The long bond yield settled at 5.20%, down from June's 5.31%. The average 30 year mortgage rate slipped for most of the month before starting back up at 6.08%. The Dow Industrials fell through 10,000 but recovered to end the month at 10139 as the economy was thought to be improving. Consumer confidence is still high. However, home sales slowed in June and retail sales are slowing so far this summer. Second quarter GDP was up only 3.0% compared to an expected 3.7%.

Oil surged to $43.80 per barrel as production approached maximum effort and demand keeps increasing. Part of the problem is the fear that the Russian government will force Yukos, a large Russian oil producer, into bankruptcy, which will certainly pinch down a significant part of the worldwide supply chain. It has been pointed out from several sources that the U.S. has had no new refinery capacity since the 70's. We are seriously set up as a nation for much higher gas prices should any substantial disruption occur in production anywhere. Domestic gasoline prices actually decreased in late July as oil jumped to new high prices. Parts of the markets are not paying attention very far into the future.

Al Qaeda terrorist fears have had minimal effect on markets so far even with increased warnings and alerts. Except for increased security, we are all waiting to see what will happen by November.

The Democratic Convention had little effect on economic matters. Were the opinions and plans discussed there important or meaningful? The markets didn't seem to notice, or care.

The estimated budget deficit, a record at $445B, will not be as bad as originally predicted, but is still a record. Unless there is some magical policy that I don't know about, this deficit will add to the national debt. The dollar climbed to 89.70 anyway, with the euro at 1.2058, down slightly.

The increasing national debt numbers are approaching the legal limits but there is almost no reporting in the financial media that this might be a disrupting political item before the election. Since both parties are partially at fault, no one wants to stir up the hornets nest and alert the voters. Since the voters wanted the increased spending, its a moot point.

Many of these important news items are being easily discounted by the markets and we are probably becoming more complacent than we should be. When a disruptive event eventually occurs, it will move markets much more than normal.

fn       Fund                     1 mo   3 mo  12 mo   2 yr   3 yr
21 VGPMX Vanguard Prec Metals .    0.9    7.2   26.2   67.7  111.0
 6 SGGDX First Eagle Gold     .    0.4    2.6   10.9   54.7  173.2
 7 FKRCX Franklin Gold & PrM A.   -1.1    5.1   16.7   57.3   86.9
14 RYPMX Rydex Prec Metals    .   -1.4    3.9    8.0   41.7   77.8
 5 FSAGX Fidelity Select Gold .   -1.5    2.4    0.2   35.6   88.7
10 FGLDX INVESCO Gold & Pr Mtl.   -1.5    5.2   17.4   56.1  113.8
 8 GOLDX Gabelli Gold         .   -1.7    2.8   11.2   61.8  154.5
13 OPGSX Oppenheimer Gold A   .   -1.7    4.6   20.7   62.9   98.8
 4 EKWBX Evergreen Prec Mtls B.   -2.0    2.2   23.2   77.2  151.4
 2 BGEIX Amer Cent Global Gold.   -2.2    3.2    9.4   53.1  125.3
16 TGLDX Tocqueville Gold     .   -2.5    1.1   15.2   67.3  160.7
 1 ASA   ASA Ltd              .   -2.5    1.5   -9.8   36.9  121.3
20 INIVX Van Eck Intl Inv GoldA   -2.6    1.9   11.3   53.8  141.9
12 OCMGX Monterey OCM Gold    .   -2.6    0.2    7.5   52.2  138.2
11 MIDSX Midas Fund           .   -2.8    2.9   11.4   61.6  113.5
 9 LEXMX ING Precious Metals  .   -3.2    0.7    6.7   47.2  115.6
19 USAGX USAA Gold            .   -3.4    1.3   19.5   78.4  167.4
15 SGDAX Scudder Gold & Pr Mts.   -4.1   -1.8   30.0  103.5  176.7
 3 INPMX AXP Precious Metals A.   -4.4   -2.0   14.2   60.5  101.1
18 UNWPX US Global World PrecM.   -4.8   -5.1   39.4   93.4  191.2
17 USERX US Global Gold Shrs  .   -5.9   -2.9   21.3   69.5  152.4

Vanguard Precious Metals (VGPMX) took the top spot again, and joined with First Eagle Gold (SGGDX) as the only two to post a monthly gain. While the past three months are essentially still positive, 2004 has turned into a very poor year for gold funds.

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 July 30, 2004.

fn        Fund                    pos     nav
 4 EKWBX Evergreen Prec Mtls B.   20.7   27.01
21 VGPMX Vanguard Prec Metals .   19.6   14.15
18 UNWPX US Global World PrecM.    9.1   13.02
10 FGLDX INVESCO Gold & Pr Mtl.   -0.7    3.24
15 SGDAX Scudder Gold & Pr Mts.   -2.8   16.21
 6 SGGDX First Eagle Gold     .   -6.9   14.43
 7 FKRCX Franklin Gold & PrM A.   -7.4   15.94
13 OPGSX Oppenheimer Gold A   .   -7.9   16.60
16 TGLDX Tocqueville Gold     .  -11.8   29.32
19 USAGX USAA Gold            .  -13.6   13.59
11 MIDSX Midas Fund           .  -15.9    1.76
17 USERX US Global Gold Shrs  .  -23.9    6.59
 3 INPMX AXP Precious Metals A.  -24.2    9.36
20 INIVX Van Eck Intl Inv GoldA  -29.4    9.08
 2 BGEIX Amer Cent Global Gold.  -32.3   10.28
14 RYPMX Rydex Prec Metals    .  -34.1   34.52
 8 GOLDX Gabelli Gold         .  -39.0   14.14
 9 LEXMX ING Precious Metals  .  -40.8    6.02
12 OCMGX Monterey OCM Gold    .  -43.7   10.39
 5 FSAGX Fidelity Select Gold .  -53.0   22.83
 1 ASA   ASA Ltd              .  -66.3   35.17

This indicator shows that most funds have given up most of their annual gains, and most are below their 52 week averages and some well below it. However, it also shows that no fund is near its 52 week low.

The following list shows the approximate size of funds as measured in total assets under management in $millions. (As of the end of July) 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 .   620
 2 BGEIX Amer Cent Global Gold.   589
21 VGPMX Vanguard Prec Metals .   533
16 TGLDX Tocqueville Gold     .   453
 6 SGGDX First Eagle Gold     .   393
 7 FKRCX Franklin Gold & PrM A.   384
 1 ASA   ASA Ltd              .   337
19 USAGX USAA Gold            .   272
18 UNWPX US Global World PrecM.   241
20 INIVX Van Eck Intl Inv GoldA   226
13 OPGSX Oppenheimer Gold A   .   198
 8 GOLDX Gabelli Gold         .   182
14 RYPMX Rydex Prec Metals    .   157
15 SGDAX Scudder Gold & Pr Mts.   110
10 FGLDX INVESCO Gold & Pr Mtl.   101
 9 LEXMX ING Precious Metals  .    80
12 OCMGX Monterey OCM Gold    .    65
17 USERX US Global Gold Shrs  .    60
 3 INPMX AXP Precious Metals A.    59
11 MIDSX Midas Fund           .    49
 4 EKWBX Evergreen Prec Mtls B.    37

While these numbers had increased over the past year, a total of several hundreds of millions of dollars in assets were lost in April, partially recovered in May, and some more lost in June and July.

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
18 UNWPX US Global World PrecM.   1.51
15 SGDAX Scudder Gold & Pr Mts.   1.47
 4 EKWBX Evergreen Prec Mtls B.   1.39
17 USERX US Global Gold Shrs  .   1.29
19 USAGX USAA Gold            .   1.11
13 OPGSX Oppenheimer Gold A   .   1.11
 3 INPMX AXP Precious Metals A.   1.07
20 INIVX Van Eck Intl Inv GoldA   0.95
12 OCMGX Monterey OCM Gold    .   0.93
11 MIDSX Midas Fund           .   0.90
16 TGLDX Tocqueville Gold     .   0.90
 2 BGEIX Amer Cent Global Gold.   0.86
14 RYPMX Rydex Prec Metals    .   0.85
 7 FKRCX Franklin Gold & PrM A.   0.85
21 VGPMX Vanguard Prec Metals .   0.84
10 FGLDX INVESCO Gold & Pr Mtl.   0.82
 8 GOLDX Gabelli Gold         .   0.82
 9 LEXMX ING Precious Metals  .   0.82
 5 FSAGX Fidelity Select Gold .   0.75
 6 SGGDX First Eagle Gold     .   0.63
 1 ASA   ASA Ltd              .   0.62

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. These numbers didn't change from last month.

Vanguard Precious Metals (VGPMX) remained in the top spot again this month, over the past three months period, and moved into the top three over the past year. Comparing the relative position indicator, Evergreen Precious Metals(EKWBX), Vanguard (VGPMX), and U.S. Global World Precious Minerals (UNWPX) are the only three funds above their 52 week averages.

While most funds are in bad shape since the first of the year, they are still in decent shape over the past 12 months since last August. However, twelve month returns will not look so good as we pass the gains racked up last fall from August to November. Hopefully, gold will get some recognition soon. Some analysts are predicting 480-500 as a reasonable price by Christmas. Some are also expecting a test of 360 this fall, so watch out.

As gold slipped from its high of 428 in early 2004 to a recent 391, a decrease of only 9%, gold equities and gold funds have plummeted an average of 22%. In other markets, it looks like complacencies are discounting the potential bad news and assuming all will work out from national deficits to low interest rates and continuing home sales making many of us rich. That is reflected in the lack of a public need for gold investments. If all we suffer through is a mild economic deflationary trend, gold will also slip with all other markets. However, there is almost no consideration in these markets for bad news disrupting our sunny day. Since gold stocks have had much of the excess optimism drummed out of them, most are based for a very rewarding rally if something happens that the markets cannot accept, whatever that might be. Under current conditions, gold and silver are ready to lead the way.