Most of gold's movement can be attributed to the inverse movement of the U.S. dollar, which rose from 83.60 to over 85.50 before sliding back to 82.51. The euro ended at 1.3188. The major factor which ended the dollar rally was an announcement by South Korea that they were going to spread their future reserves more in the direction of non-dollar priced assets. The market misunderstood that to mean that they might sell dollars, which they quickly repudiated. The effect, however, was to reinforce the idea that more central bankers are not pleased with the U.S.'s excessive deficit spending and the increasing trade deficit flooding the world with greenbacks. The latest trade deficit from December was the second largest ever at over $56 billion, and showed no signs of getting smaller in the near future. Deficit news pushed the dollar down and gold rallied.

The fear that the IMF might revalue its gold holdings or perhaps sell them was a factor that pushed gold down until the market realized that selling was very unlikely.

With the long term bond yield leveling off near 4.70% and the short term bonds still rising, a flat yield curve has been developing. Historically that's a sign of an approaching recession. Apparently someone wants 30 year bonds, and the yield closed the month at 4.70% after dipping as low as 4.36%. As a result, mortgage rates remained relatively low at 5.57% for a 30 year mortgage, fueling a continuing housing boom as buyers outnumber the supply of new homes. The number of buyers is directly related to the mortgage rate, which determines who can afford to buy at today's prices.

Meanwhile, the rise in commodity prices continued as copper reached a new sixteen year high with aluminum reaching a new ten year high. Oil advanced from 47.78 to close the month at 51.68. These prices will eventually spread into the rest of the economy, better known as inflation to the average consumer.

DRDGOLD, better known as Durban Deep (DROOY) of South Africa, plunged to the 1.00 level as it announced it was running out of cash and some analysts mentioned bankruptcy. All gold mines are not the same. I'm sure gold fund managers know that.

The Dow reached over 10,800 but ended at 10,766. The two new ETF's have produced some new demand for bullion, far outpacing U.S. mutual funds, supposedly because they remove the need for storage and security for many investors interested in owning gold.

fn       Fund                     1 mo   3 mo  12 mo   2 yr   3 yr
14 PMPIX Profund Prec Mtls Ultr   12.9  -14.1   -5.1   31.7       
19 UNWPX US Global World Pr Mns   10.3    0.3    9.0   94.2  180.3
22 VGPMX Vanguard Prec Metals .   10.0    2.2   17.0   71.8  101.9
13 OPGSX Oppenheimer Gold A   .    9.0   -5.3    3.3   50.7   79.3
 2 FGLDX AIM Gold & Pr Mtls Inv    8.6   -3.5    3.3   43.1   89.0
11 MIDSX Midas Fund           .    8.2   -5.0    3.9   42.8   98.9
10 LEXMX ING Precious Metals A.    7.9   -6.0   -2.1   32.2   78.5
17 TGLDX Tocqueville Gold     .    7.8   -3.7    3.3   45.8  102.3
 8 FKRCX Franklin Gold & PrMt A    7.7   -6.7    1.2   41.0   66.4
 5 EKWBX Evergreen Prec Mtls B.    7.5   -6.1   -0.9   52.5  113.3
21 INIVX Van Eck Intl Inv GoldA    7.5   -6.9    1.2   33.5   96.1
 1 ASA   ASA Ltd              .    7.5  -13.1   -7.7    0.5   59.4
 6 FSAGX Fidelity Select Gold .    7.3   -4.7   -0.7   19.3   59.1
15 RYPMX Rydex Prec Metals    .    7.2   -9.5   -8.9   22.1   45.9
 3 BGEIX Amer Cent Global Gold.    7.1   -7.7   -0.5   32.9   83.1
 9 GOLDX Gabelli Gold         .    7.0   -7.2   -3.0   30.1   91.6
18 USERX US Global Gold Shares.    7.0   -3.6    3.6   55.5  116.5
20 USAGX USAA Precious Metals .    6.8   -5.8   -1.8   49.8  108.3
 4 INPMX AXP Precious Metals A.    6.7   -6.9  -12.6   33.1   77.0
16 SGDAX Scudder Gold & Pr Mt A    6.6   -8.6   -3.4   67.7  147.5
12 OCMGX OCM Gold             .    6.6   -7.5   -7.1   25.5   93.3
 7 SGGDX First Eagle Gold A   .    5.6   -7.7   -0.7   26.0  100.1

Profund Precious Metals (PMPIX) took the top spot for February after two weeks of leadership. It was such a good month that all funds gained, and some started to make the last twelve months look acceptable. The dollar, at 82.51, fell from its rally high over 85.50 and gave gold stocks and funds a reason to rally. However, we have approached a price level which could be a temporary peak even though the dollar still manages to have intraday rallies and is hesitant to fall below 82.40.

This is a list of reported distributions during 2004. This combines dividends and capital gains, and they're taken into consideration for comparison of annual results.

fn        Fund                  distribution
16 SGDAX Scudder Gold & Pr Mt A   1.66
13 OPGSX Oppenheimer Gold A   .   1.38
17 TGLDX Tocqueville Gold     .   1.36
 4 INPMX AXP Precious Metals A.   1.16
22 VGPMX Vanguard Prec Metals .   1.00
21 INIVX Van Eck Intl Inv GoldA   0.97
 1 ASA   ASA Ltd              .   0.55
19 UNWPX US Global World Pr Mns   0.46
12 OCMGX OCM Gold             .   0.36
10 LEXMX ING Precious Metals A.   0.23
 9 GOLDX Gabelli Gold         .   0.20
20 USAGX USAA Precious Metals .   0.15
 3 BGEIX Amer Cent Global Gold.   0.08
18 USERX US Global Gold Shares.   0.05
 2 FGLDX AIM Gold & Pr Mtls Inv   0.04
 8 FKRCX Franklin Gold & PrMt A   0.01
 5 EKWBX Evergreen Prec Mtls B.   0.00
11 MIDSX Midas Fund           .   0.00
15 RYPMX Rydex Prec Metals    .   0.00
 7 SGGDX First Eagle Gold A   .   0.00
 6 FSAGX Fidelity Select Gold .   0.00
14 PMPIX Profund Prec Mtls Ultr   0.00

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 28, 2005.

fn        Fund                     pos     nav
22 VGPMX Vanguard Prec Metals .  100.0   18.11
19 UNWPX US Global World Pr Mns   46.3   17.11
11 MIDSX Midas Fund           .   45.9    2.11
 2 FGLDX AIM Gold & Pr Mtls Inv   44.9    3.77
 8 FKRCX Franklin Gold & PrMt A   44.5   18.66
17 TGLDX Tocqueville Gold     .   37.3   33.83
18 USERX US Global Gold Shares.   35.9    8.30
 5 EKWBX Evergreen Prec Mtls B.   32.3   32.20
13 OPGSX Oppenheimer Gold A   .   30.9   19.29
 7 SGGDX First Eagle Gold A   .   26.9   16.47
21 INIVX Van Eck Intl Inv GoldA   19.7    9.85
 1 ASA   ASA Ltd              .   15.5   40.58
 3 BGEIX Amer Cent Global Gold.   15.2   11.92
 6 FSAGX Fidelity Select Gold .   14.4   27.45
10 LEXMX ING Precious Metals A.   11.5    6.81
 9 GOLDX Gabelli Gold         .    5.7   16.10
14 PMPIX Profund Prec Mtls Ultr    0.5   29.84
20 USAGX USAA Precious Metals .   -4.9   15.48
16 SGDAX Scudder Gold & Pr Mt A  -12.9   17.18
15 RYPMX Rydex Prec Metals    .  -13.1   38.02
12 OCMGX OCM Gold             .  -18.7   11.44
 4 INPMX AXP Precious Metals A.  -28.9    9.40

Again, I will point out that Vanguard is doing something right to distance itself from the other funds. Hitting new highs consistently over the last two weeks, considering the $1.00 distribution in December, VGPMX has moved away from most of the other funds and deserves the credit.

The following list shows the approximate size of funds as measured in total assets under management in $millions. (As of the end of February) 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 .   836
 6 FSAGX Fidelity Select Gold .   708
 3 BGEIX Amer Cent Global Gold.   687
17 TGLDX Tocqueville Gold     .   523
 7 SGGDX First Eagle Gold A   .   503
 8 FKRCX Franklin Gold & PrMt A   469
 1 ASA   ASA Ltd              .   388
20 USAGX USAA Precious Metals .   330
19 UNWPX US Global World Pr Mns   295
 9 GOLDX Gabelli Gold         .   284
13 OPGSX Oppenheimer Gold A   .   240
21 INIVX Van Eck Intl Inv GoldA   240
15 RYPMX Rydex Prec Metals    .   228
16 SGDAX Scudder Gold & Pr Mt A   127
 2 FGLDX AIM Gold & Pr Mtls Inv   112
10 LEXMX ING Precious Metals A.    87
18 USERX US Global Gold Shares.    78
12 OCMGX OCM Gold             .    71
14 PMPIX Profund Prec Mtls Ultr    67
 4 INPMX AXP Precious Metals A.    59
11 MIDSX Midas Fund           .    57
 5 EKWBX Evergreen Prec Mtls B.    44

With its recent gains in net asset value, Vanguard Precious Metals(VGPMX) continues to widen its lead over Fidelity(FSAGX) and American Century(BGEIX). The size of a fund is a statistic that is nice to know but usually has very little impact on real value. It may pose a problem for management in moving into and out of stocks. That's why managers make the big bucks.

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
14 PMPIX Profund Prec Mtls Ultr    1.56
20 USAGX USAA Precious Metals .    1.18
 4 INPMX AXP Precious Metals A.    1.10
13 OPGSX Oppenheimer Gold A   .    1.08
16 SGDAX Scudder Gold & Pr Mt A    1.08
 6 FSAGX Fidelity Select Gold .    1.04
18 USERX US Global Gold Shares.    1.04
19 UNWPX US Global World Pr Mns    1.03
12 OCMGX OCM Gold             .    1.02
15 RYPMX Rydex Prec Metals    .    1.02
 3 BGEIX Amer Cent Global Gold.    0.94
11 MIDSX Midas Fund           .    0.94
 9 GOLDX Gabelli Gold         .    0.93
21 INIVX Van Eck Intl Inv GoldA    0.90
10 LEXMX ING Precious Metals A.    0.87
22 VGPMX Vanguard Prec Metals .    0.85
 2 FGLDX AIM Gold & Pr Mtls Inv    0.85
 5 EKWBX Evergreen Prec Mtls B.    0.84
 1 ASA   ASA Ltd              .    0.81
 8 FKRCX Franklin Gold & PrMt A    0.80
17 TGLDX Tocqueville Gold     .    0.75
 7 SGGDX First Eagle Gold A   .    0.71

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. In a sustained up market, they should do very well, but a declining market might catch them too.

February's resulting increases in NAV for all funds was an encouraging sign that the gold market may have turned the corner to the upside, or at least reached a support level at 412 which will hold for the next rally to 450+. Gold stocks in general had excellent moves, some spectacular. Only a few lost during the month, and you can only hope that your fund didn't own them.

An Economist Magazine article with World Gold Council data predicts that gold will settle back to $350 by 2008. See for yourself. Go the bottom of the page for the next link.

Many politicians feel that the deficit is only a sign of the U.S. economic growth and is not to be worried about. They are wrong. Eventually, foreigners will have enough cash to buy us out. Thomas Jefferson pointed this out way back in 1787 when arguing against a runaway government.

Overall gold mining production has been decreasing in South Africa as the rand appreciated, making mining more costly. Exploration worldwide has not reached the record production reached in 2001, and that indicates that an increase in demand due to any worldwide crisis will give gold another kickstart. For the Iraq war, it appears it has been well discounted and therefore has little effect on gold movements.

The 412 price level held when the dollar peaked at 85.50 and 436 was reached when the dollar fell to 82.51. Keep those bracket relationships in mind.

The dollar moves about .40 up or down each day depending on what traders consider important and gold stocks follow inversely. By the end of the month, closing on highs for the month, most gold stocks and funds are overbought and due for a correction, but the major trend is still up. Trade in and out at your own risk.

Repeat: I don't think there is anything that the Bush Administration, Congress, or the Federal Reserve can do to stop the weakening dollar over the long term even if they wanted to, and that is up for discussion. The growing trade deficit is unstoppable short of a depression and higher interest rates will only be temporary help until the dollar market adjusts to each new fix. Meanwhile, the dollar will continue to go up and down like bumps on a ski slope, which usually ends up further down the hill.