For May, gold rose from 678 to 688 before sliding to 652, and then closed back up at 661.0. Gold and silver, which closed at 13.41, seem to be reaching a base position due to a failure to fall past the 650 and 12.80 levels as predicted by some analysts. One reason for the late month advance was an announcement by the European Central Bank that they had no plans to sell more gold until this autumn, if then. Gold equities stopped falling and showed some positive action. The dollar, having rallied to 82.43 from April's 81.38, dipped to 82.30.

The long bond yield rose to 5.01% and stayed there for the last week of the month, a value not seen since last August. The interest rate trend is up, one indication of incoming inflation. Even with record federal revenues this spring from taxes, we still managed to have a large deficit, both federal and trading.

The U.S. economy stalled in the first quarter of 2007 as consumers kept their money and existing house sales fell to a four year low. The inventory of existing homes increased, telling us that there is an increasing number of owners each month trying to sell. This did not stop worldwide stock markets from reaching new highs, including the Dow, which finished the month at 13,688, another alltime high.

The left leaning government in France lost to a right leaning party which thinks it can work with the U.S., and local leftist governments lost in Spain and Italy. This is a new trend for Europe.

Russia tested a missile designed to avoid missile defenses and threatened to restart the cold war with Europe if they continued with the U.S. missile defense set up in Poland and in the Czech Republic.

Political problems in Venezuela and Nigeria threatened to reduce U.S. access to oil supplies. It's another reason to expect oil prices to rise and inflation to be more of a future factor. In addition, all central banks, including the Federal Reserve, are expanding money supplies at over 10%. That is one reason, combined with debt, that world markets are flush with cash, pushing values to new highs, and another reason to expect inflation soon. Official inflation is only 2.6%, but they're cheating to come up with that number.

Some foreign market ETFs have done exceptionally well and are now included on part of the EagleWing web site. This essentially demonstrates growth of other markets not connected to the dollar.

fn            Fund                1 mo   3 mo  12 mo   2 yr   3 yr
10 LEXMX ING Precious Metals A.    8.3   18.2   18.7  124.0  107.2
22 VGPMX Vanguard Prec Metals .    6.9   15.4   25.4  127.1  185.8
14 PMPIX Profund Prec Mtls Ultr    4.5    0.7  -12.1   71.1   55.0
15 INPMX Riversource Prec MtlsA    4.0    6.5   16.7  112.4   89.8
11 MIDSX Midas Fund           .    3.0    6.2   16.2  162.3  163.7
13 OPGSX Oppenheimer Gold A   .    2.4    7.6   24.1  132.9  143.0
27 XAU   Phlx Gold/Silver Index    2.0    0.1   -2.0   62.0   55.6
 2 FGLDX AIM Gold & Pr Mtls Inv    1.5    1.3   10.0   93.8   94.1
16 RYPMX Rydex Prec Metals    .    1.0    1.8    8.4   78.4   57.2
 4 SGDAX DWS Gold & Prec Mtls A    1.0    2.6   10.4   91.2   74.9
 9 GOLDX GAMCO Gold AAA       .    0.9    2.6    9.0  102.0   92.0
20 USAGX USAA Precious Metals .    0.6    1.0   17.7  133.4  120.7
19 UNWPX US Global World Pr Mns    0.4    3.5   11.8  141.7  146.6
25 SLV   iShrs Silver Trust ETF    0.4   -5.3    6.0  	        
21 INIVX Van Eck Intl Inv GoldA    0.3    0.3   14.6  117.7  109.0
17 TGLDX Tocqueville Gold     .   -0.2    1.1   15.7  105.5  104.3
 8 FKRCX Franklin Gold & PrMt A   -0.4    3.9   16.2  116.0  115.6
18 USERX US Global Gold Shares.   -0.5   -4.0   -0.4  124.5  112.6
 5 EKWBX Evergreen Prec Mtls B.   -0.8   -0.4    8.7  108.7  102.3
12 OCMGX OCM Gold             .   -0.9   -1.8    4.7   99.6   86.9
 6 FSAGX Fidelity Select Gold .   -1.0   -1.3    5.6   96.8   94.2
23 GDX   Mkt V Gold Miners ETF.   -1.0   -1.9    0.8   	        
 3 BGEIX Amer Cent Global Gold.   -1.2   -1.9    0.2   86.4   75.6
26 HUI   Amex Gold Bugs Index .   -1.6   -1.6    0.1   79.9   67.2
 1 ASA   ASA Ltd              .   -1.7    4.3    7.3   88.7   85.3
24 GLD   StrtTrks Gold Shrs ETF   -2.3   -1.4    2.0   57.4       
 7 SGGDX First Eagle Gold A   .   -2.6   -1.3    2.0   69.0   69.8

ING Precious Metals (LEXMX) remained at the top with an exceptional month and was followed by Vanguard(VGPMX), both having a great three month period. Vanguard's choice of spreading assets into natural resources as well as gold has given it another good year, and made it the three year leader. Midas (MIDSX) and Oppenheimer Gold (OPGSX) are not far behind. US Global World Precious Metals (UNWPX) has had only an average year and is losing its two year leadership behind Midas. Almost half of the funds had a losing month as gold equities bounced in both directions.

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 May:

				           nav
fn          Fund                  pos   04/30/07  05/31/07
22 VGPMX Vanguard Prec Metals .   95.8    31.22    33.38
11 MIDSX Midas Fund           .   88.4     4.66     4.80
10 LEXMX ING Precious Metals A.   70.5    11.31    12.25
13 OPGSX Oppenheimer Gold A   .   58.6    31.45    32.20
 2 FGLDX AIM Gold & Pr Mtls Inv   50.5     6.16     6.25
20 USAGX USAA Precious Metals .   50.1    28.68    28.86
 8 FKRCX Franklin Gold & PrMt A   49.0    33.66    33.54
24 GLD   StrtTrks Gold Shrs ETF   42.7    67.09    65.54
17 TGLDX Tocqueville Gold     .   38.9    53.27    53.14
16 RYPMX Rydex Prec Metals    .   38.2    56.85    57.44
23 GDX   Mkt V Gold Miners ETF.   36.4    39.56    39.16
21 INIVX Van Eck Intl Inv GoldA   35.2    16.37    16.42
25 SLV   iShrs Silver Trust ETF   34.5   133.35   133.83
15 INPMX Riversource Prec MtlsA   32.0    14.50    15.08
 5 EKWBX Evergreen Prec Mtls B.   28.9    55.32    54.86
 1 ASA   ASA Ltd              .   27.6    66.80    65.38
19 UNWPX US Global World Pr Mns   21.9    28.48    28.60
26 HUI   Amex Gold Bugs Index .   14.8   339.60   334.20
 9 GOLDX GAMCO Gold AAA       .    9.3    25.24    25.46
12 OCMGX OCM Gold             .    5.4    18.26    18.09
18 USERX US Global Gold Shares.    4.7    15.41    15.34
 4 SGDAX DWS Gold & Prec Mtls A    2.0    21.03    21.24
 6 FSAGX Fidelity Select Gold .   -0.6    34.66    34.33
 3 BGEIX Amer Cent Global Gold.   -1.1    19.25    19.01
27 XAU   Phlx Gold/Silver Index  -11.7   137.06   139.76
 7 SGGDX First Eagle Gold A   .  -13.5    21.37    20.81
14 PMPIX Profund Prec Mtls Ultr  -54.4    37.17    38.83 

The top funds are those who can hold onto gains once they have them, and some plunge with any weakness. Profund Precious Metals (PMPIX) had a good month but has a way to go before it gets back into the top funds. XAU, usually considered a gold market representative, is near the bottom and is not a good example of gold funds and the gold market.

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 .   3478
 6 FSAGX Fidelity Select Gold .   1370
 3 BGEIX Amer Cent Global Gold.   1011
 8 FKRCX Franklin Gold & PrMt A    961
19 UNWPX US Global World Pr Mns    918
17 TGLDX Tocqueville Gold     .    863
 7 SGGDX First Eagle Gold A   .    703
 1 ASA   ASA Ltd              .    671
13 OPGSX Oppenheimer Gold A   .    661
20 USAGX USAA Precious Metals .    652
21 INIVX Van Eck Intl Inv GoldA    417
 9 GOLDX GAMCO Gold AAA       .    386
23 GDX   Mkt V Gold Miners ETF.    340
18 USERX US Global Gold Shares.    228
16 RYPMX Rydex Prec Metals    .    198
 4 SGDAX DWS Gold & Prec Mtls A    172
14 PMPIX Profund Prec Mtls Ultr    155
 2 FGLDX AIM Gold & Pr Mtls Inv    150
11 MIDSX Midas Fund           .    145
10 LEXMX ING Precious Metals A.    130
12 OCMGX OCM Gold             .    106
15 INPMX Riversource Prec MtlsA     85
 5 EKWBX Evergreen Prec Mtls B.     75

Three funds are still well over a billion dollars in assets.

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
14 PMPIX Profund Prec Mtls Ultr    1.70
26 HUI   Amex Gold Bugs Index .    1.45
25 SLV   iShrs Silver Trust ETF    1.33
27 XAU   Phlx Gold/Silver Index    1.11
13 OPGSX Oppenheimer Gold A   .    1.08
24 GLD   StrtTrks Gold Shrs ETF    1.07
 4 SGDAX DWS Gold & Prec Mtls A    1.04
11 MIDSX Midas Fund           .    1.03
 3 BGEIX Amer Cent Global Gold.    1.00
 9 GOLDX GAMCO Gold AAA       .    1.00
 1 ASA   ASA Ltd              .    1.00
16 RYPMX Rydex Prec Metals    .    0.98
18 USERX US Global Gold Shares.    0.98
 8 FKRCX Franklin Gold & PrMt A    0.97
10 LEXMX ING Precious Metals A.    0.97
 5 EKWBX Evergreen Prec Mtls B.    0.95
17 TGLDX Tocqueville Gold     .    0.95
 7 SGGDX First Eagle Gold A   .    0.95
15 INPMX Riversource Prec MtlsA    0.95
20 USAGX USAA Precious Metals .    0.94
21 INIVX Van Eck Intl Inv GoldA    0.90
 2 FGLDX AIM Gold & Pr Mtls Inv    0.88
12 OCMGX OCM Gold             .    0.88
 6 FSAGX Fidelity Select Gold .    0.82
19 UNWPX US Global World Pr Mns    0.81
22 VGPMX Vanguard Prec Metals .    0.78
23 GDX   Mkt V Gold Miners ETF.    0.75

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.

As gold slipped from its high set near 688 in early May, some analysts raised the possibility of a decline to the 620 level with silver below 12. However, with a rally on the last day of the month, this may not happen. The dip in May had been strong enough to cause gold ETFs to sell some of their bullion, depressing the price further. This selling demonstrates the weakness of ETFs to the markets because selling may produce more selling, adding to the magnitude of any decline.

If the dollar cannot continue its rally past 82.43, gold funds will be in very good shape. Another good sign for gold funds is the rising long bond yield telling us that interest rates are trending up. It's also a bad sign for mortgages.

Historically, when Congress has a serious long-lasting internal conflict, the market does not do well. With the entrance of the immigration bill and the immediate disagreements from all sectors of the political spectrum, we have an issue which I don't think has a good political solution. Eventually, sometime this summer, we will recognize that we have a major problem that will fester for months, and it could easily be the catalyst that causes the market to come down for its long expected correction.

One extreme position for metals is that they may get caught in a major decline of other commodities, most of which have had an exception year. There is some fear that the dramatic climb in Chinese stock markets and ETFs, joined by the thousands of new and inexperienced Chinese investors could produce a correction that could get nasty. Since the NASDAQ and Dow pay attention to the overnight Chinese markets, a severe Chinese correction could have a big effect on us, including gold equities.

The recent detection by the FBI of domestic terrorism threats has opened the possibility that we don't like to think about. However, you should give some consideration to the possibility that a major city in the U.S. could be nuked, or inflamed. If it happened to be New York or Washington, what would you do and where would you like your money to be. If you depend upon a government check, would it be forthcoming? It might pay to have a few gold coins at home and lots of cash to cover expenses for awhile since banks might not have the cash. Credit might be hard to get.

Long term, the major fundamental conditions still point toward a weaker dollar, a weaker economy, higher interest rates, and higher precious metal prices.