Rust Rare Coin, Inc. March, 2008

PRICE TRENDS

IN OUR OPINION. . . .

As March begins the metals markets feel like a runaway train. With each passing day negative economic news diminishes the appetites of investors for paper assets—especially the stock market and currencies. Conversely, there is more and more interest in commodities--especially precious metals. As reported under “Gold” some countries are creating additional venues where investors can get involved with precious metals.

Recent statements by the Fed make it evident that they will continue to lower interest rates in spite of the fact that there is concern of inflation.

We are still a bit wary that there could be some correction in the metals markets. They have moved much faster than we are comfortable with. However, due to the poor economic indicators it is difficult to say when the next pullback will be.

We still recommend purchasing on the dips. Fasten your seatbelts! This looks like a long ride!

GOLD

Gold prices came moved to new highs, after a slew of supportive US economic data confirmed higher inflationary pressures as evidenced by a higher producer price index, sinking consumer confidence, and weak home prices, thereby encouraging gold buying. The decisive factor in favor of higher gold prices at the end of the month seemed to be the comments from Federal Reserve Vice Chairman, Donald Kohn, that the danger of US economy weakening further is a bigger worry than higher inflation, and that the central bank has the tools and is ready to do what it needs to respond to “difficult times.” This was taken by the gold market to mean the Fed was determined to stave off further economic weakness by pursuing an aggressive accommodative monetary [policy], even at the risk of inciting inflation. The combination of higher prices and an accommodative monetary policy is tailor made for gold price appreciation. Until it becomes clear the Fed is nearing an end to its accommodative cycle, which Vice Chairman Kohn’s latest comments do not indicate, gold is likely to stay well bid. A penetration of USD/EUR 1.50, could spark further bullion buying.

Federal Reserve Chairman, Ben Bernanke, told Congress at the end of February that the central bank will remain on course for additional rate cuts at least in the near term. Downside risks to growth remain the key focus of monetary policy, said Bernanke. Testifying after inflation readings for January showed rising prices, the Fed chairman acknowledged that inflation risks have increased, but he did little to alter market expectations that the Fed will choose to cut rates again at the next meeting on March 28.

World Gold Council data, issued in its quarterly publication, Demand Trends, reaffirmed the decline in jewelry and other forms of physical gold demand. The WGC tabulates that gold demand in Q4 2007 contracted 17% year-on-year to 843 tons due largely but not exclusively to a sharp drop in jewelry demand by India. The significant contraction in gold demand in Q4 came as a result of higher prices and high price volatility according to the WGC. Physical demand remains weak and, based on recent Indian import data and on conversations with merchants and information gathered from jewelers, this may become an increasingly powerful drag on gold prices. We also find it interesting that gold traded lower, despite platinum prices pushing over $2000/oz. This may be a sign of underlying weakness in the gold market, and further losses may follow.

Due to a power supply crisis, gold output from South Africa is likely to suffer considerable cutbacks. As AngloGold Ashanti announced their Q4 and 2007 year end earnings results, they also announced that they expect a reduction of approximately 400,000 ounces of gold in 2008. Anglo expected to produce between 4.8 million ounces (Moz) and 5.0 Moz of gold at cash costs ranging from $245/oz to $435/oz. AngloGold Ashanti chief executive Mark Cutifani said, “The uncertainty around Eskom power supply is having a significant impact on our operations in South Africa. This uncertainty means that our South African business faces very particular challenges right now and we’re working constructively with organized labor, Eskom and the government to ensure that we find sustainable solutions that protect the reserve integrity and potential of these operations.”

French President Nicolas Sarkozy was in South Africa at the end of February for talks with President Thabo Mbeki. The power crisis was believed to be on the agenda. Mr. Mbeki is thought to be seeking cooperation from France as well as an increase in the investment in the transport, energy, automotive, and aeronautical sectors. Accompanying Mr. Sarkozy is Anne Lauvergeon, Chairman of Areva, the French nuclear firm which is bidding for a contract to build 12 power plants in South Africa.

Meanwhile an urgent meeting has been called to discuss potential job losses in the mining industry. Minister of Minerals and Energy, Buyela Sonjica, will be joined by members of the National Union of Mineworkers Solidarity, the United Association of South Africa, the Chamber of Mines (CoM), and Eskom, Mining Weekly reports. According to Jabu Maphalala, Deputy Communications Adviser of CoM, the meeting was not to decide how many jobs would be cut but rather to assess the impact of the power crisis so far. Mr. Maphalala wants the meeting to “. . . identify the potential impacts on job losses, impacts on production issues and impacts on the mining industry’s economic contribution.”

Deutsche Bank said on Thursday, February 28, that it will launch three exchange-traded notes (ETNs) offering short, long and leveraged trading strategies in gold, underscoring growing investment interest as bullion races to record highs. “These products are the first of their kind and fill a need in the market for the investor who really follows gold and is looking for a sophisticated way to get leveraged or short exposure to it.” Gregory Collett, director in the global markets investment products group at Deutsche Bank in New York, told Reuters in a phone interview. Each of the 3 ETNs are senior unsecured obligations offered by Deutsche Bank that track the performance of an underlying index—“DB Liquid Commodity Index--Optimum Yield Gold.” The notes will be traded on the NYSE. The 3 products are namely: DB Gold Double Short ETN, DB Gold Double Long ETN, and DB Gold Short ETN.

The “double long” fund provides investors with two times the monthly performance of the Optimum Yield Gold Index plus a Treasury bill index return, while the two short funds offer investors up to two times the monthly inverse performance of the gold index plus a monthly Treasury bill index return, the bank said.

Collett said the 3 ETNs can help investors who are looking to diversify. “You shouldn’t just have stocks, bonds, real estate, and you should also have some commodities exposure,” he said. ETNs trade on exchanges throughout the day and have some similarity to exchange-traded funds (ETFs). ETFs and ETNs broaden market participation by providing easier access to investors. Exchange traded notes, unlike exchange-traded funds, do not purchase physical gold to back the number of shares sold.

Investment interest has been on the rise in gold and related products because of the metal’s price performance and as stock market woes prompt investors to flee to bullion because of its safe-haven appeal.

Hedge funds, wealthy and sophisticated investors have increasingly used commodity-related ETNs and ETFs in hopes of higher returns than stocks and bonds.

SILVER

Silver surged, as investors moved into silver, actively selling gold at the same time, thus trading the gold/silver ratio. In a pronounced bull (or bear) market, it is not unusual for silver to outperform gold and on occasion for palladium, to outperform platinum. This is due in part, we believe, to the fact that both silver and palladium are less liquid than gold and platinum, respectively and can therefore move more sharply on similar investor interest. It is also possible that investors, anxious to participate in the bullion rally, but who may be wary of purchasing gold and platinum, are targeting the “cheaper” metals, silver and palladium. Silver is the best play for 2008, but silver is never a smooth ride. It comes with a lot of risk. If owning gold is like flying in a 747, then owning silver is like flying in an F-15. With silver, one needs to be prepared for heart-stopping reversals and zigs and zags that are all but unheard of in gold.

PLATINUM/PALLADIUM

Platinum initially fell heavily on what we believe was profit taking, but active investor interest in palladium pushed that market higher. The fact that palladium rallied as platinum weakened may be evidence that investors believe the automakers will make a determined shift away from platinum and towards palladium as components of auto catalytic converters. While higher platinum prices have increased the incentive to substitute and thrift away from platinum wherever possible, we are not aware of an imminent breakthrough that would demonstrably raise palladium demand or lower platinum consumption. Rather, we believe the platinum market could be more impacted by potential labor disputes as the South African National Union of Mineworkers (NUM) is warning that it would reject any layoffs associated with power rationing to the mines. Furthermore, the NUM has threatened to strike if higher electricity tariffs were put through by the government as requested by Eskom, the national state owned power authority. Any deterioration in industrial relations at a time of tight supply threatens to push platinum prices even higher.

Although gold production losses because of the power supply problem are considerable, it is platinum that is most impacted by the power outages. South Africa is responsible for 77% of world platinum production compared to only 12% of gold output. While producers will strive to maximize efficiency, it is important to note that consumption of platinum is rising annually, and available above ground stocks have been depleted by at least 2.9 Moz in the past 12 years due to production/consumption deficits. Despite having touched $2000/oz, platinum prices may continue to rally as industrial users may feel compelled to secure supplies.

The possibility that platinum output in South Africa will remain weak could bolster platinum further and many investors in the PGM market appear to be taking an interest in palladium. It is important to distinguish, however, between an investor-led bull market and one where there has been a fundamental change in the underlying physical fundamentals.