Aggressive Portfolio September 15, 2007:

The gold market has been on a tear over the past month or so and appears to be ready to make a substantial move higher. The momentum has changed as gold moved through $700.00 an ounce and there are a number of factors that will help to maintain the upward pressure on the price of gold going forward. Breaking the $700.00 barrier is an important psychological hurdle for investors and traders.

The fundamental reasons to own gold are more positive than we have seen in quite a while. There are increasing concerns regarding increased inflation created by rising crude oil prices and higher agricultural prices as well. The price of crude oil recently reached the psychologically important level of $80.00 a barrel while at the same time wheat futures are moving up at an exponential pace.  Historically the combination of higher energy costs and higher food prices have increased inflation expectations as prices steadily rise over the longer term. Gold has a long history of being used as a hedge against purchasing power erosion caused by inflation over the long term.

The US dollar has been weakening over the past few months and the momentum here is picking up steam as well. The recent increase in economic uncertainty created by the turmoil in the credit markets is adding to the US dollar weakness. There has been an increase in the number of investors who now believe the Federal Reserve will be forced to lower interest rates over the next few meetings in order to stem the decline in the bond market and increase the availability of credit. The jury is still out regarding how far rates will decline in the coming months but as interest rates fall so will the US dollar.

Most commodities are priced in US dollars and as the dollar falls in value the price of the commodity will increase all things being equal. The US dollar will be under increasing pressure as the fall out from the credit crisis becomes more acute and the consumer becomes more hesitant to spend.

The supply demand equation is moving from an over supply position due to increased demand from Asia as these economies continue to grow and create a larger middle class of new consumers. The growing middle class in Asia are turning to gold as their storehouse of wealth which is the traditional method of protecting the accumulated wealth from government and economic uncertainty.

The tradition of using gold as a storehouse of wealth is pervasive and well established through out India. The government has reduced controls on the purchase and ownership of gold and this has opened up the market to the entire population of over 1 billion people. The pace of wealth creation is increasing and this will add considerable demand for gold over the next decade or possibly longer.

Investors with a long term time horizon should maintain a 10 to 15% position in gold as a hedge against inflation and as insurance against financial turmoil. Over the next 12 to 18 months investors could increase that allocation to 25 to 30% in order to take advantage of the positive changes in the gold market.

There are many gold companies to choose from in the Canadian market but I think companies that are on the verge of production or major production increases are very well positioned to benefit from the potential price increases over the next 12- 18 months.

Aurizon Mines Ltd. (ARZ-T) started operation of the Casa Berardi mine in late 2006 and will have first year production of approximately 100,000 ounces of gold. The company anticipates that production will average 150,000 ounces annually over the next 5 – 6 years.

This increased production will come at a time when the price of gold is strengthening and could see new all time highs in the coming months, positioning Aurizon for a substantial increase in profitability which should be reflected in a higher share price.

Minefinders Corporation Ltd. (MFL-T) is an emerging gold producer. The company expects to have their Dolores project in Mexico in limited production by the fourth quarter of 2007 with full production anticipated by the end of the second quarter of 2008.

The current reserve estimate for Dolores project indicates 118 million tonnes with an average gold equivalent grade of 1.43 grams per tonne which should produce 3.06 million ounces of gold and 144 million ounces of silver. The company plans an 18,000 tonne per day open pit heap leach operation on the Dolores project.

The company will be starting production at a time when gold prices are forecast to be very robust which should lead to excellent profitability going forward.

Aggressive Portfolio September 15, 2007: