend ÎÒ High 1,092.00 899.00 28.90 Rhodium decoupled itself completely from the other metals. Instead of rising further it suffered a massive set-back last week, when (industrial) buyers suddenly Low 1,046.00 866.00 27.84 withdraw completely from the market, leaving the sellers amongst themselves. And Close 1,068.00 879.00 28.26 there were quite a few of them; traders, who had been playing the market from the long side, but also a small number of fund managers, who wanted to take profits Platinum: $1.100 just missed60 Minut e QXPT= [HiLoCl Bar] [Professional] 07/03/2006 - 02/04/2006 (GMT) before the end of the quarter (respectively in Japan even the end of the financial Price USD year). The selling started right on Monday morning after the market had reached a Ozs high of more than $4,400 an ounce and it continued throughout the week until the

metal saw on Friday a bottom below the $4,000-mark. We would not rule out that 1060 the price looses another 100 or so dollars. However, we base our view also on the fact that there is still a considerable portion of industrial buying interest that so far 1040 hasn’t been satisfied yet, all in all we expect the market to turn around again not too far in the future. 1020 1000 Silver Flying high and (a)n(o) end in sight, Trend ÎÔ 13 19 24 30 There is seldom a price moving so much with so little to write about. In the Mar 06 absence of any other fundamental information apart from news about a strike in the Mexican mining industry, it was once again on the speculators to drive the price higher. And from their perspective they did a good job. The metal, starting relatively slow last Monday at $10.70 an ounce, exploded on Wednesday and PD US$/oz €/oz €/gram later on Friday morning, storming 12 percent higher to $11.94, this level which marked a new 23-year high. Around noon, profit-taking set in and the white metal High 348.50 287.00 9.22 started to give up some of its gains. It fell back to $11.45 only to climb again to Low 320.00 264.00 8.49 $11.60. It finally closed at $11.49 and thus just a fraction above the days low. Close 330.00 272.00 8.74 Once again it is difficult to find a rationale behind the recent development. Yes, the silver-ETF is around the corner, but how many investors are going to buy the metal then on a 23-year high? And how much additional silver can end up in the vaults, when funds already own close to 10.000 tons of the metal in form of …

Heraeus Metallhandelsgesellschaft mbH, 03.04.2006, Page 1

Precious Metals Palladium: Nearly doubled Dainil ye QiXghtPD= [ HmonthsiLoCl Bar]

[Professional] 26/07/2005 - 06/04/2006 (GMT)

Price

… speculative long positions just on COMEX alone? When the gold-ETFs came USD out in the years between 2003 and 2005, gold was initially trading 250 dollars Ozs below the current levels! But, as we said here last week, it is definitely better not 300 to try to stop the roaring bull with bare hands. But once the tide turns, and it most 280 likely will at some stage, it might get as nasty for the bulls as it is now for industrial 260

end-users and for the few owners of short-positions. It seems worthwhile to keep 240

in mind that the white metal has shown in the past its ability to fall much faster 220

than it normally rises. Technically there is not much resistance now apart from 200 Fridays high at $11.94; support can be expected at $10.85, $10.65 and $9.90. 180

Aug Sep Oct Nov Dec Jan Feb Mar Apr Gold Following silver to a new 25-year high, Trend ÎÔ 2005 2006 With all the eyes on silver these days, gold has had last week only a role as supernumerary. That doesn’t mean that the yellow metal laid back and took a rest. In contrast. It started last Monday on the low at around $558 and rose then more than 30 dollars without looking back much. After reaching the highs on Friday it AU US$/oz €/oz €/gram suffered a small set-back, but with a close at around $582 it has kept all options High 589.40 484.90 15.59 open. Like in the case of the other metals, we think that the recent rally (and not Low 558.40 462.70 14.88 only that one) has gone one step too far. Fundamentally there is certainly not Close 581.70 481.60 15.48 much reason for the latest move and one sign for that is that refiners in Hong Kong (including our own operation) are currently being flooded with scrap metal. Gold: 25-year highs Yearly QXAU= [HiLoCl Bar] Maybe the truth is somewhere in the middle, especially since soft factors, like a [Professional] 06/09/1981 - 23/01/2008 (GMT) Price higher oil price, all time highs for copper and other metals, the unsolved situation USD in Iran and a softer dollar rather seem to work in favour of the yellow metal. If and Ozs where a fair price can be found in that situation, remains to be seen. For the time 500

being last weeks high builds a first technical resistance and support levels are 450 lying at $580 and then every ten dollars on the down-side. 400

Banks in Germany report mixed reactions by the retail investors with respect to 350 the current price-hype. While the physical business with more long-term oriented investors clearly suffers on the current levels (banks report even net-selling by 300 retail clients in that segment) speculators seem to have not enough yet: One bank 250 reported on Friday a rising demand for call warrants with a strike of $1,000 (gold, 82 84 86 88 90 92 94 96 98 2000 02 04 06 08 not platinum!). Obviously the speculative element behind these purchases is extreme, but it offers a glimpse of what some (of the many) gold-bugs expect.

After the partial withdrawal of Anglo American we reported last week that Anglogold is now looking to play in one way or the other an active role in the AG US$/oz €/oz €/kilo ongoing consolidation of the gold industry. The chief executive of the Brazilian iron ore miner CRVD said recently in that context that his company planned to High 11.94 9.83 316.04 study buying Anglo American’s stake in the biggest South African gold miner. Low 10.72 8.91 286.46 A good insight into the state of the Turkish gold market as well as a rather Close 11.49 9.43 303.18

cautious outlook was published last week on Reuters. Rising labour costs, an Source: Heraeus Metallhandelsgesellschaft mbH

overvalued currency and a soaring gold price were blamed for the slow-down in Silver: In six week from $96 0to Minu $12te QXAG= [HiLoCl Bar] [Professional] 07/03/2006 - 02/04/2006 (GMT) growth, which the Turkish market saw in 2005. Industry officials from Turkey were Price USD quoted saying that India and China are now becoming increasingly competitive Ozs after salaries on both sides of the Bosporus have tripled in recent years. Gold 11.4

imports into Turkey fell in the first two months of this year to 24 tons and thus to 11.1 the lowest level since 2003. Compared to 2005 that number declined by 52 10.8 percent. But, despite the challenges, Turkey is the second largest jewellery exporter in the world after Italy and official exports last year totalled 110 tons of 10.5 gold, five tons more than 2004. About the same number is sold on top to tourists 10.2 and traders from neighbouring countries. The Istanbul Gold Exchange is in the 9.9 meantime looking to increase trading volumes by introducing 24-hour electronic 13 19 24 30 trading. Last year the average trading volume was 1,299 kg, more than ten Mar 06 percent above the 2004 figure. Another ETF is currently in the planning phase in South Africa. The local bank ABSA plans to issue a commodity-ETF, which incorporates several commodities. Silver: Long time since theY emetalarly QXAG =saw [HiLoCl Bthesear] prices. [Professional] 06/09/1981 - 23/01/2008 (GMT) A spokesperson of ABSA declined to give further details for the time being. Price USD Apart from the discussions taking place in Germany about whether or not the Ozs Bundesbank should sell parts of its gold treasure, it has been fairly quiet recently 12 on the central bank side. That changed to some extend last Friday, when the European Central Bank announced the sale of 57 tons of gold. Prior to that sale, 10

the ECB owned 720 tons of gold, representing around 25 % of its total currency 8 reserves. That number was considerably above the original figure decided in 1998, when the ECB had taken over 15 percent of the initially transferred reserves 6 in form of gold. The ECB said that it does not intend to sell more gold in the current year of the Central Bank Agreement, which lasts until September 2006. 4 82 84 86 88 90 92 94 96 98 2000 02 04 06 08

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