At the first of the month, the oil price climbed to above $38 and then fell below $25 as the war started on March 19. The dollar rallied, gold fell and interest rates climbed over the first few days of the conflict

International bankers openly stated that the increasing U.S. trade deficit was consuming too much of the world's capital and was not sustainable. President Bush estimated that the immediate cost of the war would be about $75 billion, and requested that amount from Congress. We can always borrow it from the Chinese after we buy their products.

In the U.S. economy, the Federal Reserve left the interest rate alone, still at 1.25% for short term loans. Consumer confidence fell again, with the ABC News/Money Magazine index reaching a low level not seen since 1993. Sales of new homes in February fell even as mortgage rates set a new forty year low, but sales of existing homes slipped only slightly.

The trade deficit settled at 'only' $41 billion, and was treated as good news. The deficit, now about $4.5 - 5% of GDP, is funded by other nations continuing to buy government bonds, and the long bond went up with demand enough to produce a forty year low yield of 4.67% prior to the war. It then went to 5.03% in three days as if someone had second thoughts, and closed the month at 4.93%. Credit card delinquencies in the fourth quarter of 2002 were the highest in twelve years, and personal bankruptcies continued to set a record pace in 2003. Increasing job losses obviously had a detrimental effect.

Another specter overlooking the U.S. economy is the increasing number of S&P 500 companies with pension liabilities eating away at profits. The last two years have been a disaster for many corporation's pension assets, making 2002 the worst pension funding year in history.

For the month, gold started at 350, rallied to 356, and then fell to 326 before closing at 335.9. Silver rallied from 4.58 to 4.67 before falling to 4.34 and closing at 4.46. The XAU index fell steadily from 71.9 to 62.2 before closing at 66.9. All of these, including funds, finished in a rally as if the low had been reached.

fn         Fund                   1 mo   3 mo  12 mo   2 yr   3 yr
 1 ASA   ASA Ltd              .   -4.2  -15.3   22.2  123.4  120.8
19 USAGX USAA Gold            .   -5.5  -10.5    4.0   99.0   85.7
18 UNWPX US Global World PrecM.   -5.8   -5.8   12.4   96.1   34.3
 7 FKRCX Franklin Gold & PrM A.   -6.1  -13.6   -5.6   37.4   35.7
 9 LEXMX ING Pilgrim Pr Mtls A.   -6.2  -11.1   10.0   85.4   72.5
21 VGPMX Vanguard Prec Metals .   -6.2   -8.2   -6.5   50.6   51.4
12 MNTGX Monterey OCM Gold    .   -6.3   -9.6   25.0  127.1  101.9
17 USERX US Global Gold Shrs  .   -6.3  -10.1    7.0   97.1   55.6
15 SCGDX Scudder Gold & Pr Mt S   -6.5   -8.1   16.5   79.9   82.4
 4 EKWBX Evergreen Prec Mtls B.   -6.6  -11.4   10.2   93.7   85.6
 2 BGEIX Amer Cent Global Gold.   -6.9  -13.5    6.3  104.7   81.3
14 RYPMX Rydex Prec Metals    .   -7.2  -14.2   -4.0   51.0       
 6 SGGDX First Eagle SGen Gold.   -7.3   -9.9   23.1  139.9  124.6
16 TGLDX Tocqueville Gold     .   -7.7  -10.6   11.9  114.6   99.5
10 FGLDX INVESCO Gold & Pr Mtl.   -7.7  -12.1    4.8   67.8   50.0
11 MIDSX Midas Fund           .   -7.9  -15.7    2.4   61.3   24.0
 8 GOLDX Gabelli Gold         .   -8.1  -11.8   13.5  121.9  108.7
13 OPGSX Oppenheimer Gold A   .   -8.3  -14.1   -6.4   42.3   33.6
 3 INPMX AXP Precious Metals A.   -8.6  -12.8   -0.1   57.7   46.3
 5 FSAGX Fidelity Select Gold .  -10.0  -14.5    1.8   81.5   64.9
20 INIVX Van Eck Intl Inv GoldA  -10.4  -15.8   10.7  106.7   77.3

ASA Limited (ASA) showed the least decline for the month, indicating it is turning less bearish, and that is a good sign. All funds closed the month on a positive note, rescuing these numbers from a worse condition. Equities for the month were down, but several were positive for the month, another good sign.

fn          Fund                 pos  nav(03-31-03)
16 TGLDX Tocqueville Gold     .   57.3   21.64
12 MNTGX Monterey OCM Gold    .   46.7    8.54
 1 ASA   ASA Ltd              .   45.6   34.70
 6 SGGDX First Eagle SGen Gold.   45.2   11.61
15 SCGDX Scudder Gold & Pr Mt S   44.0   10.45
20 INIVX Van Eck Intl Inv GoldA   39.5    6.99
 8 GOLDX Gabelli Gold         .   38.5   10.83
 4 EKWBX Evergreen Prec Mtls B.   26.0   18.52
 9 LEXMX ING Pilgrim Pr Mtls A.   23.0    4.71
 5 FSAGX Fidelity Select Gold .   21.7   20.46
 2 BGEIX Amer Cent Global Gold.   18.4    7.90
19 USAGX USAA Gold            .   18.2    9.51
10 FGLDX INVESCO Gold & Pr Mtl.   14.1    2.40
11 MIDSX Midas Fund           .    8.4    1.29
17 USERX US Global Gold Shrs  .    7.9    4.73
18 UNWPX US Global World PrecM.    6.0    9.14
14 RYPMX Rydex Prec Metals    .   -5.4   26.78
 3 INPMX AXP Precious Metals A.   -7.5    7.24
 7 FKRCX Franklin Gold & PrM A.  -13.4   11.32
21 VGPMX Vanguard Prec Metals .  -15.2   10.00
13 OPGSX Oppenheimer Gold A   .  -19.2   11.94

Tocqueville Gold (TGLDX) leads this list with its ability to hold onto asset gains.

These numbers demonstrate a fund's ability to retain previous advances without falling out of bed when gold has a bad month or two. It's obvious which funds couldn't hold onto their gains and which have.

fn    fund                       assets
21 VGPMX Vanguard Prec Metals .    600
 5 FSAGX Fidelity Select Gold .    525
 2 BGEIX Amer Cent Global Gold.    352
 1 ASA   ASA Ltd              .    333
 7 FKRCX Franklin Gold & PrM A.    263
13 OPGSX Oppenheimer Gold A   .    146
20 INIVX Van Eck Intl Inv GoldA    145
18 UNWPX US Global World PrecM.    134
15 SCGDX Scudder Gold & Pr Mt S    123
19 USAGX USAA Gold            .    121
10 FGLDX INVESCO Gold & Pr Mtl.    106
 8 GOLDX Gabelli Gold         .    105
 9 LEXMX ING Pilgrim Pr Mtls A.    100
16 TGLDX Tocqueville Gold     .     86
 6 SGGDX First Eagle SGen Gold.     82
17 USERX US Global Gold Shrs  .     79
14 RYPMX Rydex Prec Metals    .     65
 3 INPMX AXP Precious Metals A.     44
11 MIDSX Midas Fund           .     39
12 MNTGX Monterey OCM Gold    .     38
 4 EKWBX Evergreen Prec Mtls B.     24

I have found this number to bear watching, as new investments come in and redemptions take out. Over the past two years, however, the total amount of assets under management by these funds has shown significant increases as would be expected for the best sector of the market.

There are only so many valid gold equities worldwide and portfolio managers must allocate investments carefully.

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. Naturally, if the market is going up, you would want one at the top of this list. However, during a correction, the funds at the bottom would probably do better.

fn      fund                      beta
18 UNWPX US Global World PrecM.   1.55
17 USERX US Global Gold Shrs  .   1.51
 6 SGGDX First Eagle SGen Gold.   1.38
 1 ASA   ASA Ltd              .   1.37
20 INIVX Van Eck Intl Inv GoldA   1.21
 8 GOLDX Gabelli Gold         .   1.21
12 MNTGX Monterey OCM Gold    .   1.20
16 TGLDX Tocqueville Gold     .   1.07
 3 INPMX AXP Precious Metals A.   1.07
 2 BGEIX Amer Cent Global Gold.   1.06
 9 LEXMX ING Pilgrim Pr Mtls A.   1.02
19 USAGX USAA Gold            .   1.02
11 MIDSX Midas Fund           .   0.99
 4 EKWBX Evergreen Prec Mtls B.   0.97
10 FGLDX INVESCO Gold & Pr Mtl.   0.89
15 SCGDX Scudder Gold & Pr Mt S   0.85
 5 FSAGX Fidelity Select Gold .   0.85
14 RYPMX Rydex Prec Metals    .   0.82
13 OPGSX Oppenheimer Gold A   .   0.68
21 VGPMX Vanguard Prec Metals .   0.66
 7 FKRCX Franklin Gold & PrM A.   0.65

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. The nav movement is a direct reflection of the types of equities selected by the fund manager.

The dollar rally was brought on by a belief by many investors that a quick victory would bring about a national market recovery, and gold was no longer needed. To many analysts, that was only a false hope.

The action on gold was determined by the action on the dollar, which fluctuated daily. The dollar was determined by traders watching the many different opinions on the outcome of the war, many of which are switching from a quick and clean view to a long and expensive view.

In addition, the twin deficits, trade and budget, have been placed on the back burner after war considerations, but are building up problems for the future.

With a cost estimate for the fighting part of the war at about $75 billion, the economy is being drained of its assets and these expenses will eventually be unsustainable. Any loss by the economy will hurt the dollar and result in higher gold prices in the future.

With another large trade deficit, the U.S. economy continues to distribute dollars overseas, with some returning to our shores to buy our debt.

Of course, at some point, foreign investors, now holding an estimated 35-40% of U.S. government debt, will own enough to give subtle hints about U.S. policy. In other words we are slowly selling America's freedom. Before that happens, the dollar will slide and gold will be the only international refuge.

The overhang of pension liabilities is yet another example of financial problems which just won't go away soon. It can be solved only with more growth.

Since mortgage rates are generally determined by the long bond yield, if foreign investment slows, mortgage rates go up and the housing market falls. Since the housing market is already overextended and vulnerable, deflating this bubble will not be nice. The number of defaulting mortgages is growing and is a leading indicator of mortgage industry problems.