For the year, the price of gold climbed from 347 to 390 before falling back to 321 in April. From there it began a sustained climb to reach 417 by the end of the year, approaching a thirteen year high. Not to be left out, silver rose from 4.80 to 4.91 in February before dipping to 4.34 in March. At that point it began an advance to 5.19 in July, 5.32 in September, and 5.95 by year's end. Each time, each high was higher than the previous high, and each low was higher than the previous low. XAU advanced from 76.7 to 108.8 (+41%). The top gold fund, Scudder Gold and Precious Metals (SGDAX), was up 94%.

By December, most hedging companies had decided to cut back on forward sales and hedging, and when Barrick Gold (ABX) made it official that they were through with hedging for now, it gave a sudden year-end push to gold prices. While Gold reached a new high on December 30, most gold funds spent the month correcting for the advance since last summer.

Most of the world economies are expanding if not booming as stock exchanges are up and currencies are all getting better against the dollar. The U.S. trade deficit continues to be huge at $41b, helping the export business for just about everyone else on the planet. Central banks continue to buy or hold dollars to maintain a workable relationship between their currency and the dollar. Latest numbers show that foreign central banks hold over $800b in dollars. The Fed also holds over 1 trillion in dollars for foreign banks.

The dollar fell for most of the year against all major currencies, boosting gold in dollar terms. The dollar index fell from 101.85 to 87.16 and the euro climbed from 1.049 to 1.257. Against the yen, the dollar fell from 118.7 to 107.4 yen/dollar, even with the Bank of Japan supporting the dollar with massive purchases. Against the U.S. dollar, the British pound reached a six year high, and the Canadian, New Zealand, and Australian dollars are at multi-year highs.

Problems in Argentina, Brazil, Venezuela, and North Korea were eclipsed by the war in Iraq and have appeared only temporarily in the news. Their economic effects on gold and the dollar have been minor as Iraq is now placing a major burden on the U.S. budget, and it looks like it will be around for awhile. Any act of terrorism tends to weaken the dollar and strengthen the case for gold.

The long bond yield climbed slightly from 4.78% to 5.06% as most mortgage rates remained below 6%. One of the main engines to fuel consumer spending in 2002 and 2003 was the refinancing of existing mortgages, which effectively stopped last summer. The real estate market, while still booming in new home sales in many areas of the country, is no longer providing additional fuel in the way of new spendable cash. Existing home sales peaked in September and look to be on the way down.

The fear of deflation was dismissed last year when Fed Governor Bernanke claimed that the guys in charge would not allow deflation. The Fed is prepared to print, print, print and the U.S. government to spend, spend, spend to prevent an economic slowdown. Investors have taken notice of the large budget deficit.

While inflation has not become a worry for the market, most commodities have risen substantially in price, particularly those priced in dollars. The CRB index is up over 29%. In addition, the economic growth of China has created a large demand for raw materials which will continue to exist well into the future, and has spurred more economic expansion throughout Asia. With China's recent liberalization of gold ownership, demand for private gold ownership will also increase.

During fall, 2003, Chairman Greenspan stated that he didn't feel that the dollar had to fall much to reduce the trade deficit to acceptable numbers. So far, we have seen only minimal effect on trade data due to the lower dollar, so it will take some time to prove or disprove his statement. Meanwhile, the dollar will continue to weaken as the accumulative deficit mounts. That means gold will rise.

Billionaire investors George Soros and Warren Buffett both think the dollar has much more to fall and have taken substantial positions in foreign currencies. In the words of Warren Buffett, we are selling our national assets to foreigners. Buffett already has a substantial stake in silver bullion.

Fund management fraud in the mutual fund industry is much more wide spread than initially believed, but so far has not been found in gold fund management.

To gather this information and data, I want to give my acknowledgment and appreciation to the many excellent sources on the internet, including as a minimum, the following sites:

http://www.PrudentBear.com
http://www.Bloomberg.com
http://www.kitcomm.com
http://www.thebulliondesk.com
http://www.the-privateer.com
http://www.usagold.com
http://www.gold-eagle.com
http://www.mineweb.com
http://www.adenforecast.com
http://www.thebullandbear.com
http://www.esignal.com
http://stockcharts.com
http://finance.yahoo.com
http://www.silver-investor.com
http://goldinfo.net
http://www.321gold.com

fn         Fund                   1 mo   3 mo  12 mo   2 yr   3 yr
 6 SGGDX First Eagle Gold     .    2.6   19.2   39.4  188.4  296.0
 4 EKWBX Evergreen Prec Mtls B.    0.8   30.0   65.4  183.0  253.8
21 VGPMX Vanguard Prec Metals .    0.5   22.9   59.0  111.7  150.5
14 RYPMX Rydex Prec Metals    .    0.3   25.7   42.3  111.0  150.3
 7 FKRCX Franklin Gold & PrM A.   -0.4   21.2   49.1  109.0  129.6
10 FGLDX INVESCO Gold & Pr Mtl.   -0.7   24.1   47.3  135.1  175.3
11 MIDSX Midas Fund           .   -0.9   18.9   51.8  144.5  176.5
18 UNWPX US Global World PrecM.   -0.9   41.3   90.9  241.8  267.5
16 TGLDX Tocqueville Gold     .   -1.3   21.0   53.8  180.8  242.1
 9 LEXMX ING Precious Metals  .   -1.5   23.6   46.4  144.0  205.1
 2 BGEIX Amer Cent Global Gold.   -1.8   21.6   46.6  153.8  236.2
 8 GOLDX Gabelli Gold         .   -2.1   20.9   49.4  183.6  252.1
13 OPGSX Oppenheimer Gold A   .   -2.2   27.2   59.1  126.5  170.8
20 INIVX Van Eck Intl Inv GoldA   -2.3   21.4   44.3  175.3  231.8
 5 FSAGX Fidelity Select Gold .   -2.5   16.5   31.8  116.4  170.3
 3 INPMX AXP Precious Metals A.   -2.7   26.6   59.0  155.4  170.5
19 USAGX USAA Gold            .   -2.8   26.1   72.8  193.5  284.6
12 OCMGX Monterey OCM Gold    .   -3.1   23.3   49.2  193.1  278.0
17 USERX US Global Gold Shrs  .   -3.3   32.8   67.1  207.3  236.8
 1 ASA   ASA Ltd              .   -3.5    7.9   13.1  137.9  223.9
15 SGDAX Scudder Gold & Pr Mts.   -5.3   28.8   94.8  230.6  283.5

The leader for December was First Eagle Gold (SGGDX) as most funds lost value. As gold advanced from 396.8 to 415.7 in December, gold equities and funds didn't respond. The advances in XAU and HUI were judged to be overdone and a correction was due. Almost all reached a yearly high on December 2 and should quickly resume a close relationship to the price of gold, meaning 'up'. Distributions are included in these numbers.

Every fund has doubled within the last two years, some have tripled.

The Position indicator gives the relative position of a fund between its 52 week high and low. A high is represented by +100 and a low by -100. As of December 31, 2003.

fn        Fund                    pos     nav
 4 EKWBX Evergreen Prec Mtls B.   95.0   33.87
11 MIDSX Midas Fund           .   87.0    2.20
 7 FKRCX Franklin Gold & PrM A.   86.7   19.43
 6 SGGDX First Eagle Gold     .   85.0   17.41
14 RYPMX Rydex Prec Metals    .   84.6   44.42
16 TGLDX Tocqueville Gold     .   82.1   36.58
 9 LEXMX ING Precious Metals  .   82.0    7.76
 1 ASA   ASA Ltd              .   80.7   45.50
20 INIVX Van Eck Intl Inv GoldA   78.7   11.64
 8 GOLDX Gabelli Gold         .   78.2   18.18
 2 BGEIX Amer Cent Global Gold.   78.2   13.17
17 USERX US Global Gold Shrs  .   75.3    8.76
10 FGLDX INVESCO Gold & Pr Mtl.   72.3    3.88
12 OCMGX Monterey OCM Gold    .   69.9   13.79
21 VGPMX Vanguard Prec Metals .   67.1   16.38
 5 FSAGX Fidelity Select Gold .   64.6   29.83
19 USAGX USAA Gold            .   63.5   17.35
15 SGDAX Scudder Gold & Pr Mts.   60.9   20.90
13 OPGSX Oppenheimer Gold A   .   60.5   20.92
 3 INPMX AXP Precious Metals A.   55.0   12.35
18 UNWPX US Global World PrecM.   52.7   16.66

This indicator demonstrates a fund's ability to retain previous advances without falling out of bed when gold has a bad month or two. Some of these figures may be distorted because dividends were not included. For instance, UNWPX made a distribution of 1.86, which decreased its position measurement substantially from its numerical peak.

This is a list of reported distributions during 2003, highly unusual but expected after the substantial gains.

fn        Fund                  distribution
18 UNWPX US Global World PrecM.   1.86
 5 FSAGX Fidelity Select Gold .   1.42
15 SGDAX Scudder Gold & Pr Mts.   1.25
13 OPGSX Oppenheimer Gold A   .   1.20
19 USAGX USAA Gold            .   0.94
21 VGPMX Vanguard Prec Metals .   0.93
 3 INPMX AXP Precious Metals A.   0.85
 1 ASA   ASA Ltd              .   0.75
 4 EKWBX Evergreen Prec Mtls B.   0.69
16 TGLDX Tocqueville Gold     .   0.64
 6 SGGDX First Eagle Gold     .   0.56
12 OCMGX Monterey OCM Gold    .   0.28
20 INIVX Van Eck Intl Inv GoldA   0.22
 2 BGEIX Amer Cent Global Gold.   0.20
 8 GOLDX Gabelli Gold         .   0.17
10 FGLDX INVESCO Gold & Pr Mtl.   0.14
 7 FKRCX Franklin Gold & PrM A.   0.10
11 MIDSX Midas Fund           .   0.08
17 USERX US Global Gold Shrs  .   0.03
14 RYPMX Rydex Prec Metals    .   0.01
 9 LEXMX ING Precious Metals  .   0.00

While in past years there was a lack of dividends from gold funds, 2003 saw an overflowing of dividends, mostly in December, as a result of fund gains.

The following list shows the approximate size of funds as measured in total assets under management in $millions. (As of December 31) This is only an approximation as the size changes daily with new purchases, redemptions, and nav changes. Relative positions of the funds usually don't change much. The largest remain the largest.

fn         Fund                 assets
 5 FSAGX Fidelity Select Gold .  824
 2 BGEIX Amer Cent Global Gold.  718
21 VGPMX Vanguard Prec Metals .  587
16 TGLDX Tocqueville Gold     .  505
 7 FKRCX Franklin Gold & PrM A.  446
 1 ASA   ASA Ltd              .  435
 6 SGGDX First Eagle Gold     .  421
19 USAGX USAA Gold            .  315
20 INIVX Van Eck Intl Inv GoldA  308
18 UNWPX US Global World PrecM.  286
13 OPGSX Oppenheimer Gold A   .  211
 8 GOLDX Gabelli Gold         .  186
15 SGDAX Scudder Gold & Pr Mts.  173
10 FGLDX INVESCO Gold & Pr Mtl.  136
 9 LEXMX ING Precious Metals  .  112
17 USERX US Global Gold Shrs  .   84
14 RYPMX Rydex Prec Metals    .   75
 3 INPMX AXP Precious Metals A.   71
11 MIDSX Midas Fund           .   70
12 OCMGX Monterey OCM Gold    .   51
 4 EKWBX Evergreen Prec Mtls B.   38

The total capitalization of all gold mining investments worldwide was less than $90 billion, but with each month producing a 15-20% asset growth, total assets are increasing substantially. We have seen these numbers approximately double over the last twelve months. While the navs are increasing and contribute to the increased asset level, it also shows that there are more investments coming into precious metal funds from other sources.

The beta indicator measures the relative volatility of a fund's net asset value (nav) movement over the last 52 weeks as compared to the gold fund group average, 1.0. This number indicates volatility but does not specify the direction of movement, so it is only a measurement of relative activity of the price of the fund.

fn        fund                    beta
15 SGDAX Scudder Gold & Pr Mts.   1.65
18 UNWPX US Global World PrecM.   1.43
19 USAGX USAA Gold            .   1.33
17 USERX US Global Gold Shrs  .   1.30
13 OPGSX Oppenheimer Gold A   .   1.22
 3 INPMX AXP Precious Metals A.   1.15
 4 EKWBX Evergreen Prec Mtls B.   1.12
11 MIDSX Midas Fund           .   1.06
16 TGLDX Tocqueville Gold     .   1.04
 2 BGEIX Amer Cent Global Gold.   1.03
 8 GOLDX Gabelli Gold         .   1.03
20 INIVX Van Eck Intl Inv GoldA   1.02
 7 FKRCX Franklin Gold & PrM A.   0.98
14 RYPMX Rydex Prec Metals    .   0.98
21 VGPMX Vanguard Prec Metals .   0.98
10 FGLDX INVESCO Gold & Pr Mtl.   0.97
12 OCMGX Monterey OCM Gold    .   0.97
 9 LEXMX ING Precious Metals  .   0.96
 5 FSAGX Fidelity Select Gold .   0.81
 6 SGGDX First Eagle Gold     .   0.73
 1 ASA   ASA Ltd              .   0.69

The beta for each fund may change 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.

Only four funds were positive for December, led by First Eagle Gold (SGGDX), which ended the year up 39%. The top fund for 2003 was Scudder Gold (SGDAX), up 94%.

The limited correction in gold stocks during December didn't coincide with any drop in the price of gold, which kept rising with the drop in the dollar. With the dollar still sliding, the price of gold is set to continue its climb, and gold equities more than likely will join in the parade once again.

Most stock market analysts estimate that the U.S. economy will grow at 4.5% through 2004 and the market will continue its climb, possibly to new all-time highs for all indexes. These same analysts don't see the Federal Reserve raising rates much until late in the year, if then.

The dollar's slide could be slowed or stopped if U.S. interest rates were increased, but you can bet that the Federal Reserve doesn't have that on the agenda. Rising rates would hurt any new market investments and drop a ton of bricks on the bond market, so the Bush administration will fight that at least until after the election. Therefore, only an increased international disdain for dollar investments could force rates up, requiring the Treasury Department to offer new debt at a higher yield. The Fed would have to follow. That disdain could be caused by another 15-20% decrease in the dollar, which would cause international investors to stop buying U.S. debt at only 4%.

If interest rates increase before summer, most market analysts will retract their estimates.

At the beginning of 2004, almost all economic trends still point toward a sliding dollar and resulting higher prices for precious metals. That speaks well for all gold funds.