ANNUAL FORECAST for 2006 By:  Leonard Melman Published in “ICMJ’S Prospecting and MINING Journal   When our 2005 Forecast is reviewed, we cannot help but take some satisfaction. While we admittedly erred in our call on the direction of the US Dollar which unexpectedly rose throughout much of the year, we were bang-on in our estimates of the US Budgetary and Balance-Of-Trade deficits, the petroleum markets, disruptions in the world’s ability to deliver raw materials and the subsequent growth of inflation. We noted that the above factors would create a “fertile ground for speculation in the world of precious metals” - and so it turned out. We called for gold to reach near $600 and while it fell a bit short (as this is written), gold still turned in a solid performance. Silver was forecast to rise to ‘near $10’ and platinum to close ‘about $1,000.’ The latter two were close to dead right. So, it is with some feelings of confidence that we look forward to 2006. There is a change in our emphasis regarding the factors which we expect to drive the precious metals markets higher. While last year we concentrated on fundamental information regarding demand over supply, this year we are anticipating that the precious metals markets will be driven higher - maybe VERY sharply higher - by a rising feeling of uncertainty, perhaps even bordering on outright fear and panic regarding America’s and the world’s financial structures which we forecast will grow during the coming year. As noted earlier, it is our expectation that one of the prime factors in this anticipated rising uncertainty will be the demise of the housing bubble. Much of the economic strength of America during the past half-decade has not come from a powerful and expanding industrial sector throwing off a multitude of high-paying jobs - which would be typical of a healthy and dynamic economy - but rather it has come from new monies thrown off as the result of real estate speculation. These hundreds of billions have been spent in the economy and it is that source of money that has sustained the appearance of fundamental strength. But we believe that emperor is about to lose his set of clothes and reality will be stripped bare for all to see and that reality is that the United States has transformed itself during the past four decades from a sound, powerful and dynamic economic society into a heavily indebted-at-all-levels nation. How long will the rest of the world re-invest their huge pile of American dollars into the American economic structure? We believe that time span is short and, if the housing market fails to rise and then begins to collapse, thereby negatively affecting the economy, that might also be the signal for other nations to get their money out of the USA. Should that happen, the pressures to raise interest rates to attract foreign investment and support the dollar could be unstoppable and accelerating rises in interest rates would not only crush real estate, but as the cost of borrowing rose sharply, industrial and even municipal and state government budgets would be negatively impacted. In addition, we do expect the growing fundamental materials demand from India as well as Japan’s rebounding economy and growth in several South American countries will continue the demand/supply pressures on the world’s raw materials markets as well. Accordingly, we are quite bullish on the precious metals sector and offer the following predictions: Gold will trade between $500 and $600 for a while until uncertainties regarding the financial markets begin to grow. Prices will then rise more sharply and should reach near $750 by the end of 2006. Silver should advance by an even greater percentage as ‘safe money’ finds the lower price range of silver to be attractive and we look for silver to reach $15.00. Because of its tighter market and more significant industrial demand, we also expect platinum to outperform gold and reach the area of $1,400 per ounce. Time will tell and once again we would remind readers that any investment decisions should only be made after consultation with qualified investment advisors.