Gold's steady advance since May has had several short pauses, but the trend goes on. That trend is commodity driven, inflation-fear driven, decreasing-supply driven, and emphasized more this month, international-conflict driven. Gold has also become much more acceptable as a feasible investment vehicle, so many more investors are getting in on metals worldwide.

International tensions came from many directions. In the latest election in Palestine, Hamas replaced the Fatah party in the leadership position for Palestinians, but their warlike positions do not set well with the U.S. or Europe. Osama bin Laden again expressed his intent to have violence return to the U.S. and disrupt financial markets.

Iran expressed an intent to develop its nuclear capabilities, claiming only peaceful use. The U.N. and the European Community decided to get involved in encouraging Iran to comply with international agreements without cutting off oil flow. Iran replied that they had no intention of limiting oil production unless they were attacked, which might have eased the climbing price of oil. Oil closed the month over $67. Part of the increase was violence in Nigeria and the Ivory Coast cutting off production.

Iran threatened to sell its oil for euros instead of dollars starting in March, which might have assisted in the slide in the dollar index of about 2% to 88.96. In an effort to support the dollar, the Federal Reserve welcomed its new Chairman, Benjamin Bernanke, by raising its short term rate to 4.50%, the highest level since May 2001. The long bond yield closed at 4.68%, up slightly from December.

Mortgage rates were down slightly to 6.13% for 30 year mortgages, but could not prevent a decrease of 5.7% in sales of existing homes in December.

The Dow edged up over 11,000 but fell back through. Most analysts feel that the economy is good enough to push through 11,000 for another good year, but the market has had a hard time holding above that number. GM and Ford are both laying off thousands and trying to keep away from bankruptcy. Most airlines are in trouble and housing and mortgage stocks are heading downhill. There are plenty of areas for possible market pain in the near future.

Islamic governments in the Middle East are now converting much of their dollar reserves to gold, and with the enlargement of the Dubai Gold and Commodities Exchange, gold will be traded seven days a week. Some predict that the price of gold will reach $800 in 2006.

Russia demonstrated how they could cut off gas supply lines to Ukraine and indirectly Europe if they so desired, but the negotiations with Ukraine were settled with a higher price. I'm sure the cutoff sent a reminder message to European consumers that Russia is a major supplier.

The fear of inflation continued unabated as economically, the money supply, M3, has been soaring at unbelievable levels, and not just in the U.S. Almost all countries have discovered that increasing their domestic money supply gives their economy a boost. The result is more investors becoming aware that an increased money supply usually means currency inflation, and higher prices for 'stuff' such as gold.

The month ended with the Davos Economic Summit in Switzerland as everyone who is anyone attended. A concensus was reached that China will have to be reckoned with as a major player for the future.

fn            Fund                1 mo   3 mo  12 mo   2 yr   3 yr
14 PMPIX Profund Prec Mtls Ultr   29.6   66.0  103.5   81.7  137.4
 1 ASA   ASA Ltd              .   24.8   52.7   86.9   69.9   74.8
18 USERX US Global Gold Shares.   24.6   52.3   73.7   74.5  152.5
19 UNWPX US Global World Pr Mns   23.7   52.8   70.4   75.7  199.9
 4 INPMX Riversource Prec MtlsA   20.9   46.6   61.9   41.0  101.9
13 OPGSX Oppenheimer Gold A   .   20.8   46.0   67.0   72.1  131.4
12 OCMGX OCM Gold             .   20.7   47.3   63.6   47.0   92.6
 9 GOLDX Gabelli Gold         .   20.1   44.2   67.5   56.7  103.6
15 RYPMX Rydex Prec Metals    .   19.9   43.9   56.9   41.3   78.7
 5 EKWBX Evergreen Prec Mtls B.   19.8   48.1   70.5   67.1  141.9
 3 BGEIX Amer Cent Global Gold.   19.7   49.2   66.8   60.3  106.9
21 INIVX Van Eck Intl Inv GoldA   19.7   40.2   61.6   54.2  100.6
16 SGDAX Scudder Gold & Pr Mt A   19.3   46.4   54.2   42.8  142.5
17 TGLDX Tocqueville Gold     .   19.3   44.0   63.1   58.8  120.6
 8 FKRCX Franklin Gold & PrMt A   18.9   47.4   77.0   75.0  131.8
10 LEXMX ING Precious Metals A.   18.8   44.3   67.9   55.7  105.7
11 MIDSX Midas Fund           .   17.1   46.4   79.5   76.8  136.8
 2 FGLDX AIM Gold & Pr Mtls Inv   16.7   40.5   62.8   61.4  114.4
22 VGPMX Vanguard Prec Metals .   16.7   34.4   70.2   94.2  165.8
 7 SGGDX First Eagle Gold A   .   16.6   39.2   55.8   52.1   85.9
20 USAGX USAA Precious Metals .   16.2   46.5   71.1   60.6  140.0
 6 FSAGX Fidelity Select Gold .   16.0   44.1   72.2   62.5   91.6

Profund (PMPIX) held the top spot for the second month in a row and demonstrated that their method of leveraged investments pays off in an up market. All funds had a good month, and all set a new 52 week high on January 31. Most are all-time highs.

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 January 31, 2006.

					      nav
fn          Fund                  pos   12/30/05 01/31/06
 1 ASA   ASA Ltd              .   100    55.01    68.66
 2 FGLDX AIM Gold & Pr Mtls Inv   100     4.84     5.65
 3 BGEIX Amer Cent Global Gold.   100    15.50    18.56
 4 INPMX Riversource Prec MtlsA   100    11.79    14.26
 5 EKWBX Evergreen Prec Mtls B.   100    42.56    50.97
 6 FSAGX Fidelity Select Gold .   100    33.24    38.55
 7 SGGDX First Eagle Gold A   .   100    20.34    23.72
 8 FKRCX Franklin Gold & PrMt A   100    25.64    30.49
 9 GOLDX Gabelli Gold         .   100    20.80    24.98
10 LEXMX ING Precious Metals A.   100     8.90    10.57
11 MIDSX Midas Fund           .   100     2.99     3.50
12 OCMGX OCM Gold             .   100    14.49    17.49
13 OPGSX Oppenheimer Gold A   .   100    23.29    28.13
14 PMPIX Profund Prec Mtls Ultr   100    41.47    53.76
15 RYPMX Rydex Prec Metals    .   100    46.37    55.61
16 SGDAX Scudder Gold & Pr Mt A   100    19.42    23.17
17 TGLDX Tocqueville Gold     .   100    40.80    48.67
18 USERX US Global Gold Shares.   100    10.70    13.33
19 UNWPX US Global World Pr Mns   100    20.32    25.14
20 USAGX USAA Precious Metals .   100    21.18    24.61
21 INIVX Van Eck Intl Inv GoldA   100    12.36    14.80
22 VGPMX Vanguard Prec Metals .   100    23.20    27.08

All funds set a new 52 week high on January 31 as everyone looked good.

The following list shows the approximate size of funds as measured in total assets under management. (In $millions as of the end of January) 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 .   2679
 6 FSAGX Fidelity Select Gold .   1103
 3 BGEIX Amer Cent Global Gold.    956
 7 SGGDX First Eagle Gold A   .    776
 8 FKRCX Franklin Gold & PrMt A    748
17 TGLDX Tocqueville Gold     .    744
 1 ASA   ASA Ltd              .    663
20 USAGX USAA Precious Metals .    463
19 UNWPX US Global World Pr Mns    430
13 OPGSX Oppenheimer Gold A   .    405
 9 GOLDX Gabelli Gold         .    394
21 INIVX Van Eck Intl Inv GoldA    358
15 RYPMX Rydex Prec Metals    .    198
16 SGDAX Scudder Gold & Pr Mt A    182
14 PMPIX Profund Prec Mtls Ultr    172
 2 FGLDX AIM Gold & Pr Mtls Inv    146
10 LEXMX ING Precious Metals A.    125
18 USERX US Global Gold Shares.    125
12 OCMGX OCM Gold             .    107
 4 INPMX Riversource Prec MtlsA     91
11 MIDSX Midas Fund           .     80
 5 EKWBX Evergreen Prec Mtls B.     64

These increases of assets under management are of major concern to managers, and this month added to everyone's bucket of goodies. Fidelity Select (FSAGX) became the second fund over one billion, joining Vanguard (VGPMX).

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   1.74
18 USERX US Global Gold Shares.   1.25
17 TGLDX Tocqueville Gold     .   1.22
11 MIDSX Midas Fund           .   1.22
 1 ASA   ASA Ltd              .   1.18
 3 BGEIX Amer Cent Global Gold.   1.10
 5 EKWBX Evergreen Prec Mtls B.   1.09
 8 FKRCX Franklin Gold & PrMt A   1.09
10 LEXMX ING Precious Metals A.   1.09
20 USAGX USAA Precious Metals .   1.06
 9 GOLDX Gabelli Gold         .   1.04
15 RYPMX Rydex Prec Metals    .   1.03
19 UNWPX US Global World Pr Mns   1.02
 4 INPMX Riversource Prec MtlsA   1.00
12 OCMGX OCM Gold             .   0.99
 6 FSAGX Fidelity Select Gold .   0.98
21 INIVX Van Eck Intl Inv GoldA   0.98
 2 FGLDX AIM Gold & Pr Mtls Inv   0.95
13 OPGSX Oppenheimer Gold A   .   0.92
16 SGDAX Scudder Gold & Pr Mt A   0.82
22 VGPMX Vanguard Prec Metals .   0.82
 7 SGGDX First Eagle Gold A   .   0.78

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. Perhaps the greatest difference is the policy of Profund (PMPIX) to leverage purchases or go 100% cash when they want. This policy produces a higher volatility rating and more amplified returns in an up market.

Some funds make distributions to shareholders during the year, usually in December.

                                    $
 6 FSAGX Fidelity Select Gold .   3.86
17 TGLDX Tocqueville Gold     .   2.09
 1 ASA   ASA Ltd              .   1.20
13 OPGSX Oppenheimer Gold A   .   1.18
19 UNWPX US Global World Pr Mns   1.04
22 VGPMX Vanguard Prec Metals .   0.80
 7 SGGDX First Eagle Gold A   .   0.49
 9 GOLDX Gabelli Gold         .   0.18
 8 FKRCX Franklin Gold & PrMt A   0.16
20 USAGX USAA Precious Metals .   0.16
18 USERX US Global Gold Shares.   0.12
 5 EKWBX Evergreen Prec Mtls B.   0.07
12 OCMGX OCM Gold             .   0.05
10 LEXMX ING Precious Metals A.   0.02

Some don't.

 3 BGEIX Amer Cent Global Gold.   0.00
 2 FGLDX AIM Gold & Pr Mtls Inv   0.00
 4 INPMX Riversource Prec MtlsA   0.00
11 MIDSX Midas Fund           .   0.00
15 RYPMX Rydex Prec Metals    .   0.00
16 SGDAX Scudder Gold & Pr Mt A   0.00
21 INIVX Van Eck Intl Inv GoldA   0.00
14 PMPIX Profund Prec Mtls Ultr   0.00

Gold ended 2005 at 517.1. It closed January at 570.8, up 53.7 or over 10%, in only 1(one, uno, eine, ichi) month, 20 trading days (.6%, or $2.70 per day average).

Separate from gold's advance, gold stocks have made their own monster gains, and they have been surging up and down daily in their advance to new highs. Weekly fund returns reflect this.

Supported by an overall increase in the demand for all commodities of substance, gold is but one. That increase in demand can be directly tied to new economic growth in Asia, led by China, and their trade with neighbors has produced a new need for goods and raw materials throughout Asia. This new trade has produced a financial situation where commodities are in short supply. China is actively searching for supplies of raw materials for future grown so this shortfall will continue.

Another factor is the difficulty of getting gold reserves out of the ground and to market. Production has actually been decreasing due to the low gold price of past years, and is not matching worldwide demand.

With this increase in gold's price we can assume that those previously short gold have unhedged as much as possible or they are now taking a beating. Commercial hedgers, being the professionals that they are, are still heavily in short positions, waiting for the correction.

One accepted economic belief is that the price of gold reflects the growth of inflation. However, the way that gold has become the thing to buy and invest in, produces the aura of a commodity responding to supply and demand independent of monetary influences. In other words, the fear of inflation affects the amount of demand, but inflation is not demand. Gold is moving up because so many people are getting interested. Not in the U.S. particularly, but on a huge international scale. However, if gold has become primarily a commodity and not inflation insurance, it is susceptible to supply and demand curves which occasionally cause corrections when buyers figure out the price is too high. A correction will come when the big funds and banks decide to stop buying, along with selling from India.

Even with gold stocks keeping up with gold, a general stock market slide of 10% would certainly cause most gold equities to have a significant correction and bring gold funds back down 10-20% before resuming the climb. A more drastic market correction due to some unforeseen problem, or problems, could cause volatile surges in both directions.

You may have noticed the increasing number of gold analysts and merchants with advertisements on the internet, on TV, and in the news. Gold has become acceptable again as a family investment. This means that more of the public, worldwide, will be getting on the bandwagon. The long term trend is still up.