OUTLOOK

"Bearish on Gold Stocks"

7/16/2007

We believe the XAU Index, representative of gold stocks, will decline to 146 or less after reaching its high of the year at 152.19 on 7/13/07.  We believe this correction will take place within the next 6 weeks.

Our indicators are showing extremes in  bullish sentiment and overbought conditions in gold stocks which increase the probabilities of a correction going forward.  Given our bearish outlook on gold stocks, we have established positions to profit from a decline in the sector.

Mark Yuan, CFA