Gold started the year at 635, dipped to 605 in January, reached 692 in April, traded back to 641 in June, surged to 835 by early November, slid back to 794 in December, and closed the year back up to 834.9.

Silver started at 12.81, dipped to 12.13 in January, reached 14.69 in February, traded back to 12.21 in June, rallied to 13.33 in July, crashed to 11.46 in August, surged to 15.46 by early November, slid back to 13.82 in December, and closed the year back up to 14.79.

XAU started at 142.25, dipped to 130 in January, reached 147 in February and 148 in April, traded back to 132 in June, rallied to 158 in July, crashed to 125 in August, surged to 193 by early November, slid back to 159 in December, and closed the year back up to 173.32.

In general, gold stocks matched the timing of gold, silver, and XAU with a dip in January, a high point in April, a dip in late June followed by a rally in July to a low in August. From August 16 to November 6 gold funds surged over 50% before sliding back by December 17. By the end of the year we were back into a major rally.

The Dow Industrials and the S&P Index had a good year, but NASDAQ was better with almost a 10% gain. Emerging markets led the way overseas with China, Brazil, and India having great investment results.

A major boost in the Dow this month was the latest injection of liquidity into the markets after an interest cut to 4.25% by the Federal Reserve had only a negative effect. The Dow rallied for a few days, but shortly thereafter the dollar slipped and gold bottomed. The current rally in gold started on December 17, even as the dollar continued to climb to 77.72 a few days later.

The markets would have done better if the subprime real estate mortgage crisis had never developed, eliminating billions of dollars in investment capital and forcing the Fed into its print-more-money mode.

One reason for advances in international markets was the creation of new money worldwide as central banks raced to outdo the U.S. Federal Reserve's liquification of our currency. A reasonable estimate of the rate of new money creation in 2007 was 12% for the dollar, and other currencies are exceeding our production.

The housing market wasn't expected to be hurt much by mortgage limitations, but the curve is still sloped downward and 2008 looks like it will not be another gain for the markets.

One of the exceptions will be gold and silver markets, and probably most other commodities, such as oil, which is pressing up against the $100 mark.

As the year ended, the price of gold was bumping up against the all-time high of over $850, and looked to be getting momentum for the new year. It was also the first month ever in which gold closed over $800.

fn            Fund                1 mo   3 mo  12 mo   2 yr   3 yr
24 GLD   StrtTrks Gold Shrs ETF    6.6   12.2   30.5   59.9   88.3
25 SLV   iShrs Silver Trust ETF    5.7    7.6   14.2   	         
21 INIVX Van Eck Intl Inv GoldA    3.4    5.7   27.2   84.7  133.7
12 OCMGX OCM Gold             .    3.3    4.9   23.3   68.0  111.6
20 USAGX USAA Precious Metals .    2.9    5.2   27.3   82.3  153.7
19 UNWPX US Global World Pr Mns    2.7    3.8   20.5   82.8  138.6
 1 ASA   ASA Ltd              .    2.6    3.2   20.5   44.4  101.8
 4 SGDAX DWS Gold & Prec Mtls A    1.9    5.1   24.2   59.2   91.6
11 MIDSX Midas Fund           .    1.6    4.2   31.7   89.0  164.0
 9 GOLDX GAMCO Gold AAA       .    1.6    3.5   25.8   66.3  118.1
18 USERX US Global Gold Shares.    1.5    5.0   15.5   73.5  130.3
27 XAU   Phlx Gold/Silver Index    1.3    2.7   21.8   35.4   74.5
16 RYPMX Rydex Prec Metals    .    1.3    2.7   19.9   45.8   77.2
 5 EKWBX Evergreen Prec Mtls B.    1.2    3.5   22.6   66.3  123.8
17 TGLDX Tocqueville Gold     .    1.0   -2.6   12.0   55.7  101.9
13 OPGSX Oppenheimer Gold A   .    0.9    0.3   30.5   87.4  146.7
22 VGPMX Vanguard Prec Metals .    0.9    2.4   32.0   75.4  152.2
26 HUI   Amex Gold Bugs Index .    0.8    4.2   21.0   47.8   90.1
15 INPMX Riversource Prec MtlsA    0.8   -3.8   13.1   53.0   92.1
 3 BGEIX Amer Cent Global Gold.    0.8    3.6   14.4   44.8   87.1
 2 FGLDX AIM Gold & Pr Mtls Inv    0.4    3.9   22.9   57.9  109.4
 8 FKRCX Franklin Gold & PrMt A    0.3    2.8   25.6   65.5  132.5
 7 SGGDX First Eagle Gold A   .    0.3    4.3   23.5   49.6   88.6
 6 FSAGX Fidelity Select Gold .    0.2    2.5   25.3   56.4  120.9
14 PMPIX Profund Prec Mtls Ultr   -0.9   -2.5   25.8   30.7   80.8
23 GDX   Mkt V Gold Miners ETF.   -1.1    1.1   14.9	      

It was a good year for all gold funds, better for some as fund managers showed that there was a difference in investment talents and techniques. Fund gains over the last 12 months were from 13.1%(INPMX) to 32.0%(VGPMX). XAU(21%) and HUI(21%) were in the middle of the pack.

Midas(MIDSX, 164%), USAA(USAGX, 153%), Vanguard(VGPMX, 152%), and Oppenheimer(OPGSX, 146%) produced the best gains over the last three years. The worst case over three years was XAU at 74%, about 22% compounded annually.

The Position indicator gives the relative position of a fund between its 52 week high and low. A high is represented by +100 and its low by -100. Positions and prices as of the end of December:

				           nav
fn          Fund                  pos   11/30/07 12/31/07
24 GLD   StrtTrks Gold Shrs ETF   90.2    77.32    82.46
 6 FSAGX Fidelity Select Gold .   63.7    43.43    39.88
22 VGPMX Vanguard Prec Metals .   61.0    36.71    33.29
 1 ASA   ASA Ltd              .   58.7    73.25    75.17
25 SLV   iShrs Silver Trust ETF   56.7   139.00   146.97
21 INIVX Van Eck Intl Inv GoldA   54.4    19.68    17.79
 4 SGDAX DWS Gold & Prec Mtls A   51.5    25.16    21.48
16 RYPMX Rydex Prec Metals    .   47.3    66.75    67.60
 7 SGGDX First Eagle Gold A   .   47.2    25.66    23.97
20 USAGX USAA Precious Metals .   46.9    34.36    32.52
 8 FKRCX Franklin Gold & PrMt A   45.5    40.11    36.38
12 OCMGX OCM Gold             .   45.3    21.49    20.78
 5 EKWBX Evergreen Prec Mtls B.   43.6    66.38    62.30
 9 GOLDX GAMCO Gold AAA       .   43.5    30.93    28.41
 2 FGLDX AIM Gold & Pr Mtls Inv   42.1     7.44     7.42
27 XAU   Phlx Gold/Silver Index   40.9   171.07   173.32
26 HUI   Amex Gold Bugs Index .   39.7   406.21   409.37
13 OPGSX Oppenheimer Gold A   .   39.5    37.48    35.57
18 USERX US Global Gold Shares.   39.0    18.28    16.13
 3 BGEIX Amer Cent Global Gold.   37.7    22.28    22.34
11 MIDSX Midas Fund           .   32.3     5.56     5.64
19 UNWPX US Global World Pr Mns   24.5    31.98    26.25
23 GDX   Mkt V Gold Miners ETF.   24.0    46.36    45.83
14 PMPIX Profund Prec Mtls Ultr   22.2    51.80    47.79
17 TGLDX Tocqueville Gold     .   21.9    57.05    48.84
15 INPMX Riversource Prec MtlsA    6.9    15.71    11.74

Funds continued to decline into December but rallied in the second half to produce nice gains for the month. It was interesting that the ETF GLD held onto its gains the best, and in fact was more receptive to gains at the end of the month. In other words, the price of gold kept rising as funds and gold equities were hesitant to get back on the bandwagon. One factor this year was the number of unusually large distributions by many funds, which caused the right column to be lower than the middle column in many cases.

Known distributions by gold funds, most done in December:

ASA 2.90
BGEIX .11
EKWBX 4.90
FGLDX .05
FKRCX 3.84
FSAGX 3.63
GOLDX 3.01
INIVX 2.56
INPMX 4.09
OCMGX 1.42
OPGSX 2.24
PMPIX 3.55
SGDAX 4.17
SGGDX 1.76
TGLDX 8.78
USAGX 2.85
USERX 2.43
UNWPX 6.60
VGPMX 3.74

MIDSX 0.00
RYPMX 0.00

The following list shows the approximate size of funds as measured in total assets under management. (In $millions as of the end of December) 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
22 VGPMX Vanguard Prec Metals .   4130
 6 FSAGX Fidelity Select Gold .   1578
13 OPGSX Oppenheimer Gold A   .   1359
 8 FKRCX Franklin Gold & PrMt A   1100
 3 BGEIX Amer Cent Global Gold.   1090
17 TGLDX Tocqueville Gold     .    931
20 USAGX USAA Precious Metals .    913
19 UNWPX US Global World Pr Mns    807
 7 SGGDX First Eagle Gold A   .    788
 1 ASA   ASA Ltd              .    616
21 INIVX Van Eck Intl Inv GoldA    540
 9 GOLDX GAMCO Gold AAA       .    445
23 GDX   Mkt V Gold Miners ETF.    394
11 MIDSX Midas Fund           .    250
18 USERX US Global Gold Shares.    238
 4 SGDAX DWS Gold & Prec Mtls A    191
 2 FGLDX AIM Gold & Pr Mtls Inv    164
16 RYPMX Rydex Prec Metals    .    137
12 OCMGX OCM Gold             .    131
 5 EKWBX Evergreen Prec Mtls B.     84
14 PMPIX Profund Prec Mtls Ultr     82
15 INPMX Riversource Prec MtlsA     79

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 by measuring the difference between a fund's high and low navs, 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
14 PMPIX Profund Prec Mtls Ultr    1.51
11 MIDSX Midas Fund           .    1.16
23 GDX   Mkt V Gold Miners ETF.    1.13
26 HUI   Amex Gold Bugs Index .    1.10
27 XAU   Phlx Gold/Silver Index    1.09
13 OPGSX Oppenheimer Gold A   .    1.07
 9 GOLDX GAMCO Gold AAA       .    1.06
20 USAGX USAA Precious Metals .    1.04
 8 FKRCX Franklin Gold & PrMt A    1.03
 3 BGEIX Amer Cent Global Gold.    1.01
 5 EKWBX Evergreen Prec Mtls B.    1.01
21 INIVX Van Eck Intl Inv GoldA    1.01
19 UNWPX US Global World Pr Mns    1.01
 1 ASA   ASA Ltd              .    0.98
18 USERX US Global Gold Shares.    0.98
 4 SGDAX DWS Gold & Prec Mtls A    0.97
 6 FSAGX Fidelity Select Gold .    0.97
12 OCMGX OCM Gold             .    0.96
22 VGPMX Vanguard Prec Metals .    0.91
 2 FGLDX AIM Gold & Pr Mtls Inv    0.87
17 TGLDX Tocqueville Gold     .    0.86
15 INPMX Riversource Prec MtlsA    0.82
16 RYPMX Rydex Prec Metals    .    0.81
 7 SGGDX First Eagle Gold A   .    0.81
25 SLV   iShrs Silver Trust ETF    0.75
24 GLD   StrtTrks Gold Shrs ETF    0.70

Over the year price movements by the funds have become more similar as evidenced by the decreasing range of fund BETAs. Profund Precious Metals Ultra (PMPIX) is the exception due to its technique of leveraged investing and cash positions. It moves much more that other funds, both ways.

The beta for each fund may change as the fund advances and declines, but the general position on the list doesn't change much, except as a reference to other funds. As you can see, there is a big difference between portfolio management policies of different funds.

The top of our gains list this month included GLD and SLV, two non-leveraged ETFs not noted for big moves. However, it is becoming obvious that the bullion price of gold and silver has advanced further than the relative price action of the funds. Unless gold reverses, and that is highly unlikely if the dollar keeps sliding, gold stocks and funds will soon join in the advance.

With the opening of financial markets in China and India to new ETFs for gold and silver, the new demand to stock the ETFs with bullion will soon increase well beyond the ability of sources to produce new bullion. The price of gold will rise. These ETFs will also provide a secondary system of savings which avoids banks if you are in a country with a doubtful currency or weak financial system. That ensures that these ETFs will be of functional use, not just a financial instrument. As currencies get weaker, consumers will deposit savings into gold ETFs, bullish for gold.

Another factor in the increasing gold price is decreasing production. While most of the gold ever mined is still available somewhere in jewelry or bank vaults, gold mine production of new bullion is decreasing, and some gold is actually consumed in industry, never to be recovered. As this reduction in production becomes more evident, demand will drive the price of gold up more.

Further interest rate cuts by the Federal Reserve needed to rescue the stock and credit markets will push the dollar lower, and gold higher. I consider this inevitable.

The increase in printing of new money is a major cause in the lower value of the dollar, and I expect it to continue. As the dollar slides, precious metals and gold equity prices have a strong tendency to rise, and this relationship appears to be continuing into the new year.

The increasing influence of sovereign funds in our domestic market is just a beginning for the selling of America to whoever has our dollars, and that exceeds a trillion dollars, enough to buy almost all gold stocks worldwide. While gold stocks are not yet on the shopping list, the investment by Abu Dhabu in Citigroup is just a beginning of what we can expect.