World politics and news emphasized the fear of an impending war with Iraq and the many resulting unknowns. With U.N. inspectors on the news daily, a U.S. claim that the Iraq report was grossly inadequately carried more weight than normal. True to historical form, this fear produced a higher gold price. Another force behind the rising gold price has been a dramatically weaker dollar as worldwide investors appear to think that the U.S. is biting off more than it can chew and the dollar will suffer. Astute observers noticed that right after Federal Reserve Governor Bernanke stated in November that the Fed would do whatever was necessary to defeat a deflationary economy, the dollar seemed to wilt, and it became open season on the dollar. The euro resumed its appreciation, reaching a three year high at 1.049 and the yen a three year high at 118.75 even as Japan keeps trying to keep the yen cheap. The dollar index closed at 101.85, the lowest level in years.

In Venezuela the national strike managed to shut down the oil flow from that country, but OPEC offered to increase their supply to meet demand. Meanwhile, U.S. inventories reached a thirty year low, and oil climbed from $27 to more than $33, a gain of over 20%

North Korea presented another factor into the unknown calculations with its decision to restart its nuclear reactor. I'm not sure how much effect this had on the dollar, but it might someday.

The U.S. economy continued its sluggish action as unemployment reached an eight year high. With the consumer staying home for most of the month, most retailers had a terrible holiday season. It just might have been because consumer debt is at record levels and layoffs keep coming. Productivity measurements increased, but consumer confidence fell. The national current account deficit remains near $35 billion each month and sets a new twelve month record deficit every time it's calculated. The federal budget deficit seems to balloon every month as if no one is watching. The U.S. housing boom/bubble continued as mortgage rates reached a forty year low, and new home sales expanded in November.

The long bond yield dipped from 4.98% to 4.78% as the Federal Reserve decided to leave their short term rate unchanged. It had little effect on the stock market as the Dow dropped from 8645 to 8341. Gold gained from 316.7 to 349.5, a gain of over 10%, and, on the very last day of the year, silver jumped to 4.80, as if to signal that something was coming in the new year.

fn         Fund                   1 mo   3 mo  12 mo   2 yr   3 yr
 1 ASA   ASA Ltd              .   36.3   27.6  109.0  184.6  139.5
17 USERX US Global Gold Shrs  .   30.2   13.4   83.9  101.5   41.4
18 UNWPX US Global World PrecM.   28.6   12.8   78.6   92.1   18.9
 8 GOLDX Gabelli Gold         .   26.1   16.4   89.8  133.5   97.1
 2 BGEIX Amer Cent Global Gold.   25.9   11.6   72.3  128.3   73.9
12 MNTGX Monterey OCM Gold    .   25.5   14.3   96.5  153.4   99.8
 5 FSAGX Fidelity Select Gold .   24.8   10.3   61.5   98.7   62.8
 4 EKWBX Evergreen Prec Mtls B.   24.0   14.4   70.5  110.9   81.0
 6 SGGDX First Eagle SGen Gold.   23.2   13.9  105.6  179.0  119.2
15 SCGDX Scudder Gold & Pr Mt S   21.3   12.5   65.5   89.8   72.3
14 RYPMX Rydex Prec Metals    .   20.9   12.3   48.2   74.7       
10 FGLDX INVESCO Gold & Pr Mtl.   20.8    9.6   59.6   87.0   58.7
 9 LEXMX ING Pilgrim Pr Mtls A.   19.6    9.1   66.7  107.0   61.1
11 MIDSX Midas Fund           .   19.5    4.8   61.1   82.1   12.5
 7 FKRCX Franklin Gold & PrM A.   18.7   12.7   38.9   48.7   35.9
16 TGLDX Tocqueville Gold     .   18.6    9.2   75.0  112.3   89.4
 3 INPMX AXP Precious Metals A.   18.1   10.4   54.3   63.4   44.9
13 OPGSX Oppenheimer Gold A   .   17.8    8.8   40.8   60.7   32.9
19 USAGX USAA Gold            .   16.3    7.3   61.4  109.9   77.6
21 VGPMX Vanguard Prec Metals .    7.8    7.4   27.4   43.7   32.8
20 INIVX Van Eck Intl Inv GoldA    6.0   -6.4   55.1   86.5   45.2

12 of 21 were up over 20% in December. The surge was primarily due to a weaker dollar brought on by many factors, but the threat of a full scale war in Iraq seems to be adding a worldwide pro-gold force not seen for years. The failure of the Bush administration or the Fed to reject Fed Governor Bernanke's idea that the guys in charge would not allow deflation indicates that they are prepared to spend, spend, spend and print, print, print. The means that the dollar will only get weaker, weaker, weaker, making gold prices higher, higher, higher. You don't need a PhD to detect a trend, and the market noticed.

Ten funds have doubled within the last two years and six others are close.

 fn     Fund                        pos  nav(12-31)
 6 SGGDX First Eagle SGen Gold.   94.2   12.89
 1 ASA   ASA Ltd              .   93.3   40.98
12 MNTGX Monterey OCM Gold    .   92.5    9.45
 8 GOLDX Gabelli Gold         .   86.3   12.28
 5 FSAGX Fidelity Select Gold .   82.3   23.92
16 TGLDX Tocqueville Gold     .   80.2   24.20
15 SCGDX Scudder Gold & Pr Mt S   77.5   11.37
 4 EKWBX Evergreen Prec Mtls B.   68.7   20.90
11 MIDSX Midas Fund           .   66.3    1.53
 2 BGEIX Amer Cent Global Gold.   66.2    9.13
 9 LEXMX ING Pilgrim Pr Mtls A.   62.8    5.30
10 FGLDX INVESCO Gold & Pr Mtl.   60.6    2.73
19 USAGX USAA Gold            .   55.0   10.62
14 RYPMX Rydex Prec Metals    .   50.6   31.22
 7 FKRCX Franklin Gold & PrM A.   48.5   13.10
13 OPGSX Oppenheimer Gold A   .   42.6   13.90
17 USERX US Global Gold Shrs  .   34.9    5.26
 3 INPMX AXP Precious Metals A.   33.5    8.30
18 UNWPX US Global World PrecM.   20.4    9.70
21 VGPMX Vanguard Prec Metals .   19.5   10.89
20 INIVX Van Eck Intl Inv GoldA   19.0    8.30

First Eagle SoGen Gold (SGGDX), ASA Limited (ASA-NYSE), and Monterey OCM Gold (MNTGX) all set new highs for the year during the last week of December, then slipped back. These numbers also point out that most funds have much more room to climb before they reach their highs set last May.

These numbers demonstrate a fund's ability to retain previous advances without falling out of bed when gold has a bad month or two. It's obvious which funds can't hold onto their gains and which have.

 fn    fund                       assets
21 VGPMX Vanguard Prec Metals .   653
 5 FSAGX Fidelity Select Gold .   613
 2 BGEIX Amer Cent Global Gold.   407
 1 ASA   ASA Ltd              .   393
 7 FKRCX Franklin Gold & PrM A.   267
20 INIVX Van Eck Intl Inv GoldA   172
18 UNWPX US Global World PrecM.   142
19 USAGX USAA Gold            .   136
15 SCGDX Scudder Gold & Pr Mt S   134
13 OPGSX Oppenheimer Gold A   .   130
10 FGLDX INVESCO Gold & Pr Mtl.   121
 8 GOLDX Gabelli Gold         .   119
 9 LEXMX ING Pilgrim Pr Mtls A.   112
16 TGLDX Tocqueville Gold     .    96
 6 SGGDX First Eagle SGen Gold.    91
17 USERX US Global Gold Shrs  .    88
14 RYPMX Rydex Prec Metals    .    76
 3 INPMX AXP Precious Metals A.    50
11 MIDSX Midas Fund           .    47
12 MNTGX Monterey OCM Gold    .    42
 4 EKWBX Evergreen Prec Mtls B.    27

These asset numbers have been experiencing an increasing trend across the board as fresh investment capital comes into the gold sector. Since neither Vanguard (VGPMX) nor Fidelity (FSAGX) is leading the pack in performance, it looks like fund marketing with name recognition is still important in increasing funds under management. While not the most famous gold funds, they are certainly well know in the mutual fund business and therefore benefit from their reputations. Far from a negative, a fund family's reputation should be a major factor in selecting a fund.

fn      fund                      beta
18 UNWPX US Global World PrecM.   1.55
17 USERX US Global Gold Shrs  .   1.51
 1 ASA   ASA Ltd              .   1.37
 6 SGGDX First Eagle SGen Gold.   1.25
20 INIVX Van Eck Intl Inv GoldA   1.21
 8 GOLDX Gabelli Gold         .   1.16
12 MNTGX Monterey OCM Gold    .   1.12
16 TGLDX Tocqueville Gold     .   1.07
 3 INPMX AXP Precious Metals A.   1.07
 2 BGEIX Amer Cent Global Gold.   1.06
 9 LEXMX ING Pilgrim Pr Mtls A.   1.02
19 USAGX USAA Gold            .   1.02
11 MIDSX Midas Fund           .   0.99
 4 EKWBX Evergreen Prec Mtls B.   0.97
10 FGLDX INVESCO Gold & Pr Mtl.   0.89
15 SCGDX Scudder Gold & Pr Mt S   0.85
 5 FSAGX Fidelity Select Gold .   0.85
14 RYPMX Rydex Prec Metals    .   0.82
13 OPGSX Oppenheimer Gold A   .   0.68
21 VGPMX Vanguard Prec Metals .   0.66
 7 FKRCX Franklin Gold & PrM A.   0.65

The beta for each fund changes monthly as the fund advances and declines, but the general position on the ladder doesn't change much, except as a reference to other funds. As you can see, there is a big difference between management policies of different funds. The nav movement is a direct reflection of the types of equities selected by the fund manager.

ASA Limited (ASA-NYSE) jumped to the top spot this month, which indicates to me that there is an international demand building for gold equities, not just commodity traders in New York hyping the market. It also was the leader in most time periods compared on the EagleWing Web Page. To be fair, I must also restate that ASA is not technically a mutual fund like the other twenty, but is close enough to compare. It also benefits from an increase in gold market demand that can affect its evaluation more than the normal net asset valuation of other funds.

The obviously weakening dollar, driven by budget deficits, trade deficits, investment deficits, and a probable war with Iraq, has presented a case for an alternate safe investment, and many investors think that gold is the only remaining refuge. A higher oil price is probably a minor input, but is probably short term.

There are still signs that the domestic economy, while weak, is still growing. GDP is increasing, even with all the bad news of layoffs and bankruptcies. Low interest rates undoubtedly are helping encourage some growth, even if it does distort the real estate market into thinking that home values are actually going up. Mortgage rates hit a forty year low and refinancing is still going strong. New home sales were still high in November, but when money stops flowing into the housing bubble when rates turn up, it will deflate. There will be many disappointed homeowners, but that's another story.

One interesting factor to be considered is a measured increase in the amount of physical gold brought to the market as the price increases, particularly in India. There are tonnes available to come to the marketplace if the price moves high enough. If enough of these owners think this move is just another peak in another gold cycle, then it might be just that.