After reaching as high as 416 during a moment of dollar weakness, gold failed to seriously test January's 426. It then fell to a fourteen week low below 392 before closing at 396.4. Silver gained from 6.24 to 6.69, touching a new five year high at 6.77. The next long term high is at 7.23, well within reach. XAU advanced from 95.58 to 105 before closing at 99.8. Gold funds had a reasonably successful month as most were up.

In Japan, the effort to keep the yen down with the dollar has apparently paid off as exports have climbed enough to make the trade surplus increase from 102 billion yen to over 507 billion. The Nikkei average responded by climbing to 11,276 Some of this is obviously due to the currency management by the Japanese central bank, which has become common place. The dollar reached a three month high against the yen.

Singapore and Thailand reported extraordinary growth during the fourth quarter of 2003, indicating that Asia is easily matching U.S. growth numbers.

The U.S. December trade deficit came in at $42 Billion, second highest monthly deficit ever, but no one appeared to think it was important. The long bond yield slipped to 4.84% as mortgage rates kept going down. The housing market continued upward, with the scarcity of available detached single family homes in California forcing the average price to over $400,000. Some of this climb in prices is certainly due to the lower mortgage rates, holding as low as 5.24%.

While inflation is still reported to be less than 2%, during the last two months the Commodity index (CRB) has risen over 7% with higher prices and lower inventories of copper, steel, natural gas and even soybeans. Oil punched through 35 to close at 36.16, and gasoline prices are going up. Platinum reached a 16 year high. Since autumn of 2001, the CRB index is up almost 50% in 2 1/2 years.

Chairman Greenspan warned about the budget deficit and suggested limiting Social Security payments, but claimed that his low interest rate program was helping the economy. While the amount of job creation depends upon who you believe, U.S. manufacturing production remained at a relatively high level.

The euro fell to 1.2484, partly due to the possibility that the European Union would lower rates from 2.50% to 2.25%. That made the dollar look good.

fn       Fund                     1 mo   3 mo  12 mo   2 yr   3 yr
 3 INPMX AXP Precious Metals A.    6.4   -4.8   63.2  127.6  161.7
14 RYPMX Rydex Prec Metals    .    5.4   -6.4   43.7   73.5  113.6
 4 EKWBX Evergreen Prec Mtls B.    5.2   -4.3   65.6  137.2  215.2
18 UNWPX US Global World PrecM.    4.4   -4.0   85.0  181.8  260.3
10 FGLDX INVESCO Gold & Pr Mtl.    4.2   -5.6   47.0  100.2  156.6
17 USERX US Global Gold Shrs  .    3.7  -11.0   60.1  139.3  206.3
13 OPGSX Oppenheimer Gold A   .    3.6  -10.6   55.2   90.0  133.3
 2 BGEIX Amer Cent Global Gold.    3.4  -10.0   44.5  104.1  192.8
12 OCMGX Monterey OCM Gold    .    3.1  -10.8   41.6  131.9  227.1
 6 SGGDX First Eagle Gold     .    2.7   -3.4   35.2  131.1  241.9
11 MIDSX Midas Fund           .    2.5   -8.6   45.0  106.0  143.5
 7 FKRCX Franklin Gold & PrM A.    2.5   -7.8   49.9   79.4   99.5
 8 GOLDX Gabelli Gold         .    2.3  -10.3   42.6  124.8  208.6
21 VGPMX Vanguard Prec Metals .    2.3   -4.0   55.0   85.6  131.9
 9 LEXMX ING Precious Metals  .    1.6   -9.5   42.0  101.4  165.8
19 USAGX USAA Gold            .    1.3  -11.5   64.8  136.1  240.1
16 TGLDX Tocqueville Gold     .    1.2   -8.5   47.3  124.9  203.3
 1 ASA   ASA Ltd              .    1.2   -9.7   19.3  102.9  141.8
20 INIVX Van Eck Intl Inv GoldA    1.1  -10.4   40.7  121.3  192.9
15 SGDAX Scudder Gold & Pr Mts.    1.0  -12.7   82.7  179.9  228.4
 5 FSAGX Fidelity Select Gold .    0.3  -11.0   26.5   75.2  139.8

The leading gold fund for February was AXP Precious Metals (INPMX) as all funds gained value. The last three months since early December have seen a decrease in the value of gold equities and gold fund assets. On the other hand, the gain over the last 12 months is still substantial.

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 February 27, 2004.

fn        Fund                    pos     nav
 4 EKWBX Evergreen Prec Mtls B.   82.9   32.16
18 UNWPX US Global World PrecM.   78.1   16.14
 3 INPMX AXP Precious Metals A.   72.0   12.09
 6 SGGDX First Eagle Gold     .   72.0   16.40
21 VGPMX Vanguard Prec Metals .   71.8   15.64
10 FGLDX INVESCO Gold & Pr Mtl.   67.0    3.69
16 TGLDX Tocqueville Gold     .   59.9   33.94
 7 FKRCX Franklin Gold & PrM A.   57.1   17.97
14 RYPMX Rydex Prec Metals    .   56.7   41.47
11 MIDSX Midas Fund           .   55.6    2.03
15 SGDAX Scudder Gold & Pr Mts.   55.4   19.27
 1 ASA   ASA Ltd              .   54.4   42.60
20 INIVX Van Eck Intl Inv GoldA   52.5   10.67
 2 BGEIX Amer Cent Global Gold.   50.6   12.07
13 OPGSX Oppenheimer Gold A   .   50.3   19.11
19 USAGX USAA Gold            .   50.1   15.80
 8 GOLDX Gabelli Gold         .   48.2   16.66
17 USERX US Global Gold Shrs  .   48.2    8.06
 9 LEXMX ING Precious Metals  .   47.5    7.13
 5 FSAGX Fidelity Select Gold .   46.4   27.21
12 OCMGX Monterey OCM Gold    .   44.0   12.70

All are well above their 52 week average. This indicator demonstrates a fund's ability to retain previous advances without falling out of bed when gold has a bad month or two. In other words, their investments are more stable. Distributions have been included for these comparisons.

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 February 27) 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 .   752
 2 BGEIX Amer Cent Global Gold.   658
21 VGPMX Vanguard Prec Metals .   561
16 TGLDX Tocqueville Gold     .   468
 7 FKRCX Franklin Gold & PrM A.   412
 1 ASA   ASA Ltd              .   408
 6 SGGDX First Eagle Gold     .   396
19 USAGX USAA Gold            .   287
20 INIVX Van Eck Intl Inv GoldA   283
18 UNWPX US Global World PrecM.   277
13 OPGSX Oppenheimer Gold A   .   193
 8 GOLDX Gabelli Gold         .   170
15 SGDAX Scudder Gold & Pr Mts.   159
10 FGLDX INVESCO Gold & Pr Mtl.   130
 9 LEXMX ING Precious Metals  .   103
17 USERX US Global Gold Shrs  .    78
 3 INPMX AXP Precious Metals A.    70
14 RYPMX Rydex Prec Metals    .    70
11 MIDSX Midas Fund           .    64
12 OCMGX Monterey OCM Gold    .    47
 4 EKWBX Evergreen Prec Mtls B.    36

These numbers have approximately doubled over the last twelve months. While the navs are increasing and contribute to the increased asset level, it also shows that there are more investment funds 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. These numbers have not changed since December's high.

The top funds for February were AXP Precious Metals (INPMX), Rydex Precious Metals (RYPMX), and Evergreen Precious Metals (EKWBX) as all funds gained. Numbers would have been even better except for a 10% drop during the last week of the month. Gold is struggling to find a support area near 395 so it can take off again, but so far there are many analysts who believe gold will correct to as low as 365 before it reachs the next base.

Silver kept on firing on all cylinders, reaching a new high and approaching a breakout point above 7.23. I would not be surprised to see silver bust through.

With the heavy use of raw materials and commodities by China in the last two years, inventories have dropped and prices are soaring. Consumer prices in Asia have climbed enough for China to publish a warning about high prices. This situation has the similarities of a growth cycle surging at the top, bringing about a deflationary bust. The problem to the analyst is that the top is very difficult to determine, so it could last for months, perhaps another year. Until then, commodity prices will continue to rise, and that rise will undoubtedly affect the U.S. markets. Copper alone is up 30% for 2004, reaching an eight year high.

The European Union and others expressed the opinion at the latest G7 meeting that the dollar had fallen enough. That strengthened the dollar and put a stop to gold making new highs for awhile. The market has essentially agreed to gold correcting and makes every rally suspect.