Toward the end of the month, gold rallied and XAU crashed from a high over 155 to 133.35, partially due to Newmont Mining sliding almost 10% in two days when it announced it had a poor 4th quarter. Comparing XAU with GLD shows a distinct separation as GLD, following the price of gold, has moved back up and XAU hasn't. XAU is burdened with slumping NEM and ABX.

When stocks, including XAU, drop before gold, they usually signal a coming decline in gold, and decreasing South African stocks tell me that the international demand for gold stocks may be waning. However, present day gold seems to be developing a world of its own as the international market, central banks, and hedge funds have concentrated on bullion, not gold stocks.

Basic commodity prices continue to remain bullish as demand from China and India continues to increase. In addition, money supply measurements have been increasing worldwide for most currencies, and the dollar is not the leader. Perhaps that is one reason that the dollar index has maintained its relatively high position, closing February at 90.11. It has been in the 90 to 91 range since early February. If governments are inflating their currencies and demand is increasing for commodities, expect higher prices for tangible products, 'stuff'. Gold is but a representation of the broader trend and is in a long term trend not based on technical market factors.

Lower consumer confidence in U.S. domestic markets helped to drive the Dow down on the last day of the month, closing at 10,993. The long bond yield closed at 4.50%, less than the 10 year yield and the 2 year yield. This inverted yield curve often precedes a recession. Unofficial inflation reached 4.0% in January.

The price of oil was down for the month, but international events are putting pressure on the price and potential disruptions in the supply of oil. Rebels in Nigeria threatened to cut off a significant source, and the rebellion continues. A possible civil war in Iraq would certainly restrict its supply, and Iranian persistence for nuclear power has brought about strong disagreements with Europe and the U.S.. Venezuela made a few more threats about cutting supplies to the U.S. and has completed an agreement with China. Each caused a temporary spike in the price.

A new projected Exchange Traded Fund for silver will probably boost silver demand as GLD did for gold in the past six months. Silver closed at 9.72.

fn            Fund                1 mo   3 mo  12 mo   2 yr   3 yr
11 MIDSX Midas Fund           .   -2.3   31.0   62.1   68.5  144.3
19 UNWPX US Global World Pr Mns   -2.5   35.3   50.5   64.0  203.4
17 TGLDX Tocqueville Gold     .   -3.7   26.9   45.6   51.1  121.6
22 VGPMX Vanguard Prec Metals .   -4.4   19.2   47.8   81.4  168.1
20 USAGX USAA Precious Metals .   -4.8   26.0   52.6   50.9  146.9
18 USERX US Global Gold Shares.   -5.3   33.3   53.9   59.4  155.3
21 INIVX Van Eck Intl Inv GoldA   -5.3   19.7   42.3   44.4  102.7
10 LEXMX ING Precious Metals A.   -5.9   25.6   46.4   44.3  103.6
 4 INPMX Riversource Prec MtlsA   -6.2   26.0   42.3   24.3  102.9
12 OCMGX OCM Gold             .   -6.7   26.9   43.1   32.9   88.3
 6 FSAGX Fidelity Select Gold .   -6.8   17.5   49.6   50.9   88.0
 2 FGLDX AIM Gold & Pr Mtls Inv   -7.4   19.1   38.7   43.3  110.7
 7 SGGDX First Eagle Gold A   .   -7.6   15.9   36.2   36.8   82.8
13 OPGSX Oppenheimer Gold A   .   -7.6   24.6   41.5   53.4  127.3
 5 EKWBX Evergreen Prec Mtls B.   -8.3   24.1   45.5   45.6  138.6
 8 FKRCX Franklin Gold & PrMt A   -8.9   21.7   49.8   55.6  127.3
 3 BGEIX Amer Cent Global Gold.   -9.5   22.8   40.9   40.3  102.7
 9 GOLDX Gabelli Gold         .   -9.5   18.7   41.6   38.6   95.9
16 SGDAX Scudder Gold & Pr Mt A   -9.7   18.8   30.6   27.6  130.4
15 RYPMX Rydex Prec Metals    .  -10.4   17.9   31.0   20.1   71.4
 1 ASA   ASA Ltd              .  -10.6   23.6   55.1   49.6   71.8
14 PMPIX Profund Prec Mtls Ultr  -20.2   18.7   43.7   36.3  109.7

After Profund (PMPIX) held the top spot for two straight months, it plunged to the bottom for February. It was replaced by Midas Fund (MIDSX), presently making the right stock picks. This leadership extends over the past 12 months, so it's not just a one month wonder.

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 February 28, 2006.

					      nav
fn          Fund                  pos   01/31/06  02/28/06
11 MIDSX Midas Fund           .   91.3     3.50     3.42
19 UNWPX US Global World Pr Mns   90.2    25.14    24.50
17 TGLDX Tocqueville Gold     .   84.1    48.67    46.85
22 VGPMX Vanguard Prec Metals .   83.1    27.08    25.88
20 USAGX USAA Precious Metals .   80.8    24.61    23.44
18 USERX US Global Gold Shares.   80.5    13.33    12.63
21 INIVX Van Eck Intl Inv GoldA   77.5    14.80    14.02
10 LEXMX ING Precious Metals A.   76.4    10.57     9.95
 6 FSAGX Fidelity Select Gold .   75.9    38.55    35.91
 4 INPMX Riversource Prec MtlsA   73.9    14.26    13.38
12 OCMGX OCM Gold             .   71.6    17.49    16.31
13 OPGSX Oppenheimer Gold A   .   69.2    28.13    25.98
 2 FGLDX AIM Gold & Pr Mtls Inv   67.8     5.65     5.23
 5 EKWBX Evergreen Prec Mtls B.   66.8    50.97    46.76
 7 SGGDX First Eagle Gold A   .   64.9    23.72    21.91
 8 FKRCX Franklin Gold & PrMt A   64.5    30.49    27.78
 3 BGEIX Amer Cent Global Gold.   61.8    18.56    16.80
 9 GOLDX Gabelli Gold         .   61.3    24.98    22.61
16 SGDAX Scudder Gold & Pr Mt A   60.2    23.17    20.93
 1 ASA   ASA Ltd              .   60.0    68.66    61.39
15 RYPMX Rydex Prec Metals    .   56.6    55.61    49.81
14 PMPIX Profund Prec Mtls Ultr   33.7    53.76    42.88

February was a negative month for all funds, but all are still well above their 52 week averages. The two months of 2006 put all funds up for a very decent return.

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 .   2560
 6 FSAGX Fidelity Select Gold .   1028
 3 BGEIX Amer Cent Global Gold.    865
 7 SGGDX First Eagle Gold A   .    717
17 TGLDX Tocqueville Gold     .    716
 8 FKRCX Franklin Gold & PrMt A    682
 1 ASA   ASA Ltd              .    593
20 USAGX USAA Precious Metals .    441
19 UNWPX US Global World Pr Mns    419
13 OPGSX Oppenheimer Gold A   .    374
 9 GOLDX Gabelli Gold         .    356
21 INIVX Van Eck Intl Inv GoldA    340
15 RYPMX Rydex Prec Metals    .    177
16 SGDAX Scudder Gold & Pr Mt A    165
14 PMPIX Profund Prec Mtls Ultr    137
 2 FGLDX AIM Gold & Pr Mtls Inv    135
18 USERX US Global Gold Shares.    118
10 LEXMX ING Precious Metals A.    117
12 OCMGX OCM Gold             .    100
 4 INPMX Riversource Prec MtlsA     85
11 MIDSX Midas Fund           .     78
 5 EKWBX Evergreen Prec Mtls B.     59

These totals sum up to over $10 billion, and not too long ago it was less than $5 billion. With the addition of the Exchange Trade Fund, GLD, gold is actively being purchased and used as an investment vehicle on the road to wealth. Silver is also benefitting from the projected ETF purchases which will be required to back shares.

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.

Gold dipped for the month to 561.6 after peaking above 570 in early February. Silver approached the $10 level but fell back, closing at 9.72. Funds peaked in late January and have been slipping and sliding since. The top fund, Midas Fund (MIDSX) has been showing good results for over a year.

Only a select few gold equities had a good month, and gold funds fortunate enough to have selected them in a portfolio did well. In most cases, the larger production mines, such as Newmont(NEM), Barrick(ABX), Placer(PDG), Rio Tinto(RTP), Kinross(KGC), and all South African mines had a poor month.

It is also difficult to see how the monthly leader, Midas Fund (MIDSX) did so well when its main holdings as of the end of 2005 inluded Newmont, Kinross, Glamis(GLG), Placer, and Rio Tinto, all of which were on the bad month list. Perhaps it's because of its choice of small capitalization stocks like Yamana Gold(AUY) helped as it continues along its 52 week high after agreeing to purchase Desert Sun(DEZ). Recently, it has been advantageous to have small cap mines in a portfolio since they have been the big movers. The larger stocks have been correcting.

The U.S. housing market continues to confuse the experts. Some investors and home owners think it can maintain its current level and regroup for another profitable year, but some analysts think it is on the edge of a collapse which will bring on an economic disaster for the entire economy.

Those in the first group are hoping for a continuing low interest rate environment with a low inflationary trend, supported by an economy with no stumbles, such as an oil crisis. This follows most government projections and TV analysts' commentaries. New Chairman Bernanke and the Federal Reserve policies are trying to make it work. They maintain stability by increasing the money supply as needed. In the long run that will depreciate the dollar more and cause the price of real 'stuff' like gold to go up.

The second group expects higher mortgage rates will prick the bubble and we will see home prices plummet as real estate speculators get burned. They say that if new buyers dry up, prices are unsustainable. Massive mortgage debt created over the past few years would become nonperforming assets to whomever holds them and unsold homes, now at record levels, would become a heavy burden on the financial structure of the nation. A collapsing economy would more than likely bring all prices down, including commodities such as gold.

That requires a third viewpoint. If the economy and prices deflate due to a financial destruction of mortgage debt, the money supply will contract, and the Fed will be required to rescue us all by creating dollars out of thin air, giving gold another boost.

In almost every example or scenario, precious metals go up. In most cases that means gold stocks, too.