Chairman Greenspan's comments came during a major report to Congress, suggesting that the economy was on its way to a solid recovery, and the loss of manufacturing jobs and the apparent housing bubble were not important concerns. Gold dropped for a day before resuming its rally.

At the end of the month, a report that the GDP had grown at 2.4% in the second quarter of 2003 gave some strength to the dollar and terminated gold's two week rally. The dollar gained from 94.68 to 97.14 in July, sending the euro down to 1.1226 and the yen to 120.4 yen/dollar. Meanwhile the Dow remained above 9000, closing at 9233.

One indication that the economy is picking up for real is the major rise in bond yields since mid-June. With increases in yields on U.S. Treasuries, such as the long bond climbing from 4.17% in June to close July at 5.41%, the bond market took a further hit. This has turned out to be a significant bond value decrease and could have further ramifications in the near future. It could also just be an indication that investors are becoming aware of the manuevers that the Fed used recently to artificially talk rates lower. In any case, 30 year fixed mortgage rates jumped back over 6% and corporate debt offerings continued at a high pace.

Higher mortgages didn't have much effect on the housing market as new home sales in June and July continued at a record pace. Home prices continued to rise making home ownership a great investment for now.

Following two positive months, consumer confidence dipped in July.The trade deficit for the 12 month period ending with the second quarter was a total of $553 billion, another record, well above the first quarter. Personal bankruptcies are 9% over 2002.

A planned miners strike in South Africa was avoided at the last minute, but not before causing most South African stocks to have a bad month. In addition, as the rand appreciates against the dollar, like most currencies are doing, South African Mines are getting less for their product on the world market.

With the death of Saddam's two sons, I believe the old Saddam network will soon collapse, allowing the U.S. to turn over much of the peacekeeping to U.N. forces. Even Saudi Arabia is arresting al-Qaeda supporters, so the rest of the world is getting the word.

fn         Fund                   1 mo   3 mo  12 mo   2 yr   3 yr
15 SCGDX Scudder Gold & Pr Mt S   10.9   26.0   54.7   95.4  139.3
19 USAGX USAA Gold            .    7.3   25.2   42.1   99.7  145.7
18 UNWPX US Global World PrecM.    6.5   16.6   38.4   96.6   81.2
20 INIVX Van Eck Intl Inv GoldA    6.1   16.1   34.4  103.2  120.6
13 OPGSX Oppenheimer Gold A   .    5.4   22.2   33.5   46.7   76.2
11 MIDSX Midas Fund           .    5.3   24.4   37.4   79.5   79.5
17 USERX US Global Gold Shrs  .    5.2   20.6   39.7   92.6  106.4
16 TGLDX Tocqueville Gold     .    5.2   20.6   45.2  111.2  150.6
 1 ASA   ASA Ltd              .    5.1   13.0   51.8  120.3  185.1
12 OMCGX Monterey OCM Gold    .    5.0   16.9   40.7  117.3  157.7
 3 INPMX AXP Precious Metals A.    4.9   21.2   35.0   56.7   96.9
 9 LEXMX ING Pilgrim Pr Mtls A.    4.8   19.5   37.9   90.5  124.7
 4 EKWBX Evergreen Prec Mtls B.    4.7   21.0   43.3   89.4  141.1
 5 FSAGX Fidelity Select Gold .    4.7   18.2   30.8   68.6   97.0
 8 GOLDX Gabelli Gold         .    4.6   19.1   45.5  109.6  164.0
14 RYPMX Rydex Prec Metals    .    4.6   22.2   31.2   57.8   83.3
10 FGLDX INVESCO Gold & Pr Mtl.    4.4   20.2   33.0   75.5   84.5
 6 SGGDX First Eagle SGen Gold.    4.4   15.1   38.6  135.6  187.0
 7 FKRCX Franklin Gold & PrM A.    4.1   23.2   33.6   42.3   73.8
 2 BGEIX Amer Cent Global Gold.    3.8   21.6   39.0   96.5  134.3
21 VGPMX Vanguard Prec Metals .    3.7   19.2   28.4   44.8   82.1

Scudder Gold (SCGDX) has been consistently moving to the top of the list over the past three months and this month left the rest of the pack in the dust. All funds were positive, and over half have doubled in the last three years since the top of the dot-com bubble.

After examining the top ten holdings of each fund this month, it's difficult to determine why Scudder's nav is that much better. They do own Ivanhoe Mines, up 23% for the month and hitting a new high right up to the end. But so do Tocqueville(TGLDX), U.S. Global Gold Shares(USERX), and U.S. World Precious Minerals(UNWPX).

At the peak of the rally on July 25/28, these stocks were holding near 52 week highs and should bear watching after this correction. The funds should be credited for good stock selection.

Stock Symbol Held by:
Anglo American AAUK ASA
Bema Gold BGO USERX, UNWPX,
Buenaventure BVN INPMX, EKWBX, FSAGX, FKRCX, USAGX, VGPMX
Freeport McMoran FCX almost all
Ivanhoe Mines IVHMF SCGDX, TGLDX, USERX, UNWPX,
Newcrest NCMGY ASA, BGEIX, FKRCX, LEXMX, MIDSX, USAGX,
Newmont NEM almost all
Placer Dome PDG almost all
Rio Tinto RTP VGPMX
Silver Standard SSRI none

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 July 31, 2003.

fn          Fund                   pos     nav
15 SCGDX Scudder Gold & Pr Mt S   99.2   13.21
18 UNWPX US Global World PrecM.   90.4   10.38
12 OMCGX Monterey OCM Gold    .   88.1    9.82
19 USAGX USAA Gold            .   88.0   11.94
16 TGLDX Tocqueville Gold     .   87.9   25.89
 4 EKWBX Evergreen Prec Mtls B.   86.8   22.37
13 OPGSX Oppenheimer Gold A   .   85.2   14.54
11 MIDSX Midas Fund           .   84.9    1.58
 7 FKRCX Franklin Gold & PrM A.   84.8   13.73
 8 GOLDX Gabelli Gold         .   84.7   12.83
 6 SGGDX First Eagle SGen Gold.   84.5   13.43
 2 BGEIX Amer Cent Global Gold.   83.4    9.51
10 FGLDX INVESCO Gold & Pr Mtl.   83.3    2.86
17 USERX US Global Gold Shrs  .   83.3    5.45
 9 LEXMX ING Pilgrim Pr Mtls A.   82.5    5.64
20 INIVX Van Eck Intl Inv GoldA   79.9    8.16
14 RYPMX Rydex Prec Metals    .   79.7   31.97
 3 INPMX AXP Precious Metals A.   79.4    8.76
21 VGPMX Vanguard Prec Metals .   74.7   11.85
 1 ASA   ASA Ltd              .   70.8   39.68
 5 FSAGX Fidelity Select Gold .   63.4   23.48

These numbers changed from last month as a yet another 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.

The following chart shows the approximate size of funds as measured in total assets under management in $millions. (As of July 31) 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 .   628
21 VGPMX Vanguard Prec Metals .   464
 2 BGEIX Amer Cent Global Gold.   402
 1 ASA   ASA Ltd              .   380
 7 FKRCX Franklin Gold & PrM A.   292
16 TGLDX Tocqueville Gold     .   236
20 INIVX Van Eck Intl Inv GoldA   230
 6 SGGDX First Eagle SGen Gold.   213
 8 GOLDX Gabelli Gold         .   189
19 USAGX USAA Gold            .   170
15 SCGDX Scudder Gold & Pr Mt S   147
13 OPGSX Oppenheimer Gold A   .   128
10 FGLDX INVESCO Gold & Pr Mtl.   110
18 UNWPX US Global World PrecM.   110
14 RYPMX Rydex Prec Metals    .    98
 9 LEXMX ING Pilgrim Pr Mtls A.    84
 3 INPMX AXP Precious Metals A.    52
11 MIDSX Midas Fund           .    47
17 USERX US Global Gold Shrs  .    47
12 OMCGX Monterey OCM Gold    .    37
 4 EKWBX Evergreen Prec Mtls B.    36

These numbers have not been increasing as much as I would have expected, which only proves that the investing public hasn't got the word yet that gold is into a bull market and money placed in one of these funds is well positioned. Once the public becomes aware of gold as a valid investment, then we can 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         .   1.31
15 SCGDX Scudder Gold & Pr Mt S   1.29
20 INIVX Van Eck Intl Inv GoldA   1.20
17 USERX US Global Gold Shrs  .   1.14
 2 BGEIX Amer Cent Global Gold.   1.11
19 USAGX USAA Gold            .   1.11
 4 EKWBX Evergreen Prec Mtls B.   1.11
16 TGLDX Tocqueville Gold     .   1.10
 9 LEXMX ING Pilgrim Pr Mtls A.   1.10
12 OMCGX Monterey OCM Gold    .   1.09
 5 FSAGX Fidelity Select Gold .   1.09
 6 SGGDX First Eagle SGen Gold.   1.06
18 UNWPX US Global World PrecM.   1.02
11 MIDSX Midas Fund           .   0.97
13 OPGSX Oppenheimer Gold A   .   0.97
10 FGLDX INVESCO Gold & Pr Mtl.   0.97
14 RYPMX Rydex Prec Metals    .   0.95
 3 INPMX AXP Precious Metals A.   0.95
 7 FKRCX Franklin Gold & PrM A.   0.82
21 VGPMX Vanguard Prec Metals .   0.72

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.

Scudder Gold (SCGDX) took over leadership for the one, three, and 12 month periods with a 10.9% gain in July. All funds gained as gold rallied in the face of a stronger dollar.

In the U.S., Greenspan's optimistic comments don't recognize that the housing boom, while continuing at a record pace, continues to increase housing cost as a percentage of personal income. This is happening with historic low interest rates. While official unemployment drops and personal income increases, manufacturing jobs still continue to fly overseas. In fact, the driving force of growth in the second quarter, and the leading cause of the optimistic predictions in the near future for the economy was government military spending and consumer spending, not any production.

On an international scale, it has been pointed out by many commentators that the foreign exchange balancing act being manipulated by central banks to maintain acceptable trading relationships is beginning to be seen in the metals markets. Gold's advance in July was attributed to a weak dollar, but the dollar has not fallen enough to encourage surging silver and gold prices. Over the month, the dollar actually went up.

Within a small trading range, two currencies can find a symbiotic relationship acceptable to both, but if one currency, such as the dollar, relentlessly decays, then complexities arrive in the equation. If the second currency, such as the Chinese yuan, also matches the decline, then all other trading partners are put at risk, and must adjust in the same direction in order to maintain their market well-being. What we are seeing now is an international contest to keep the dollar up by an unusual amount of dollar debt purchasing (and holding in reserves) by the central banks of our trading partners. Japan is a perfect example of this, trying to keep a weak yen.

If the Chinese permit an appreciation of the yuan, the price of gold in yuan would go down, dropping domestic prices and creating a recession in their own country. They won't do it unless they can also buy enough gold to keep the value up in yuan. They could do this by buying gold for reserves with their excessive amount of U.S. treasuries. This would be inflationary in the U.S., push U.S. interest rates higher and would have to be done slowly as not to really irritate their number one trading partner, US. I would expect gold to move up in dollars the approximate percentage amount of a yuan re-evaluation.

While they say they are not going to do it, China will not sit there and take US paper debt forever. Other countries such as Mexico who see China taking their jobs as a result of a weak dollar and yuan connection will complain louder and China will be diplomatically forced to respond.

I recently analyzed the top ten holding of each fund as posted on Yahoo Finance. At the peak on July 25/28, I checked each fund and equity to see who had what in their portfolio to see if I could detect any indication of future gains. Sorry, I couldn't reach a conclusion that made any sense. I did notice that most South African stocks had a bad month, but that was probably because of the rand appreciating and the threat of a miners strike.