The dollar rally came after a steady decline caused by the Federal Reserve dropping interest rates to rescue the falling stock market brought on by the subprime mortgage crisis caused by the Federal Reserve lowering rates a few years ago to prevent us from going into a recession then. In other words, normal market forces in a normally operating mortgage market were corrupted by government intervention over several years time, which was designed to make sure that the economy did not suffer a mild correction after the dot com bubble in 2001. By lowering interest rates far below market rates, the Fed caused money to flow into the housing market with recklessness, and now we have a market coming back to reality.

The housing market rejoiced on the good news that sales of existing homes had increased 2.9% in January, but disregarded the fact that sales were down 24% for the year. In addition, the average sale price decreased. Meanwhile, housing stocks surged upward from an oversold condition.

fn            Fund                1 mo   3 mo  12 mo   2 yr   3 yr
23 GLD   StrtTrks Gold Shrs ETF   -6.0    9.6   37.5   55.6  111.1
 1 ASA   ASA Ltd              .   -6.5    8.9   30.6   32.7  127.6
21 VGPMX Vanguard Prec Metals .   -7.1    4.7   30.0   52.6  152.9
 7 SGGDX First Eagle Gold A   .   -7.2    7.1   30.7   39.7  111.5
19 USAGX USAA Precious Metals .   -8.3    8.5   33.9   60.5  185.5
12 OPGSX Oppenheimer Gold A   .   -8.5    2.8   27.2   54.5  158.0
 2 FGLDX AIM Gold & Pr Mtls Inv   -8.6    5.3   27.9   41.2  125.4
20 INIVX Van Eck Intl Inv GoldA   -9.0    7.5   35.4   56.2  163.4
17 USERX US Global Gold Shares.   -9.2    8.3   31.0   39.2  161.3
 5 EKWBX Evergreen Prec Mtls B.   -9.5    8.3   32.3   48.9  150.7
 4 SGDAX DWS Gold & Prec Mtls A   -9.7    7.5   32.3   44.8  121.7
 9 GOLDX GAMCO Gold AAA       .   -9.7    6.3   34.4   46.5  142.9
 8 FKRCX Franklin Gold & PrMt A   -9.8    7.1   30.7   49.7  156.5
 6 FSAGX Fidelity Select Gold .   -9.8    4.9   31.8   39.9  137.1
25 HUI   Amex Gold Bugs Index .   -9.8    7.1   29.8   30.4  117.2
15 RYPMX Rydex Prec Metals    .   -9.9    3.4   24.3   28.2   96.1
26 XAU   Phlx Gold/Silver Index  -10.1    2.0   29.0   24.8   88.6
22 GDX   Mkt V Gold Miners ETF.  -10.2    4.1   20.5           	
 3 BGEIX Amer Cent Global Gold.  -10.4    4.3   22.5   27.4  106.9
16 TGLDX Tocqueville Gold     .  -10.8    2.3   11.9   28.9  110.8
11 OCMGX OCM Gold             .  -11.4    2.4   27.2   39.6  130.2
10 MIDSX Midas Fund           .  -11.5   -4.1   17.3   43.7  168.2
18 UNWPX US Global World Pr Mns  -12.1    1.2   22.1   34.2  142.1
14 INPMX Riversource Prec MtlsA  -12.6    1.4   14.0   24.2  103.7
24 SLV   iShrs Silver Trust ETF  -13.4   15.9   27.6        	
13 PMPIX Profund Prec Mtls Ultr  -15.5   -0.7   37.3   16.9   95.2

The correction set in and took away most of the gains for 2008. Most still have solid gains for the three month period, which includes December.

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 the end of March:

				           nav
fn          Fund                  pos   02/29/08  03/31/08
 1 ASA   ASA Ltd              .   66.05   87.59    81.94
23 GLD   StrtTrks Gold Shrs ETF   65.61   96.18    90.41
 7 SGGDX First Eagle Gold A   .   47.83   27.67    25.69
19 USAGX USAA Precious Metals .   47.30   38.47    35.29
25 HUI   Amex Gold Bugs Index .   44.06  486.07   438.42
 2 FGLDX AIM Gold & Pr Mtls Inv   43.57    8.56     7.82
21 VGPMX Vanguard Prec Metals .   43.33   37.53    34.86
 5 EKWBX Evergreen Prec Mtls B.   41.32   74.60    67.51
24 SLV   iShrs Silver Trust ETF   39.39  196.68   170.41
 8 FKRCX Franklin Gold & PrMt A   39.20   43.17    38.96
12 OPGSX Oppenheimer Gold A   .   38.82   40.01    36.59
22 GDX   Mkt V Gold Miners ETF.   38.21   53.12    47.70
 9 GOLDX GAMCO Gold AAA       .   38.17   33.45    30.20
 3 BGEIX Amer Cent Global Gold.   37.83   26.03    23.31
20 INIVX Van Eck Intl Inv GoldA   37.31   21.04    19.14
26 XAU   Phlx Gold/Silver Index   36.70  196.58   176.75
15 RYPMX Rydex Prec Metals    .   33.01   77.54    69.89
17 USERX US Global Gold Shares.   32.79   19.26    17.48
 6 FSAGX Fidelity Select Gold .   32.17   46.37    41.83
 4 SGDAX DWS Gold & Prec Mtls A   28.24   25.57    23.09
10 MIDSX Midas Fund           .   27.59    6.11     5.41
11 OCMGX OCM Gold             .   25.14   24.01    21.28
13 PMPIX Profund Prec Mtls Ultr    9.23   56.20    47.48
16 TGLDX Tocqueville Gold     .   -9.69   56.05    49.98
18 UNWPX US Global World Pr Mns  -28.68   30.20    26.56
14 INPMX Riversource Prec MtlsA  -33.12   13.62    11.91

Every fund took a major loss for March, and most gave up all of February's gain. Of course they are just following gold down from a recent peak, but gold, at 916 may or may not be bottoming.

The following list shows the approximate size of funds as measured in total assets under management. (In $millions as of the end of March) 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
21 VGPMX Vanguard Prec Metals .    4325
 6 FSAGX Fidelity Select Gold .    1655
12 OPGSX Oppenheimer Gold A   .    1398
 8 FKRCX Franklin Gold & PrMt A    1178
 3 BGEIX Amer Cent Global Gold.    1138
19 USAGX USAA Precious Metals .     991
16 TGLDX Tocqueville Gold     .     953
 7 SGGDX First Eagle Gold A   .     844
18 UNWPX US Global World Pr Mns     817
 1 ASA   ASA Ltd              .     672
20 INIVX Van Eck Intl Inv GoldA     581
 9 GOLDX GAMCO Gold AAA       .     473
22 GDX   Mkt V Gold Miners ETF.     410
17 USERX US Global Gold Shares.     258
10 MIDSX Midas Fund           .     240
 4 SGDAX DWS Gold & Prec Mtls A     206
 2 FGLDX AIM Gold & Pr Mtls Inv     173
15 RYPMX Rydex Prec Metals    .     142
11 OCMGX OCM Gold             .     134
 5 EKWBX Evergreen Prec Mtls B.      91
13 PMPIX Profund Prec Mtls Ultr      81
14 INPMX Riversource Prec MtlsA      80

Two of the top funds slipped but there are still five over the billion dollar mark.

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
24 SLV   iShrs Silver Trust ETF    1.31
13 PMPIX Profund Prec Mtls Ultr    1.26
25 HUI   Amex Gold Bugs Index .    1.25
26 XAU   Phlx Gold/Silver Index    1.14
22 GDX   Mkt V Gold Miners ETF.    1.10
 3 BGEIX Amer Cent Global Gold.    1.09
 1 ASA   ASA Ltd              .    1.06
 5 EKWBX Evergreen Prec Mtls B.    0.99
10 MIDSX Midas Fund           .    0.98
19 USAGX USAA Precious Metals .    0.98
15 RYPMX Rydex Prec Metals    .    0.97
 2 FGLDX AIM Gold & Pr Mtls Inv    0.96
 4 SGDAX DWS Gold & Prec Mtls A    0.92
 8 FKRCX Franklin Gold & PrMt A    0.91
 9 GOLDX GAMCO Gold AAA       .    0.91
12 OPGSX Oppenheimer Gold A   .    0.91
11 OCMGX OCM Gold             .    0.91
23 GLD   StrtTrks Gold Shrs ETF    0.89
20 INIVX Van Eck Intl Inv GoldA    0.87
 6 FSAGX Fidelity Select Gold .    0.86
21 VGPMX Vanguard Prec Metals .    0.77
17 USERX US Global Gold Shares.    0.77
 7 SGGDX First Eagle Gold A   .    0.76
14 INPMX Riversource Prec MtlsA    0.47
16 TGLDX Tocqueville Gold     .    0.47
18 UNWPX US Global World Pr Mns    0.45

The beta for each fund may change as the fund advances and declines, but the general position on the list doesn't change much, except as a reference to other funds. As you can see, there is a big difference between portfolio management policies of different funds.

Those low rates created solely by the Fed also caused investment banks such as Bear Stearns and J.P. Morgan to notice that more profit could come from manipulating money and creating investment products/derivatives designed to keep mortgages flowing to the gullible American consumer, who readily went in over his head. In any case, whatever the reason, we must now suffer through the product of an investment community gone wild with financial derivatives based on heavy leverage.

Last June, attempts to evaluate a few derivatives caused two Bear Stearns hedge funds to close because they were going bankrupt due to bad mortgage investments. Suddenly, after being forced, banks began to notice that some of the investments on their balance sheets were of questionable value, and the entire financial arrangement between banks came into question. Gold responded in July as the dollar rolled over, and commodities surged until late February, including gold and silver.

This surge, and concurrent weakness in the stock market, came to a halt this month after the Fed entered the marketplace to keep a Bear Stearns slide from becoming a marketwide disaster. The Fed's entrance rescued a falling dollar, and put a lid on speculation on most of the commodities, including gold and silver.

One of the possible reasons, heard by me from only one source, is that Bear Stearns was long bullion and had to sell bullion when the plunge came. That was the start of the avalanche.

The future is still before us (no kidding), and what will it bring? Our national trade deficit is still huge, increasing each and every month as we live under the flag of free trade. Eventually, free trade which bankrupts a country will come to a halt, and we are on our way to national bankruptcy. The theory of free trade is beautiful and logical, but a look at the numbers should demand a policy adjustment. Current economic policies are not sustainable.

Of course, before bankruptcy occurs, which would only be brought about by a currency default, or something close to it, the effects of a near defaulting currency would become evident. A continuing dollar decline well below the point at which our trading partners are comfortable will cause all imports to rise in cost enough to bring political pressures on our elected officials, most of whom will hide from the problem. However, by then, it may be too late. In an effort to appease consumers and voters, government edicts will become politicized and ineffective, such as price controls ordered by President Nixon in the early 70's.

The future of every U.S. citizen is affected by stock market stability. Pension funds are holders of vast amounts of investments dependent upon a working currency. If the dollar does not hold up well, the entire financial and social structure will get very messy. The stock market may or may not descend, and it may be supported by government intervention. The government will eventually have to hold up the dollar, and interest rates will not be allowed to go lower if it causes the dollar to drop, as it has each time rates have been lowered in the past seven years.

I have little confidence that the suggestion that the Fed be granted more power to regulate investment banks will have any effect. The money has already been spent.