Chairman Greenspan was recommended for another four year term so that may have contributed to the rally this month. Under his policies, money growth and easy credit are his answers to almost everything. Both have continued to increase for 2004, including both trade and budget deficits. Interest rates, represented by the yield on the 30 year treasury bond, advanced to 5.55% from 5.31% but closed the month at 5.34%.

Certainly influenced by an increasing mortgage rate, the housing market is showing definite signs of slowing down. The number of new home sales last month decreased 11% and the refinancing numbers almost disappeared. That eliminates refinancing money available to the economy and the markets which has been a monetary boost to spending and investing over the past three years. The Dow is having a hard time staying above 10000, even with good economic news, which pushed it back up to 10188 by the end of the month.

Petroleum prices rose to almost $42 as shortages and refinery capacity pushed the price of gasoline to all-time highs nationwide. Oil closed the month at 39.88 from April's 37.42.

The situation in Iraq moved further toward turnover of governing authority to the Iraqi people and a release of some of the political and economic burden from the US budget. That should help the dollar, not gold.

fn       Fund                     1 mo   3 mo  12 mo   2 yr   3 yr
14 RYPMX Rydex Prec Metals    .   10.0  -11.9   24.8    8.7   76.6
 2 BGEIX Amer Cent Global Gold.    9.5   -9.6   26.0   16.1  139.1
 7 FKRCX Franklin Gold & PrM A.    8.9   -8.1   29.8   18.9   69.3
13 OPGSX Oppenheimer Gold A   .    8.8   -9.6   37.4   21.1   91.3
20 INIVX Van Eck Intl Inv GoldA    8.8   -9.2   29.3   19.0  165.4
 8 GOLDX Gabelli Gold         .    8.4  -10.5   26.0   22.7  149.8
 5 FSAGX Fidelity Select Gold .    8.3  -11.2   12.6    6.2   93.2
16 TGLDX Tocqueville Gold     .    8.2   -7.5   33.9   32.1  167.9
 1 ASA   ASA Ltd              .    8.2  -11.6    5.9    3.9  104.9
 4 EKWBX Evergreen Prec Mtls B.    8.2  -11.0   41.0   34.7  152.7
19 USAGX USAA Gold            .    8.2   -8.1   42.4   36.7  178.8
 9 LEXMX ING Precious Metals  .    8.2   -9.3   22.3   14.3  121.5
10 FGLDX INVESCO Gold & Pr Mtl.    8.1   -9.8   29.7   19.0  110.4
17 USERX US Global Gold Shrs  .    8.1   -8.9   46.4   14.4  159.3
21 VGPMX Vanguard Prec Metals .    6.6  -10.0   33.5   20.7   91.6
 3 INPMX AXP Precious Metals A.    6.5  -15.9   35.4   15.9  105.0
11 MIDSX Midas Fund           .    6.4  -10.3   25.5   19.3  108.8
12 OCMGX Monterey OCM Gold    .    6.0  -13.5   26.4   28.4  152.0
 6 SGGDX First Eagle Gold     .    5.5   -9.5   19.9   23.6  183.0
15 SGDAX Scudder Gold & Pr Mts.    4.2  -10.7   58.5   60.9  173.6
18 UNWPX US Global World PrecM.    3.3  -12.2   64.9   24.9  197.8

Rydex Precious Metals (RYPMX) led the way as most funds had a gain in excess of 8%, which made up some of the loss from April. The three month balance still looks poor but the 12 month change remains positive after a bad correction.

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 May 28, 2004.

fn        Fund                    pos     nav
 4 EKWBX Evergreen Prec Mtls B.   39.5   28.61
18 UNWPX US Global World PrecM.   37.6   14.17
21 VGPMX Vanguard Prec Metals .   33.0   14.07
16 TGLDX Tocqueville Gold     .   31.6   31.39
10 FGLDX INVESCO Gold & Pr Mtl.   28.7    3.33
 6 SGGDX First Eagle Gold     .   27.0   14.84
15 SGDAX Scudder Gold & Pr Mts.   25.5   17.20
 7 FKRCX Franklin Gold & PrM A.   25.5   16.52
19 USAGX USAA Gold            .   25.1   14.52
13 OPGSX Oppenheimer Gold A   .   19.4   17.27
17 USERX US Global Gold Shrs  .   19.0    7.34
20 INIVX Van Eck Intl Inv GoldA   18.3    9.69
11 MIDSX Midas Fund           .   16.7    1.82
 3 INPMX AXP Precious Metals A.   16.6   10.17
 2 BGEIX Amer Cent Global Gold.   15.0   10.91
 9 LEXMX ING Precious Metals  .   11.5    6.47
14 RYPMX Rydex Prec Metals    .    9.8   36.54
 8 GOLDX Gabelli Gold         .    9.3   14.91
 1 ASA   ASA Ltd              .   -3.9   37.64
12 OCMGX Monterey OCM Gold    .   -6.8   10.99
 5 FSAGX Fidelity Select Gold .   -7.7   24.15

This indicator shows that only three funds are below their 52 week average, and all gained significantly over their April numbers.

The following list shows the approximate size of funds as measured in total assets under management in $millions. (As of the end of May) 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 .    667
 2 BGEIX Amer Cent Global Gold.    594
21 VGPMX Vanguard Prec Metals .    504
16 TGLDX Tocqueville Gold     .    433
 7 FKRCX Franklin Gold & PrM A.    379
 1 ASA   ASA Ltd              .    360
 6 SGGDX First Eagle Gold     .    359
19 USAGX USAA Gold            .    264
20 INIVX Van Eck Intl Inv GoldA    257
18 UNWPX US Global World PrecM.    243
13 OPGSX Oppenheimer Gold A   .    174
 8 GOLDX Gabelli Gold         .    152
15 SGDAX Scudder Gold & Pr Mts.    142
10 FGLDX INVESCO Gold & Pr Mtl.    117
 9 LEXMX ING Precious Metals  .     93
17 USERX US Global Gold Shrs  .     71
14 RYPMX Rydex Prec Metals    .     61
 3 INPMX AXP Precious Metals A.     59
11 MIDSX Midas Fund           .     58
12 OCMGX Monterey OCM Gold    .     41
 4 EKWBX Evergreen Prec Mtls B.     32

While these numbers had increased over the past year, a total of several hundreds of millions of dollars in assets were lost in April and some recovered in May. If gold rallies, these numbers will significantly increase.

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.

May was a good month but made up only a small part of April's loss. Rydex Precious Metals (RYPMX) led the way as American Century Global Gold (BGEIX), Franklin Gold (FKRCX), Oppenheimer Gold (OPGSX) and Van Eck International Investors Gold (INIVX) were in close pursuit. Most funds were up over 8%, but the three month period was still lousy.

The three week gain in funds and gold coincided with the weaker dollar, a rally in Treasury bonds prices and the resulting decrease in the yield.

With current conditions, there is no indication that the price of gasoline will drop much with the significant and lasting increase in demand from China. In fact, we can probably expect the price per gallon to move over 2.00 in the near future and stay there. With oil consumption exceeding the replacement of reserves worldwide, the movement in oil prices resembles the many increases during the 1970's, and that coincided with higher prices for just about everything, including gold and gold stocks.

The conflict in Iraq is too complex to predict, but if the Iraqi people accept the government provided, it will reduce the radical Islamic reason for suicide bombing. In turn, it will start to reduce the American taxpayer's burden of paying for an unusual expense placed on the budget and the dollar. In theory, good news in Iraq should be good news for the dollar.

With four more years of Chairman Greenspan, the Federal Reserve can be expected to open the spigots with more money if we have any type of monetary crisis. The expansion of the money supply so far in 2004 has been more than that paid out through the trade deficits. More money is essentially inflationary, and will eventually be seen in higher gold prices.

The recent correction in gold, which brought the price down from 428 to 374 may have ended with the latest three week advance, but there are many analysts who feel that this is just a technical rally on the way down to 350. There are a very few who expect a price under 350 before we take off again. In any case, the long term view still remains bullish in the eyes of just about every gold analyst.

Gold has shown a tendency to move inversely with bond yields as interest rates increase, but the true relationship is with the true interest rate difference between the CPI numbers and the Federal defined short term rate. As the CPI numbers increase, the price of gold will increase. Inflation is coming.