From a low on May 16 of 78.73, XAU gained 18% to a high of 94.55 on June 29. Gold funds responded in kind as gold equities demonstrated that they were ready to climb after the two month decline.

The Federal Reserve raised the short term federal funds rate to 3.25% and it stalled the Dow, which closed the month at 10,274. GDP grew at 3.8% for the first quarter of 2005.

The dollar continued to climb, closing the month at 89.11 after reaching the 90.0 level temporarily. This had some effect on gold prices, but not much on Thursday. The dollar's strength was brought on by reports of improving job creation and economic numbers, but mostly by the suggestion that other rate increases are in the near future. The battle with the euro continued as the euro closed at 1.2100.

Oil jumped over the $60 level, but closed the month at 56.50. China offered to purchase Unical, an American oil company which owns large reserves of oil in the Far East. China is on a resources hunt with their excess dollars and is already working on purchasing Canadian oil reserves and gold mines.

Once again, a large trade deficit had little effect on the markets. It has obviously become expected and therefore discounted, but it's not going away soon. The Chinese will have plenty of money to spend. In addition, foreign investors are no longer covering the trade deficit, the U.S. will have to cover its trade deficit some other way.

After silver jumped to 7.44 in May, it fell to 6.85 in June, taking most silver stocks with it. It's hard for gold to get going if silver is a laggard.

fn       Fund                     1 mo   3 mo  12 mo   2 yr   3 yr
14 PMPIX Profund Prec Mtls Ultr   11.6   -3.0    8.1   17.0   21.3
18 USERX US Global Gold Shares.   11.0   -1.4   10.2   49.5   46.7
16 SGDAX Scudder Gold & Pr Mt A   10.6   -1.2    1.7   53.0   78.1
 5 EKWBX Evergreen Prec Mtls B.   10.4   -0.1    9.9   44.7   62.4
19 UNWPX US Global World Pr Mns   10.2   -5.0   16.5   81.7   70.2
20 USAGX USAA Precious Metals .   10.2    1.4    6.8   41.7   63.7
10 LEXMX ING Precious Metals A.   10.2   -0.6    5.3   21.8   34.0
 3 BGEIX Amer Cent Global Gold.   10.1   -0.8    6.9   25.0   39.1
21 INIVX Van Eck Intl Inv GoldA   10.0   -0.1    9.5   32.8   40.6
 8 FKRCX Franklin Gold & PrMt A    9.5    1.3    9.2   34.1   44.5
13 OPGSX Oppenheimer Gold A   .    8.9   -0.1   10.7   43.4   49.5
 2 FGLDX AIM Gold & Pr Mtls Inv    8.5    0.3   10.0   36.9   48.8
 6 FSAGX Fidelity Select Gold .    8.4   -1.8    9.7   16.8   25.4
15 RYPMX Rydex Prec Metals    .    8.2   -2.2   -1.2   13.2   19.5
11 MIDSX Midas Fund           .    8.2   -2.0    9.4   32.0   54.8
17 TGLDX Tocqueville Gold     .    8.1    0.0   11.7   38.9   58.5
12 OCMGX OCM Gold             .    8.1   -0.7    4.3   20.9   43.6
 9 GOLDX Gabelli Gold         .    8.1   -0.9    5.6   25.0   45.4
 4 INPMX AXP Precious Metals A.    7.5   -3.1   -0.2   25.1   32.6
 1 ASA   ASA Ltd              .    6.5   -0.1    4.4    1.5   28.1
 7 SGGDX First Eagle Gold A   .    5.5   -0.3    8.2   24.7   43.3
22 VGPMX Vanguard Prec Metals .    5.4    1.1   26.9   64.5   75.2

All gold funds had a good month and made up for the last three months' bad times. Profund Precious Metals (PMPIX) took the top spot this month followed closely by many others.

Most are now positive for the 12 month period with Vanguard (VGPMX) leading the way. Investigating VGPMX's portfolio showed that it has spread assets among other resource mines besides basic gold and silver. This decision probably caused VGPMX to avoid most of the plunge in gold assets this spring, but also caused it to appreciate the least this month as gold rebounded.

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 June 30, 2005.

fn        Fund                     pos     nav
22 VGPMX Vanguard Prec Metals .   93.6   17.62
13 OPGSX Oppenheimer Gold A   .   39.8   18.27
19 UNWPX US Global World Pr Mns   25.8   15.50
17 TGLDX Tocqueville Gold     .   23.7   32.41
20 USAGX USAA Precious Metals .   16.6   14.99
 8 FKRCX Franklin Gold & PrMt A   16.0   18.05
10 LEXMX ING Precious Metals A.   14.3    6.39
21 INIVX Van Eck Intl Inv GoldA   13.5    9.31
18 USERX US Global Gold Shares.   12.4    7.67
 2 FGLDX AIM Gold & Pr Mtls Inv   12.1    3.58
 6 FSAGX Fidelity Select Gold .    9.5   24.23
 4 INPMX AXP Precious Metals A.    9.4    8.70
16 SGDAX Scudder Gold & Pr Mt A    8.1   15.87
 5 EKWBX Evergreen Prec Mtls B.    6.1   30.61
12 OCMGX OCM Gold             .   -0.7   10.79
11 MIDSX Midas Fund           .   -3.1    1.98
 1 ASA   ASA Ltd              .   -3.2   38.82
 9 GOLDX Gabelli Gold         .   -4.9   15.13
 3 BGEIX Amer Cent Global Gold.   -5.7   11.23
 7 SGGDX First Eagle Gold A   .   -9.6   15.73
15 RYPMX Rydex Prec Metals    .  -16.8   34.84
14 PMPIX Profund Prec Mtls Ultr  -17.8   26.74

Vanguard (VGPMX) is the only fund maintaining a nav near its 52 week high. Eight are still below their yearly average.

The following list shows the approximate size of funds as measured in total assets under management. (In $millions as of the end of June) 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 .   1286
 6 FSAGX Fidelity Select Gold .    625
 3 BGEIX Amer Cent Global Gold.    607
 7 SGGDX First Eagle Gold A   .    506
17 TGLDX Tocqueville Gold     .    493
 8 FKRCX Franklin Gold & PrMt A    449
 1 ASA   ASA Ltd              .    372
20 USAGX USAA Precious Metals .    304
19 UNWPX US Global World Pr Mns    263
 9 GOLDX Gabelli Gold         .    242
13 OPGSX Oppenheimer Gold A   .    236
21 INIVX Van Eck Intl Inv GoldA    232
15 RYPMX Rydex Prec Metals    .    125
16 SGDAX Scudder Gold & Pr Mt A    119
 2 FGLDX AIM Gold & Pr Mtls Inv     98
10 LEXMX ING Precious Metals A.     79
12 OCMGX OCM Gold             .     69
18 USERX US Global Gold Shares.     63
 4 INPMX AXP Precious Metals A.     60
14 PMPIX Profund Prec Mtls Ultr     60
11 MIDSX Midas Fund           .     49
 5 EKWBX Evergreen Prec Mtls B.     39

Vanguard Precious Metals(VGPMX) continues to be the largest gold fund and has increased its size significantly this spring to over a billion dollars in assets. Its results over the past year have set it above the other funds and undoubtedly has helped to add to its asset size from new investors.

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
19 UNWPX US Global World Pr Mns    1.20
 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
11 MIDSX Midas Fund           .    0.96
 1 ASA   ASA Ltd              .    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
22 VGPMX Vanguard Prec Metals .    0.84
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. This policy produces a higher volatility rating and possibly better returns in an up market.

Led by Profunds Precious Metals (PMPIX), nine funds grew by 10% or better for the month, and all funds had a good month. Another month like June and we will start to see gold funds as a group positive for 2005. However, while fundamentals still point to a higher gold price, we have reached an overbought condition with a strong dollar, not exactly a perfect position for gold. In addition, silver's reluctance to support the rise in gold in June is not a good sign. Silver should make a rise above the 7.15 level to show its in the same ballpark as gold. Otherwise its hard for gold to get going for real.

One fundamental positive for gold was the rejection of the European constitution by France and The Netherlands in late May. The votes were detrimental to the reputation of the euro and coincided with gold's rise starting in mid-May. The unanswered question is how long will the euro's weakness cause gold to go up. While some analysts say that the dollar and gold have separated their inverse relationship, I'm not so sure. One month does not a long term trend make.

For the equity market, Gold stock prices have become exceedingly volatile with some dropping like bricks and rising like rockets daily, showing that there is an untapped amount of cash ready to move into gold stocks once the gold market shows it is committed to the upside. (On July 1 gold and silver took a major hit with a strong dollar but gold stocks managed a volatile daily recovery.)

Resource prices began to heat up again as oil moved over $60 when China made an offer for Unical. This indicates that China is willing to spend its reservoir of U.S. dollars for something besides Treasuries and means that those dollars will be directed into the market away from Treasuries, probably weakening the dollar and raising interest rates.

Having read different economic opinions on U.S. economic conditions, I wonder sometimes if the two major opinions are even on the same planet. One, pro-gold, believes that the economic situation is grave, about to drive the dollar and the U.S. economy into an historical disaster, dooming the real estate market and future pensions. Such a case would bring stagflation with higher prices and a miserable social state. The second, anti-gold, believes that the Federal Reserve will rescue us all by smoothing the problems we have with an economy, creating jobs and a slowly rising interest rate which will automatically correct the imbalances now seen in real estate, the current account, and pension defaults.

The future lies between these two, but the trade deficit won't go away for years, foreigners will collect many dollars, and they will spend it when they want to. As Warren Buffett says, we will become a nation of sharecroppers as the dollar descends to fair value. My vote is still on precious metals and gold funds being one of the best places to invest.