Economic numbers from the first quarter were reported to be very good, with an annualized real growth in GDP of 5.3% and personal income up 5.4%. On the other hand, May consumer confidence plunged from a recent high in April.

The housing market had an increase in new home sales in April, but the number of houses on the market increased to record numbers. There were also increasing numbers of foreclosures as mortgage rates continued to rise, reaching the 6.60% range. Following an accounting investigation, Fannie Mae's mortgage holdings were capped at December 2005 levels, which may have slowed down new mortgages. Ex-Chairman Greenspan openly stated that the housing market is slowing as interest rates and mortgages climb.

The Dow closed at 11,168, down for the month, as the dollar closed at 84.72, also down for the month. The long bond yield closed at 5.20%, down slightly from a recent high. Many analysts feel that the Federal Reserve will still be raising rates in June, causing the dollar to rise and pushing gold down even more.

Iraq selected a new united government which might work better than previous, but excessive violence continued. In Iran, the prospects of agreeing with the West have diminished, but since they agreed to meet and discuss anything but uranium enrichment, it relieved some upward pressure on gold.

Most commodities rolled over the week after May 12, but oil gathered itself and closed the month at 71.25.

fn            Fund                1 mo   3 mo  12 mo   2 yr   3 yr
22 VGPMX Vanguard Prec Metals .   -4.6   13.0   81.0  127.9  189.8
11 MIDSX Midas Fund           .   -4.8   20.8  125.7  126.9  184.8
12 OCMGX OCM Gold             .   -7.2   16.1   90.5   78.4  125.6
 7 SGGDX First Eagle Gold A   .   -7.3   10.0   65.6   66.4   97.1
18 USERX US Global Gold Shares.   -7.3   21.9  125.4  113.5  212.6
19 UNWPX US Global World Pr Mns   -7.9   18.1  116.3  120.6  263.9
 2 FGLDX AIM Gold & Pr Mtls Inv   -8.4   11.1   76.1   76.4  128.8
 5 EKWBX Evergreen Prec Mtls B.   -8.4   13.7   92.0   86.1  159.6
13 OPGSX Oppenheimer Gold A   .   -8.5   15.4   87.8   95.9  156.9
20 USAGX USAA Precious Metals .   -8.8   14.2   98.3   87.6  165.1
 6 FSAGX Fidelity Select Gold .   -8.9    8.2   86.5   84.0  104.0
21 INIVX Van Eck Intl Inv GoldA   -9.4   14.6   90.0   82.3  135.1
 8 FKRCX Franklin Gold & PrMt A   -9.9    9.6   85.9   85.6  134.7
17 TGLDX Tocqueville Gold     .  -10.0    8.1   77.7   76.6  135.4
16 SGDAX Scudder Gold & Pr Mt A  -10.0   10.8   73.2   58.3  148.1
 9 GOLDX Gabelli Gold         .  -10.1   13.8   85.4   76.2  120.1
10 LEXMX ING Precious Metals A.  -10.1    9.7   88.7   74.6  112.1
 1 ASA   ASA Ltd              .  -10.2    1.7   74.7   71.5   75.6
 4 INPMX Riversource Prec MtlsA  -10.2   10.0   82.0   62.6  120.1
 3 BGEIX Amer Cent Global Gold.  -10.4   13.0   86.1   75.3  120.9
15 RYPMX Rydex Prec Metals    .  -12.3    6.3   64.5   45.0   79.6
14 PMPIX Profund Prec Mtls Ultr  -14.4    8.8   94.7   76.4  125.1

Even with a very poor month, all funds still have a positive twelve months and a very respectable 2006. Vanguard Precious Metals (VGPMX) settled at the top of the list with Midas (MIDSX) close behind. Midas was also the leader since last May.

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 May 31, 2006.

					      nav
fn          Fund                  pos  04/28/06  05/31/06
22 VGPMX Vanguard Prec Metals .   57.7   30.65    29.24
19 UNWPX US Global World Pr Mns   57.4   31.42    28.93
18 USERX US Global Gold Shares.   56.6   16.61    15.40
 6 FSAGX Fidelity Select Gold .   54.7   38.61    35.17
12 OCMGX OCM Gold             .   54.2   20.42    18.94
11 MIDSX Midas Fund           .   52.8    4.34     4.13
 7 SGGDX First Eagle Gold A   .   50.2   26.00    24.11
21 INIVX Van Eck Intl Inv GoldA   49.9   17.73    16.07
 5 EKWBX Evergreen Prec Mtls B.   49.0   58.04    53.15
 2 FGLDX AIM Gold & Pr Mtls Inv   48.9    6.34     5.81
13 OPGSX Oppenheimer Gold A   .   47.9   32.76    29.97
 1 ASA   ASA Ltd              .   47.6   69.53    62.46
20 USAGX USAA Precious Metals .   47.6   29.35    26.77
10 LEXMX ING Precious Metals A.   47.4   12.15    10.92
 3 BGEIX Amer Cent Global Gold.   46.1   21.18    18.98
17 TGLDX Tocqueville Gold     .   44.1   56.26    50.65
 4 INPMX Riversource Prec MtlsA   44.0   16.39    14.72
16 SGDAX Scudder Gold & Pr Mt A   43.2   25.75    23.18
 9 GOLDX Gabelli Gold         .   42.7   28.61    25.73
 8 FKRCX Franklin Gold & PrMt A   40.8   33.78    30.45
15 RYPMX Rydex Prec Metals    .   39.4   60.39    52.97
14 PMPIX Profund Prec Mtls Ultr   28.4   54.50    46.66

Comparing NAVs side by side shows the definite decline of all funds since late April. Since almost all funds set new highs on May 10, the monthly losses are even more distinct. Using the Position Indicator, we can see that all funds are still well above their 52 week averages.

As mentioned last month, most funds were setting highs in April, and advances were more like a stampede. That lasted until May 10.

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
22 VGPMX Vanguard Prec Metals .   3645
 6 FSAGX Fidelity Select Gold .   1289
 3 BGEIX Amer Cent Global Gold.    996
 7 SGGDX First Eagle Gold A   .    864
17 TGLDX Tocqueville Gold     .    842
 8 FKRCX Franklin Gold & PrMt A    800
19 UNWPX US Global World Pr Mns    709
 1 ASA   ASA Ltd              .    603
20 USAGX USAA Precious Metals .    547
13 OPGSX Oppenheimer Gold A   .    527
 9 GOLDX Gabelli Gold         .    417
21 INIVX Van Eck Intl Inv GoldA    344
15 RYPMX Rydex Prec Metals    .    201
16 SGDAX Scudder Gold & Pr Mt A    187
18 USERX US Global Gold Shares.    161
 2 FGLDX AIM Gold & Pr Mtls Inv    151
10 LEXMX ING Precious Metals A.    129
11 MIDSX Midas Fund           .    117
14 PMPIX Profund Prec Mtls Ultr    113
12 OCMGX OCM Gold             .    112
 4 INPMX Riversource Prec MtlsA     86
 5 EKWBX Evergreen Prec Mtls B.     71

With declining NAVs, the total capitalization decreased markedly during May. Vanguard (VGPMX) continues to be the leader with Fidelity (FSAGX) and American Century (BGEIX) following.

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
11 MIDSX Midas Fund           .   1.48
14 PMPIX Profund Prec Mtls Ultr   1.47
18 USERX US Global Gold Shares.   1.43
19 UNWPX US Global World Pr Mns   1.20
20 USAGX USAA Precious Metals .   1.17
22 VGPMX Vanguard Prec Metals .   1.12
 5 EKWBX Evergreen Prec Mtls B.   1.10
10 LEXMX ING Precious Metals A.   1.09
 3 BGEIX Amer Cent Global Gold.   1.09
 8 FKRCX Franklin Gold & PrMt A   1.07
 9 GOLDX Gabelli Gold         .   1.07
21 INIVX Van Eck Intl Inv GoldA   1.07
12 OCMGX OCM Gold             .   1.05
 4 INPMX Riversource Prec MtlsA   1.02
13 OPGSX Oppenheimer Gold A   .   1.01
 2 FGLDX AIM Gold & Pr Mtls Inv   0.94 
 1 ASA   ASA Ltd              .   0.92
15 RYPMX Rydex Prec Metals    .   0.92
17 TGLDX Tocqueville Gold     .   0.89
16 SGDAX Scudder Gold & Pr Mt A   0.83
 6 FSAGX Fidelity Select Gold .   0.79
 7 SGGDX First Eagle Gold A   .   0.76

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 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.

The closing price of gold peaked on May 11, but on Friday, May 12, gold surged early to exceed 728 and then reversed, closing down, the first of many down days to the end of the month. On the same day, the dollar bottomed in the currency exchange markets. By Monday morning, May 15, currency traders and central banks moved to stop the dollar's slide and the euro's climb. The euro, pound and yen all fell from their peaks as the support for the dollar put the stop on increasing prices of many commodities in dollars. Since many analysts feel that there will be more rate hikes from the Federal Reserve, the dollar continued to strengthen and gold went into its dive. As money moved into the dollar, U.S. Treasuries rallied and the long bond yield dropped from its high of 5.29% reached on the 12th.

The resulting commodity price decreases dropped gold and gold funds off of their lofty peak, and continued to the end of the month. An interesting aspect of this scenario is that XAU and gold funds peaked on Wednesday, May 10, a day earlier than gold and silver, which continued to soar an extra day. A lot of money bailed out of gold stocks before gold and silver. The smart money once again seems to be in gold stocks, not bullion.

In housing, a soft landing is coming in many real estate markets, and that could seriously limit GDP growth for the next twelve months, maybe through 2007. Supply of houses is increasing and demand is dropping. The inventory of houses available is huge.

Since consumer spending drives the economy, and since energy prices have been sucking away consumer spendable cash, the economy should slow, especially in the face of increasing inflation. A weaker economy should cause the price of gold to slow down or decrease, but inflation should cause it to rise, so we are definitely seeing mixed signals.

Major unanswered questions are abundant. Have we seen the top of the advances in gold stocks? Has XAU peaked already? How much more down space do we have before gold rebounds? I see varying opinions from experts that commodities must regroup before resuming the move up, but some say that we should get back in because it's about to take off again. There are good reasons for both recommendations.

From a worldwide perspective, the dollar was down about 6% for 2006 and had begun to worry bankers, Europeans, and Japanese. Gold fell from an overbought condition and entered a correction which some analysts estimate will continue until late summer. I'm not sure I will wait that long. Once the dollar levels off as high as the bankers want to support it, then gravity will take over and gold will probably resume its advance, along with everything else measured in ever-weakening dollars.