I just got Lawrence Rouston in the email last night.

Here are some excerts:

Many of the investors following that lead had little understanding of what caused the flight from gold, or even if there was a good reason. The attitude seems to have been: “If everybody is selling, then that ust be the right thing to do.”

While speculators flit in and out of the gold market, seemingly propelled by little more than Internet buyers take a far more rational approach to the market. When the speculators are clamoring to join the upward momentum, pushing gold to record highs as they were last March, the physical buyers wisely stand back from the market.

Once the speculators flee the market in panic, the physical buyers come back, quietly picking up gold on sale. That is exactly what is happening at this moment, with physical buyers providing support for the market as they have after every dip.

Clearly, investors and speculators do impact the markets, creating the temporary spikes and pullbacks that are so much a part of the gold market. Physical supply and demand are far more important as long term drivers of the market

For now, suffice it to say that there is nothing to suggest a break from the pattern that has prevailed for the past seven years. Investors who buy on the dips and take profits on the spikes have done even better than those who hold for the long term.

All commodities were hit over the past month as the entire sector suddenly fell out of investor favour. In part, the renewed confidence in the dollar played through the commodities world. Many of the commodity prices had been pushed up too high, totally out of balance, by investors who had simply jumped on the bandwagon with little understanding of the underlying fundamentals.

We have watched the speculators coming and going from the metals markets now for several years. You can see the pattern in the copper price chart, effectively creating froth on top of the longer term trend. Not surprisingly, when investor sentiment turned against commodities, the related companies were hit even harder. Some are comparing the present situation to 1997, when prices went into a multiyear dive.

The situation now is totally different. At that time, the emerging Asian economies had just tanked. Growth in the so-called Asian Tigers (South Korea, Taiwan, Singapore, Malaysia, Indonesia, Hong Kong) stalled after a currency crisis. China and India had not yet started their ascent. At the same time, a massive amount of new metal production capacity had just come on stream, the result of a huge development boom that went on through the 1980s.

Now, the Asian Tigers are a mere sideshow to the spectacular growth in the much larger Asian nations. Mining industry spending in this cycle has been primarily aimed at acquiring existing production, with only modest new capacity having been added and nowhere near enough new capacity in the pipeline for supply growth to overtake demand growth.

The commentary in the popular press is saying that the metal prices may not increase in the near term, setting a negative tone for investors. However, there is no mention of the enormous value in the companies that hold development assets.

Remember, we are not counting on the metal prices rising further to generate value for investors. There will be huge gains to the extent that the metal prices merely remain above the historic averages. By now, it must be getting clear that the historic averages are merely history.

At this time, the market is obsessed with the near term, and has completely lost sight of the bigger picture. For those with enough patience and courage, the present market offers outstanding bargains.

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(From the last press release)

The Company (Liberty) anticipates the cost to produce a pound of nickel to remain in the US$6.00 to US$7.25 range for the remainder of fiscal 2008 as the McWatters mine will not be declared to be in commercial production until late 2008. With the combined commercial production of the Redstone and McWatters mines at 1,400 to 1,500 tonnes per day at a much lower cost per tonne, the Company will be able to produce a pound of nickel at a target cost of US$3.50 per pound.

Although the current price of nickel is a concern for all producers, our cost to produce a pound of nickel will be approximately US$3.50 less metal credits as we hit our production targets. We anticipate the Hart mine to come on stream in the second half of 2009, and we do have the option to increase the production rate at McWatters. This could significantly increase cash flow in 2009 even if nickel prices remain at current levels." said Liberty's President and CEO, Gary Nash.