Most world markets were scorching, but slowed down at the end of the month. The Dow rose to a new all-time high over 14,000, but cratered at the end, falling to 13,211.

Meanwhile, the dollar entered the month sliding from 81.93 to 80.10 before rallying to end at 80.90. The long bond slid as the yield rose from 5.13% to 5.28%, but then collapsed to 4.95% as money went into bonds with the market tumble.

Oil continued to rise, partially due to international conditions, closing near $77.

Hedge funds began to be exposed as something that could lose money. The latest problem was initiated with heavy losses suffered by Bear Stearns and its hedge funds, creating a credit reevaluation by many banks. The Bank index, $BNK, plunged as credit tightened for investments in questionable projects. Several IPO's were not able to completely fund and some investment banks took it on the chin.

Home sales were down, still, in June.

fn            Fund                1 mo   3 mo  12 mo   2 yr   3 yr
14 PMPIX Profund Prec Mtls Ultr   14.0   16.6    1.5   71.2   83.6
27 XAU   Phlx Gold/Silver Index    9.4    8.5    4.8   59.9   71.0
12 OCMGX OCM Gold             .    6.1    3.9   13.2   93.7  107.4
16 RYPMX Rydex Prec Metals    .    5.7    3.9   11.2   69.6   71.2
 6 FSAGX Fidelity Select Gold .    5.6    3.5   12.5   89.7  114.6
 7 SGGDX First Eagle Gold A   .    5.4    0.0    5.3   64.6   79.4
23 GDX   Mkt V Gold Miners ETF.    5.4    1.0    3.1   	          
26 HUI   Amex Gold Bugs Index .    4.8    1.6    4.8   71.2   85.5
 3 BGEIX Amer Cent Global Gold.    4.4   -0.9    3.3   69.8   85.5
21 INIVX Van Eck Intl Inv GoldA    4.2    4.0   18.6  105.1  131.2
 9 GOLDX GAMCO Gold AAA       .    4.0    3.8   12.9   92.3  108.4
11 MIDSX Midas Fund           .    4.0    7.1   23.8  152.0  183.5
 2 FGLDX AIM Gold & Pr Mtls Inv    3.9    4.1   15.0   83.2  104.6
19 UNWPX US Global World Pr Mns    3.8    3.3   13.0  125.5  176.0
25 SLV   iShrs Silver Trust ETF    3.7   -4.0   12.3   	          
18 USERX US Global Gold Shares.    3.6    0.8   -1.6  104.7  139.8
 5 EKWBX Evergreen Prec Mtls B.    3.5    0.9   10.3   92.4  118.1
13 OPGSX Oppenheimer Gold A   .    2.8    4.0   27.3  117.1  156.7
24 GLD   StrtTrks Gold Shrs ETF    2.4   -1.9    4.2   51.5       
 4 SGDAX DWS Gold & Prec Mtls A    1.8    1.7   11.1   74.1   86.8
20 USAGX USAA Precious Metals .    1.7    0.7   16.3  111.9  136.0
 8 FKRCX Franklin Gold & PrMt A    1.6    0.2   16.0   98.3  124.7
17 TGLDX Tocqueville Gold     .    1.5   -0.7   15.9   89.2  117.7
15 INPMX Riversource Prec MtlsA    0.6    3.8   14.1   97.1  105.8
 1 ASA   ASA Ltd              .    0.1   -2.8    7.3   75.1   96.0
10 LEXMX ING Precious Metals A.   -1.1    7.5   20.4  101.8  121.0
22 VGPMX Vanguard Prec Metals .   -3.9    3.9   24.2  109.2  176.1

Profunds (PMPIX) jumped to the front as gold funds rallied for the month. However, it still has a ways to go to catch up with the other funds.

Vanguard Precious Metals(VGPMX) and ING Precious Metals (LEXMX), recent leaders, suffered due to their heavy inclusion of resource stocks in place of gold mines, and therefore did not benefit as much from gold's advance. However, they are still at the top over the past 12 months and two year period.

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 July:

				           nav
fn          Fund                  pos   06/29/07  07/31/07
22 VGPMX Vanguard Prec Metals .   79.3    33.75   32.43
13 OPGSX Oppenheimer Gold A   .   58.6    31.81   32.70
24 GLD   StrtTrks Gold Shrs ETF   55.4    64.27   65.79
16 RYPMX Rydex Prec Metals    .   55.1    55.90   59.09
10 LEXMX ING Precious Metals A.   54.9    12.29   12.16
11 MIDSX Midas Fund           .   54.2     4.80    4.99
 2 FGLDX AIM Gold & Pr Mtls Inv   52.4     6.17    6.41
20 USAGX USAA Precious Metals .   50.4    28.39   28.88
12 OCMGX OCM Gold             .   49.1    17.89   18.98
 8 FKRCX Franklin Gold & PrMt A   47.3    33.20   33.72
21 INIVX Van Eck Intl Inv GoldA   46.9    16.34   17.02
 5 EKWBX Evergreen Prec Mtls B.   45.1    53.93   55.84
26 HUI   Amex Gold Bugs Index .   44.3   329.35  345.04
 9 GOLDX GAMCO Gold AAA       .   40.4    25.19   26.20
15 INPMX Riversource Prec MtlsA   38.4    14.96   15.05
23 GDX   Mkt V Gold Miners ETF.   38.0    37.89   39.94
 6 FSAGX Fidelity Select Gold .   37.1    33.96   35.86
17 TGLDX Tocqueville Gold     .   36.9    52.13   52.90
 1 ASA   ASA Ltd              .   35.4    64.56   64.61
19 UNWPX US Global World Pr Mns   34.8    28.34   29.41
 3 BGEIX Amer Cent Global Gold.   25.3    18.26   19.07
27 XAU   Phlx Gold/Silver Index   19.6   135.95  148.71
25 SLV   iShrs Silver Trust ETF   14.1   123.50  128.02
18 USERX US Global Gold Shares.   11.6    14.99   15.53
 4 SGDAX DWS Gold & Prec Mtls A    4.1    21.00   21.38
 7 SGGDX First Eagle Gold A   .   -4.1    20.28   21.38
14 PMPIX Profund Prec Mtls Ultr  -23.0    38.03   43.35

All funds but two are above their 52 week average and holding recent gains well.

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
22 VGPMX Vanguard Prec Metals .    3613
 6 FSAGX Fidelity Select Gold .    1417
 3 BGEIX Amer Cent Global Gold.    1001
 8 FKRCX Franklin Gold & PrMt A     963
19 UNWPX US Global World Pr Mns     948
17 TGLDX Tocqueville Gold     .     857
 7 SGGDX First Eagle Gold A   .     703
13 OPGSX Oppenheimer Gold A   .     687
20 USAGX USAA Precious Metals .     656
 1 ASA   ASA Ltd              .     649
21 INIVX Van Eck Intl Inv GoldA     434
 9 GOLDX GAMCO Gold AAA       .     401
23 GDX   Mkt V Gold Miners ETF.     343
18 USERX US Global Gold Shares.     229
16 RYPMX Rydex Prec Metals    .     205
14 PMPIX Profund Prec Mtls Ultr     181
 4 SGDAX DWS Gold & Prec Mtls A     175
 2 FGLDX AIM Gold & Pr Mtls Inv     156
11 MIDSX Midas Fund           .     155
10 LEXMX ING Precious Metals A.     140
12 OCMGX OCM Gold             .     111
15 INPMX Riversource Prec MtlsA      88
 5 EKWBX Evergreen Prec Mtls B.      76

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
25 SLV   iShrs Silver Trust ETF     1.33
11 MIDSX Midas Fund           .     1.22
27 XAU   Phlx Gold/Silver Index     1.11
 4 SGDAX DWS Gold & Prec Mtls A     1.04
16 RYPMX Rydex Prec Metals    .     0.98
18 USERX US Global Gold Shares.     0.98
17 TGLDX Tocqueville Gold     .     0.95
 7 SGGDX First Eagle Gold A   .     0.95
20 USAGX USAA Precious Metals .     0.94
10 LEXMX ING Precious Metals A.     0.87
19 UNWPX US Global World Pr Mns     0.81
26 HUI   Amex Gold Bugs Index .     0.79
22 VGPMX Vanguard Prec Metals .     0.78
13 OPGSX Oppenheimer Gold A   .     0.76
23 GDX   Mkt V Gold Miners ETF.     0.75
 2 FGLDX AIM Gold & Pr Mtls Inv     0.74
 8 FKRCX Franklin Gold & PrMt A     0.73
15 INPMX Riversource Prec MtlsA     0.69
 1 ASA   ASA Ltd              .     0.67
21 INIVX Van Eck Intl Inv GoldA     0.62
12 OCMGX OCM Gold             .     0.62
 9 GOLDX GAMCO Gold AAA       .     0.60
 3 BGEIX Amer Cent Global Gold.     0.59
 5 EKWBX Evergreen Prec Mtls B.     0.59
24 GLD   StrtTrks Gold Shrs ETF     0.53
 6 FSAGX Fidelity Select Gold .     0.50

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.

July was a great month until the 25th, when the bottom fell out of most markets. All of this coincided with the dollar rallying. After touching below 80.10 and appearing to be on its way to new depths below 80, the dollar rebounded enough to convince investors that the trend was changing. The Dow turned over, gold fell, foreign markets stopped rising, and all at the same time, as if a switch was thrown. It is apparent to me that large sums of money move in and out of the market almost instantly, indicating that large institutions or hedge funds are controlling the major market directions.

Prior to the 25th, many gold analysts were happily jumping on the breakaway train, expecting gold to quickly test 700 and beyond. However, they failed to point out that the gold market was over bought and peaking. A correction was in order, and the same could be said for the Dow, which had set several new highs on the way to 14,000. While many stocks were hitting 52 week highs, many were making new lows, indicating that the climbing market was limited in strength. When it turned, it really turned.

In the past recent market corrections, gold stocks were also driven down, bringing XAU and HUI down, too. Generally, bullion cannot sustain a rally by itself and subsequently gives up most recent profits. This process is eventually reversed to the upside again if fundamentals are bullish, which they are for both gold and silver.

The dollar had been falling for so long, some expected a rally and were ready for it. In fact, so many were ready, other markets quickly reversed to the downside. Since I expected a dollar rally to be caused by rising interest rates, the failure of the long bond yield to rise tells me that the moving of money into bonds pushed the yield down temporarily. Therefore, if the yield stays low, I expect the dollar to give up gains and gold to restart its rally.

The credit market is beginning to be restricted by itself, which will continue to seriously affect all markets, including gold. Most mortgage companies are now heavily restricting customers.

Looking at three month graphs of most stocks, including gold stocks, shows that almost all fell out of bed over the last week of July. For many stocks, the graph is a dramatic dive, giving up all recent gains as if they had been held up only by speculative fever.

In the case of gold and silver, fundamentals are still very bullish, and precious metals equities will soon recognize that the fundamental direction is up. Right now they are too tied to the other equity markets and must separate soon so they can join the metals in the next move. Once the negative effect caused by this market correction on bullion wears off, watch out, 700.