In the Far East, President Bush finished his tour without any major conclusions or new policies. Japan has agreed to let the yen slide, but it seems to have paused at 134 yen/dollar. It will have to go much further to have much effect, and then their trading partners in Asia may complain.

In the Middle East, a proposal by Saudia Arabia for Israel to give up land won in the 1967 war in order to get official recognition of its existence by Arab states has been encouraged by many and is being seriously considered as a means of bringing peace.

A consumer confidence report came in with a decline, giving the stock markets a scare. However, several forecasts and reports gave the impression that the recession and downturn is about to end. Manufacturing was up in January, and the GDP increased 1.4% in the fourth quarter, much better than predicted. Even Chairman Greenspan was optimistic. There were no interest rate changes by the Federal Reserve, and the long bond rate ended the month at 5.42%.

Lower mortgage rates provided for record used home sales in January, although new home sales were down. The American consumer continued to spend and has not yet seen the need to save much. The lastest group to get chopped up in the market were the telecommunication companies with excess capacity, but the Dow closed up at 10106, responding to the reports that the recession is ending.

One subject becoming more important is the decision to aid or not to aid domestic steel producers in the U.S. with a major tariff against imported steel products. To do so would come in the face of the 'free trade' political agenda and create much more friction with our trading partners, particularly Europe. New tariffs are not the way the Bush administration wants to go, but politics may rule out. If so, expect more counter-tariffs to spring up, putting more pressure on currencies.

For the month, the price of gold surged from 282.1 to over 303, corrected back to 292 and closed at 296.7, in what looks like an upward bound trend. Silver, not wanting to be left behind, gained from 4.21 to 4.53 before closing at 4.49. Every gold fund gained, all but one over 7% for February. Oil gained, holding now above $21. The dollar, while below its recent high, is still a relatively strong 119.1. The euro remained around .86-.87, not appearing to have any effect upon gold prices.

fn         Fund                   1 mo   3 mo  12 mo   2 yr   3 yr
 1 ASA   ASA Ltd              .   17.3   29.8   39.7   50.2   84.8
17 TGLDX Tocqueville Gold     .   14.9   41.3   54.3   55.1   75.5
 6 SGGDX First Eagle SGen Gold.   14.7   42.0   67.7   51.7   54.8
18 USERX US Global Gold Shrs  .   14.5   41.2   46.6   17.6    8.4
21 INIVX Van Eck Intl Inv GoldA   14.3   38.0   50.9   37.8   12.8
 8 GOLDX Gabelli Gold         .   13.8   36.2   54.7   55.6   58.5
 3 INPMX AXP Precious Metals A.   12.4   31.5   29.2   26.0   24.6
11 MNTGX Monterey OCM Gold    .   11.4   32.5   57.2   43.8   34.2
20 USAGX USAA Gold            .   11.3   32.2   59.1   53.0   55.8
 2 BGEIX Amer Cent Global Gold.   10.9   32.7   59.1   42.1   32.8
14 LEXMX Pilgrim Prec Metals A.   10.5   29.5   44.8   33.9   35.3
 4 EKWBX Evergreen Prec Mtls B.   10.2   28.5   44.9   44.9   44.7
19 UNWPX US Global World Gold .    9.6   33.4   40.1   -5.0  -20.2
12 OPGSX Oppenheimer Gold A   .    9.5   19.5   28.4   25.6   31.7
 9 FGLDX INVESCO Strat Gold   .    9.4   26.7   40.3   26.7   12.4
 5 FSAGX Fidelity Select Gold .    9.4   28.9   47.4   36.5   43.6
16 SCGDX Scudder Gold         .    9.2   21.4   26.7   36.9   33.1
 7 FKRCX Franklin Gold A      .    9.2   21.9   18.2   29.1   47.1
15 RYPMX Rydex Prec Metals    .    8.3   27.0   32.4              
10 MIDSX Midas Fund           .    7.7   25.8   27.3              
22 VGPMX Vanguard Gold/Pr Mtls.    7.5   17.5   28.0   45.1   63.4
13 PRPFX Permanent Portfolio  .    1.8    0.6    3.6    5.6    3.4

With the price of gold making a nice gain for the month, the funds and equities gladly joined in. ASA turned out to be the leader, but looking at the 12 month column shows several funds over 50% for the last 12 months. Gold funds are still the leading sector for 2002, just like 2001.

fn    Fund                  pos  nav(2-28)
17 Tocqueville Gold     .   99.8   18.41
 8 Gabelli Gold         .   95.3    8.51
11 Monterey OCM Gold    .   95.0    6.24
 6 First Eagle SGen Gold.   94.6    8.45
20 USAA Gold            .   93.5    8.29
 5 Fidelity Select Gold .   93.2   18.25
 3 AXP Precious Metals A.   92.7    6.64
16 Scudder Gold         .   92.1    8.17
14 Pilgrim Prec Metals A.   90.7    3.91
18 US Global Gold Shrs  .   90.0    3.87
 9 INVESCO Strat Gold   .   89.7    2.09
21 Van Eck Intl Inv GoldA   88.3    6.97
 2 Amer Cent Global Gold.   88.0    6.70
19 US Global World Gold .   87.4    6.99
 7 Franklin Gold A      .   87.3   11.09
12 Oppenheimer Gold A   .   86.7   11.77
22 Vanguard Gold/Pr Mtls.   86.1   10.01
 4 Evergreen Prec Mtls B.   84.4   15.30
 1 ASA Ltd              .   83.0   25.74
15 Rydex Prec Metals    .   80.7   25.89
10 Midas Fund           .   77.8    1.12
13 Permanent Portfolio  .   62.5   18.93

Almost all of these reached a new 52 week high on Feb 15 and have slipped slightly since. The month ended strong and the trend seems to be continuing upward.

fn    fund                  assets
22 Vanguard Gold/Pr Mtls.   389
 5 Fidelity Select Gold .   346
 1 ASA Ltd              .   248
 2 Amer Cent Global Gold.   236
 7 Franklin Gold A      .   192
21 Van Eck Intl Inv GoldA   140
16 Scudder Gold         .   117
12 Oppenheimer Gold A   .   104
20 USAA Gold            .   103
 9 INVESCO Strat Gold   .    78
14 Pilgrim Prec Metals A.    63
19 US Global World Gold .    58
13 Permanent Portfolio  .    55
15 Rydex Prec Metals    .    55
10 Midas Fund           .    41
 3 AXP Precious Metals A.    36
18 US Global Gold Shrs  .    30
17 Tocqueville Gold     .    29
 8 Gabelli Gold         .    17
11 Monterey OCM Gold    .    16
 6 First Eagle SGen Gold.    14
 4 Evergreen Prec Mtls B.     8

fn      fund                 beta
 6 First Eagle SGen Gold.   1.58
 2 Amer Cent Global Gold.   1.41
11 Monterey OCM Gold    .   1.38
 8 Gabelli Gold         .   1.37
17 Tocqueville Gold     .   1.37
20 USAA Gold            .   1.33
21 Van Eck Intl Inv GoldA   1.24
18 US Global Gold Shrs  .   1.13
 5 Fidelity Select Gold .   1.13
 4 Evergreen Prec Mtls B.   1.10
 1 ASA Ltd              .   1.07
14 Pilgrim Prec Metals A.   1.01
 9 INVESCO Strat Gold   .   0.96
22 Vanguard Gold/Pr Mtls.   0.94
15 Rydex Prec Metals    .   0.92
19 US Global World Gold .   0.90
 3 AXP Precious Metals A.   0.82
12 Oppenheimer Gold A   .   0.75
16 Scudder Gold         .   0.74
10 Midas Fund           .   0.70
 7 Franklin Gold A      .   0.68
13 Permanent Portfolio  .   0.18

The beta for each fund changes monthly as the fund advances and declines, but the relative 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.

*** Funds that diversify with government treasuries, bullion or natural resource stocks generally have a lower beta and are less volatile compared to a portfolio concentrating on small capitalization mining companies.

In South America, gold has turned into a very good investment, particularly in any country with a weakening currency, which is turning out to be all of them. Still, very few analysts suggest that gold is a safe haven for the average citizen. A few more coming devaluations, perhaps, may make it obvious.

Most gold equities and funds peaked on Feb 15 when the price of gold was 298.4, below the week-before-high of over 303. The fact that the equities and funds continue to rise even as the short term gold price corrects indicates that there are many investors who feel that the rise in gold will continue. The $5 drop which followed an announcement in Europe that the European banks could sell gold if they wanted to lasted only one day and has since mostly been recovered.

Everyone knows that there are central banks who can sell gold from their reserves, but it would not be a good investment decision, and would create plenty of criticism. It might be done to help hold up a currency from a political or nationalistic standpoint, but the worldwide trend is being set, which is up, and one bank cannot a trend reverse. There is, of course, the potential that a number of central banks could work together to sell enough bullion to slap down the gold market for a short term, but, again, that possibility is becoming more unlikely. The fact that the U.S. has not officially sold gold to support the dollar does not mean that they didn't do it in the past, or that they won't do it in the future.

I cannot imagine the U.S. government selling gold under the conditions of a strong dollar, unless we had some really misguided decisionmakers. However, if the dollar weakens, and gold takes off, I could see that happening. Before that, we would see the dollar index fall substantially down from its current 119+ position and would see the long bond interest rate rise much more than its current 5.40% to indicate the selling of bonds. So far, that is not happening.