With French voters rejecting the European constitution, the validity and strength of the euro currency came into question. It's doubtful that the euro will be dumped because too many contries have bet the ranch on European unity. In any case, a weak euro last weekend gave strength to the dollar just when the dollar rally was about to give up. On the last day of the month, the dollar surged to over 87.80, a 52 week high, and drove gold down again. This took away some of the advances that gold funds had gathered up after May 16 lows.

In general, commodity prices have suffered over the past three months, giving no encouragement to precious metals. On the other hand, oil, having dropped enough to give hope to all the Dow Jones Industrials optimists, finally edged back over $52. Meanwhile, the Dow closed the month on a high note at 10,467. New home sales in April were outstanding and the economy chugged on as if there were no worries in the world. This helped to keep the dollar high. The long bond yield closed the month at a very low 4.34% as investors piled into Treasuries after the European voting. This lower rate will also discourage further rate hikes in the sort term rate by the Fed, now at 3%.

Another large U.S. trade deficit was reported, but since it was slightly less than the previous month, it was declared by the market to be irrelevent. The size of the deficit also brought out more talk about the possibility of the Chinese revaluing the yuan, which would be bullish for gold. China continued to deny any planned changes soon as Congress threatened to pass a new tariff law.

Another burden soon to be thrust on the taxpayer and the budget deficit is the increasing number of large corporations willing to dump their defined benefit plans on the Pension Benefit Guaranty Corporation. Recently United Airlines received initial approval to unload itself of underfunded pension obligations of over $6 billion dollars in benefits. I predict that more will follow since it is an easy way to unload a real corporate problem.

During the last week of the month, in the background, perhaps unnoticed by funds, were a handful of silver stocks which ended the month very strong. It was almost as if investors didn't like the euro, the dollar, or gold and had to put money somewhere. Silver dipped on Monday but quickly moved up to end the month at 7.44.

fn       Fund                     1 mo   3 mo  12 mo   2 yr   3 yr
 1 ASA   ASA Ltd              .    4.3  -10.0   -6.1    0.2   -1.6
14 PMPIX Profund Prec Mtls Ultr    3.7  -19.7   -9.4   15.6  -20.1
15 RYPMX Rydex Prec Metals    .    3.0  -15.3  -12.5    9.2   -4.8
 2 FGLDX AIM Gold & Pr Mtls Inv    2.5  -12.5    0.2   30.0   19.2
22 VGPMX Vanguard Prec Metals .    2.3   -7.7   20.0   60.1   44.8
18 USERX US Global Gold Shares.    2.2  -16.7   -5.3   38.7    8.3
13 OPGSX Oppenheimer Gold A   .    2.1  -13.1   -0.6   36.6   20.4
 6 FSAGX Fidelity Select Gold .    2.0  -18.5   -8.8    2.6   -3.2
 9 GOLDX Gabelli Gold         .    1.9  -13.0   -5.8   18.7   15.6
 8 FKRCX Franklin Gold & PrMt A    1.5  -11.7   -2.8   26.3   15.7
20 USAGX USAA Precious Metals .    1.5  -12.1   -6.1   33.7   28.3
12 OCMGX OCM Gold             .    1.3  -12.8   -6.4   18.4   20.3
17 TGLDX Tocqueville Gold     .    1.3  -11.4   -1.0   32.5   30.7
 3 BGEIX Amer Cent Global Gold.    1.2  -14.4   -5.8   18.7    9.3
10 LEXMX ING Precious Metals A.    0.7  -14.8   -8.1   12.4    5.0
 5 EKWBX Evergreen Prec Mtls B.    0.7  -13.9   -4.1   35.2   29.2
 7 SGGDX First Eagle Gold A   .    0.6   -9.5   -0.7   19.0   22.7
11 MIDSX Midas Fund           .    0.5  -13.3    0.5   26.2   20.0
16 SGDAX Scudder Gold & Pr Mt A    0.3  -16.5   -9.6   43.3   45.5
21 INIVX Van Eck Intl Inv GoldA    0.2  -14.1   -4.3   23.8   14.0
 4 INPMX AXP Precious Metals A.    0.1  -13.9  -10.6   21.0    3.6
19 UNWPX US Global World Pr Mns   -0.4  -17.8    2.0   68.3   27.4

With gold reaching a new recent low, gold equities rallied anyway, pushing gold funds up from lows set on May 16. ASA Limited(ASA) and Profund Precious Metals (PMPIX) moved to the front, but only modestly. Three month results were still terrible for all funds, but there was hope on the horizon.

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 31, 2005.

fn        Fund                     pos     nav
22 VGPMX Vanguard Prec Metals .    63.8   16.71
13 OPGSX Oppenheimer Gold A   .    -2.4   16.77
 4 INPMX AXP Precious Metals A.   -13.5    8.09
19 UNWPX US Global World Pr Mns   -17.9   14.06
21 INIVX Van Eck Intl Inv GoldA   -19.8    8.46
17 TGLDX Tocqueville Gold     .   -22.7   29.97
16 SGDAX Scudder Gold & Pr Mt A   -24.4   14.35
11 MIDSX Midas Fund           .   -29.7    1.83
10 LEXMX ING Precious Metals A.   -34.0    5.80
12 OCMGX OCM Gold             .   -39.0    9.98
 1 ASA   ASA Ltd              .   -39.5   36.44
 2 FGLDX AIM Gold & Pr Mtls Inv   -40.2    3.30
18 USERX US Global Gold Shares.   -41.5    6.91
20 USAGX USAA Precious Metals .   -45.6   13.60
 9 GOLDX Gabelli Gold         .   -47.7   14.00
 7 SGGDX First Eagle Gold A   .   -50.1   14.91
 8 FKRCX Franklin Gold & PrMt A   -51.8   16.48
 3 BGEIX Amer Cent Global Gold.   -52.1   10.20
15 RYPMX Rydex Prec Metals    .   -53.6   32.20
 5 EKWBX Evergreen Prec Mtls B.   -56.3   27.73
14 PMPIX Profund Prec Mtls Ultr   -57.8   23.97
 6 FSAGX Fidelity Select Gold .   -59.5   22.36

Vanguard (VGPMX) is the only fund above its 52 week average but there are several giving chase. Many funds set a new 52 week low on May 16, but have rebounded well since then.

The following list shows the approximate size of funds as measured in total assets under management. (In $millions as of the end of April) 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 .   771
 3 BGEIX Amer Cent Global Gold.   588
 6 FSAGX Fidelity Select Gold .   577
17 TGLDX Tocqueville Gold     .   463
 7 SGGDX First Eagle Gold A   .   456
 8 FKRCX Franklin Gold & PrMt A   414
 1 ASA   ASA Ltd              .   349
20 USAGX USAA Precious Metals .   290
 9 GOLDX Gabelli Gold         .   247
19 UNWPX US Global World Pr Mns   242
13 OPGSX Oppenheimer Gold A   .   208
21 INIVX Van Eck Intl Inv GoldA   206
15 RYPMX Rydex Prec Metals    .   193
16 SGDAX Scudder Gold & Pr Mt A   106
 2 FGLDX AIM Gold & Pr Mtls Inv    98
10 LEXMX ING Precious Metals A.    74
18 USERX US Global Gold Shares.    65
12 OCMGX OCM Gold             .    62
14 PMPIX Profund Prec Mtls Ultr    54
 4 INPMX AXP Precious Metals A.    51
11 MIDSX Midas Fund           .    49
 5 EKWBX Evergreen Prec Mtls B.    38

Vanguard Precious Metals(VGPMX) continues to be the largest mutual fund investing primarily in gold and gold production, and there are several much smaller.

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    1.64
16 SGDAX Scudder Gold & Pr Mt A    1.45
 4 INPMX AXP Precious Metals A.    1.39
21 INIVX Van Eck Intl Inv GoldA    1.31
15 RYPMX Rydex Prec Metals    .    1.24
11 MIDSX Midas Fund           .    1.18
19 UNWPX US Global World Pr Mns    1.17
 6 FSAGX Fidelity Select Gold .    1.15
18 USERX US Global Gold Shares.    1.12
 3 BGEIX Amer Cent Global Gold.    1.07
12 OCMGX OCM Gold             .    1.05
10 LEXMX ING Precious Metals A.    1.03
 9 GOLDX Gabelli Gold         .    0.98
 1 ASA   ASA Ltd              .    0.95
22 VGPMX Vanguard Prec Metals .    0.95
13 OPGSX Oppenheimer Gold A   .    0.93
 5 EKWBX Evergreen Prec Mtls B.    0.90
20 USAGX USAA Precious Metals .    0.86
 2 FGLDX AIM Gold & Pr Mtls Inv    0.85
17 TGLDX Tocqueville Gold     .    0.82
 8 FKRCX Franklin Gold & PrMt A    0.75
 7 SGGDX First Eagle Gold A   .    0.73

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 has caught them too.

ASA Limited (ASA) took the lead spot this month as the rand currency weakened slightly after a few years of strengthening. A stronger rand makes it more difficult for South African mines to make a profit when the price of gold decreases in the face of increasing expenses.

Profund Precious Metals(PMPIX) took advantage of the equities rally with its leveraged investment techniques, but it has a way to go to make up for losses over the last five months.

Watching gold funds, it's easy to see that investor emphasis shifted away from gold equities in April and finally away from bullion in May. As a result, during May the dollar climbed, dragging spot gold down from 435 to 417. Meanwhile, XAU rose from 83.51 to 86.27 and gold stocks advanced. To complicate matters, silver may have departed the gold bandwagon. With spot gold falling to 416.3 after the European Constitution rejection and a weaker euro, the dollar jumped to over 87. Silver, however, simply paused before jumping to 7.44, taking most silver stocks up with it. Several silver stocks were up over 8% in just a few days.

Whatever gold does due to the euro action, the strength of gold stocks in the last ten days of the month showed the latent buying power for equities waiting for the right moment. There are a multitude of investors aware of the negative economic fundamentals who are waiting in the wings and have not been fooled by the idea that gold has entered a bear market.