The market considered the dollar to be oversold in May, and enough support arrived in June to cause the euro to fall back from four year highs above 1.18 to close the month at 1.152. The yen closed at 119.6 yen/dollar as the Bank of Japan continued to keep the yen weak against the dollar. By the end of the month, the Japanese interest rate had moved negative.

Ignoring that downtrend, gold equities climbed across the board, pushing gold funds to monthly gains. The XAU index advanced from 73.4 to as high as 82 before closing at 78.6.

One reason for a stronger dollar was the appearance that the U.S. economy was showing signs of recovery with the Dow up 12% for the quarter and new home sales reaching another record in May. Personal income is still increasing each month, even if the main increase is in government payrolls. Initial jobless applications decreased slightly with bankruptcy filings leveling off.

Financial indexes are looking good as the broad money supply is up 11% over the past twelve months, and bank stocks are leading the market. The University of Michigan Consumer Confidence measurement increased during May and internet stocks were already up 35% for the year, pushing the Dow over 9300 before it closed at 8985.

The worldwide debt expansion continued as large bond sales dominated the latest two months. With the Federal Reserve lowering the short term interest rate to 1.00%, all bond yields slid to long term records. The long bond yield reached 4.17% before closing the month at 4.56%. Mortgage rates haven't been this low since 1958, continuing to support the housing market. The current account balance for the first quarter came in at $136 billion, with no sign of decreasing soon.

There were some optimistic signs from the Mideast where Israeli and Palestinian leaders agreed to a ceasefire. The conflict in Iraq is looking more like the proverbial tarbaby, where it is almost impossible to get out once we are involved. News from Iraq had almost no effect on the markets, and oil remained level at 29.92.

The SARS epidemic, which threatened to have serious implications on worldwide commerce, has been contained after making only minor damage.

fn         Fund                   1 mo   3 mo  12 mo   2 yr   3 yr
12 OMCGX Monterey OCM Gold    .    5.9    9.5   18.1  106.9  119.0
 1 ASA   ASA Ltd              .    5.2    9.2   26.2  109.6  157.6
14 RYPMX Rydex Prec Metals    .    4.3   14.1    5.6   50.8   57.2
 2 BGEIX Amer Cent Global Gold.    4.1   15.9   10.5   89.3  106.9
19 USAGX USAA Gold            .    4.0   17.0   10.0   86.1  112.4
 3 INPMX AXP Precious Metals A.    4.0   15.3    1.8   49.4   73.2
13 OPGSX Oppenheimer Gold A   .    3.8   15.5    3.1   39.2   56.7
15 SCGDX Scudder Gold & Pr Mt S    3.6   14.0   15.1   76.2   99.8
11 MIDSX Midas Fund           .    3.4   16.3   11.1   70.5   56.3
 4 EKWBX Evergreen Prec Mtls B.    3.2   15.3   11.8   80.9  111.9
16 TGLDX Tocqueville Gold     .    3.2   13.8   14.2  100.8  122.0
 7 FKRCX Franklin Gold & PrM A.    3.1   16.5    6.8   36.7   57.0
10 FGLDX INVESCO Gold & Pr Mtl.    3.0   14.2    8.7   68.1   64.1
17 USERX US Global Gold Shrs  .    3.0    9.5   -1.9   83.0   77.4
 8 GOLDX Gabelli Gold         .    2.7   13.2   16.3  100.3  132.6
21 VGPMX Vanguard Prec Metals .    2.6   14.3    2.8   39.6   72.8
18 UNWPX US Global World PrecM.    2.1    6.7   -6.5   84.7   52.2
 9 LEXMX ING Pilgrim Pr Mtls A.    1.7   14.2   10.0   81.8   96.4
 5 FSAGX Fidelity Select Gold .    1.4    9.6    3.7   60.9   76.4
 6 SGGDX First Eagle SGen Gold.    0.7   10.9   14.2  125.8  148.5
20 INIVX Van Eck Intl Inv GoldA   -0.3   10.0    2.9   91.5   89.6

Monterey OCM Gold (OCMGX) led the pack this month after changing its symbol in May. It is also one of only five funds who have doubled value in the past two years. All funds but one were gainers for June, and all have positive three month records. It's remarkable that these advances were done in the face of a falling gold price. While gold has been held back in this latest dollar support, equities have not been affected much.

The Position indicator gives the relative position of a fund between its 52 week high and low. Its high is represented by +100 and its low by -100. As of June 30, 2003.

fn          Fund                   pos     nav
16 TGLDX Tocqueville Gold     .   95.9   24.62
15 SCGDX Scudder Gold & Pr Mt S   80.7   11.91
 4 EKWBX Evergreen Prec Mtls B.   77.4   21.36
19 USAGX USAA Gold            .   77.3   11.13
 9 LEXMX ING Pilgrim Pr Mtls A.   74.2    5.38
 8 GOLDX Gabelli Gold         .   69.7   12.26
10 FGLDX INVESCO Gold & Pr Mtl.   68.9    2.74
 2 BGEIX Amer Cent Global Gold.   68.2    9.16
13 OPGSX Oppenheimer Gold A   .   66.4   13.79
 7 FKRCX Franklin Gold & PrM A.   64.1   13.19
12 OMCGX Monterey OCM Gold    .   62.0    9.35
21 VGPMX Vanguard Prec Metals .   61.2   11.43
 6 SGGDX First Eagle SGen Gold.   61.0   12.87
11 MIDSX Midas Fund           .   60.8    1.50
20 INIVX Van Eck Intl Inv GoldA   59.0    7.69
 1 ASA   ASA Ltd              .   57.6   37.75
17 USERX US Global Gold Shrs  .   56.9    5.18
18 UNWPX US Global World PrecM.   56.4    9.75
14 RYPMX Rydex Prec Metals    .   55.4   30.56
 3 INPMX AXP Precious Metals A.   54.4    8.35
 5 FSAGX Fidelity Select Gold .   39.4   22.42

These numbers changed quite a bit from last month as a new set of 52 week high-low numbers came into effect. All funds are well above their yearly average after the past three months of advance.

The position indicator demonstrates a fund's ability to retain previous advances without falling out of bed when gold has a bad month or two. It's obvious which funds couldn't hold onto their gains and which have.

The following chart shows the approximate size of funds as measured in total assets under management in $millions. (As of June 30) 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 .   600
21 VGPMX Vanguard Prec Metals .   447
 2 BGEIX Amer Cent Global Gold.   387
 1 ASA   ASA Ltd              .   361
 7 FKRCX Franklin Gold & PrM A.   280
16 TGLDX Tocqueville Gold     .   225
20 INIVX Van Eck Intl Inv GoldA   217
 6 SGGDX First Eagle SGen Gold.   205
 8 GOLDX Gabelli Gold         .   180
19 USAGX USAA Gold            .   158
15 SCGDX Scudder Gold & Pr Mt S   132
13 OPGSX Oppenheimer Gold A   .   121
10 FGLDX INVESCO Gold & Pr Mtl.   105
18 UNWPX US Global World PrecM.   103
14 RYPMX Rydex Prec Metals    .    94
 9 LEXMX ING Pilgrim Pr Mtls A.    80
 3 INPMX AXP Precious Metals A.    49
17 USERX US Global Gold Shrs  .    45
11 MIDSX Midas Fund           .    44
12 OMCGX Monterey OCM Gold    .    35
 4 EKWBX Evergreen Prec Mtls B.    35

During the past two years these numbers have increased due to higher equity values, but the total amount of new investment has not been as much as would be expected in an advancing gold bull market. Apparently most of the investing public doesn't know we are in a bull market in gold.

If the U.S. public becomes aware of gold as a valid investment, then we would expect to see much more new money entering these funds.

There are only so many valid gold equities worldwide and a new infusion of cash would push the value of most gold equities to new highs, along with the funds.

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. Naturally, if the market is going up, you would want one at the top of this list. However, during a correction, the funds at the bottom would probably do better.

fn      fund                      beta
 1 ASA   ASA Ltd              .   1.38
 8 GOLDX Gabelli Gold         .   1.26
17 USERX US Global Gold Shrs  .   1.14
15 SCGDX Scudder Gold & Pr Mt S   1.09
 5 FSAGX Fidelity Select Gold .   1.09
12 OMCGX Monterey OCM Gold    .   1.09
 2 BGEIX Amer Cent Global Gold.   1.08
 6 SGGDX First Eagle SGen Gold.   1.06
16 TGLDX Tocqueville Gold     .   1.04
 4 EKWBX Evergreen Prec Mtls B.   1.01
18 UNWPX US Global World PrecM.   1.01
 9 LEXMX ING Pilgrim Pr Mtls A.   0.99
19 USAGX USAA Gold            .   0.94
14 RYPMX Rydex Prec Metals    .   0.94
11 MIDSX Midas Fund           .   0.94
 3 INPMX AXP Precious Metals A.   0.93
10 FGLDX INVESCO Gold & Pr Mtl.   0.91
13 OPGSX Oppenheimer Gold A   .   0.90
 7 FKRCX Franklin Gold & PrM A.   0.79
20 INIVX Van Eck Intl Inv GoldA   0.72
21 VGPMX Vanguard Prec Metals .   0.66

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 nav movement is a direct reflection of the types of equities selected by the fund manager.

The way that gold equities were advancing in the face of a weak gold price, it was as if buyers were ignoring the near term price of gold and silver. It could be that investors could see that the equities and funds were the places to be, and not so much bullion. Total value of all gold equities is only $60 billion, not even equal to any decent sized Dow Jones Industrial company. Once the demand for gold equities is apparent, gold equity prices will take off beyond reason.

While many U.S. economic indicators are positive, there are still many other signs of trouble for the future. For one, manufacturing jobs are still being lost. The Fed can lower interest rates just a few more times in an attempt to help.

By cutting the rate to 1.00%, the Fed is implying that the U.S. economy still needs help, and domestically the state of California is in serious budgetary trouble. California's budget problem could be the future for several other states. That means drastically reduced state government expenditures or much higher taxes, cutting into any benefit that the federal tax cut may have produced for the national economy. A weak economy means a lower dollar to most bankers, resulting in a long term uptrend for gold. Looking at the current account deficit trend, most of the world knows that the long term direction for the greenback is still down.

During May, the value of the euro climbed against the weaker dollar enough to worry European banks because it is already showing up in trade results. Europe is not growing much at all, and a higher euro won't do them any favors.

A higher euro is relative to a weaker dollar and a weaker European economic picture means that central bankers will be looking elsewhere to maximize their reserves. In the long run, that is still gold. While the market so far doesn't support gold above 370, it looks like it's just a matter of time before it does.