For the month, the price of gold climbed from 429.9 to over 446 before slipping back to close at 433.8. Silver was not as friendly, dropping from 7.23 to 6.78. XAU gained from 90.76 to over 100 before coming back to 95.77. All gold funds rallied as gold stocks began to get more respect.

July set another record for sales of new homes, but the average price of new homes declined. In addition, the inventory of homes for sale are at an all time high. This increasing inventory may have brought about the decline in housing stocks over the past two months, but the insiders know better, and they're selling. The housing booms in Britain and Australia have definitely peaked and have turned down.

The U.S. trade deficit set another record in June of over $58.8 billion, and the U.S. credit market continued to expand. The Federal Reserve increased the short term rate to 3.50%, but longer term rates declined. The long bond yield dropped from 4.47% to 4.26%, not far above its multi-year low of 4.19% set in May. Shorter term treasury yields are slightly lower.

GDP grew at 3.3%, but Oil jumped to over $70 even before Katrina. The euro reached 1.2486 as the dollar dropped to 87.54 from 89.34, and demand for US Treasuries decreased so much that foreigners have learned to sell.

Orders for durable goods decreased in July, reflecting decreased future demand for manufacturing. Meanwhile, China continues to search for oil reserves to buy, putting upward pressure on international market prices.

Although suicide bombings continue in an attempt to disrupt the entire country, Iraqi representatives reached enough agreement to produce a draft constitution. There is no end in sight unless all of the many groups agree on how a government is to be structured, and one that can produce peace between the many groups.

fn       Fund                     1 mo   3 mo  12 mo   2 yr   3 yr
14 PMPIX Profund Prec Mtls Ultr    7.9   16.3   -0.8   -1.1   36.6
18 USERX US Global Gold Shares.    6.7   19.4   19.4   31.4   84.7
11 MIDSX Midas Fund           .    6.6   14.8   12.9   18.0   61.8
20 USAGX USAA Precious Metals .    6.1   15.9    9.5   20.3   76.3
19 UNWPX US Global World Pr Mns    6.1   17.6   25.2   55.3  121.8
10 LEXMX ING Precious Metals A.    5.9   14.8    8.2    8.7   42.2
 8 FKRCX Franklin Gold & PrMt A    5.6   14.1    8.2   17.0   60.3
22 VGPMX Vanguard Prec Metals .    5.5   19.5   37.5   58.9  113.3
21 INIVX Van Eck Intl Inv GoldA    5.5   14.2    8.5   13.4   53.2
 9 GOLDX Gabelli Gold         .    5.4   12.6    4.1    8.5   54.0
 6 FSAGX Fidelity Select Gold .    5.4   14.0    9.3    5.7   34.5
 2 FGLDX AIM Gold & Pr Mtls Inv    5.3   14.2   10.2   23.8   59.2
 3 BGEIX Amer Cent Global Gold.    5.1   12.4    3.8    7.7   47.6
13 OPGSX Oppenheimer Gold A   .    5.1   12.7    9.6   22.3   62.0
 5 EKWBX Evergreen Prec Mtls B.    5.0   13.5    8.9   23.8   74.2
 4 INPMX AXP Precious Metals A.    4.5   12.5    3.9    9.1   50.7
12 OCMGX OCM Gold             .    4.5   10.2    0.8    3.7   42.0
16 SGDAX Scudder Gold & Pr Mt A    4.4   10.9   -0.5   15.5   85.4
17 TGLDX Tocqueville Gold     .    4.2   10.2    8.7   17.2   65.7
15 RYPMX Rydex Prec Metals    .    4.2   10.2   -5.3   -2.0   24.7
 1 ASA   ASA Ltd              .    3.1    6.5   -4.3  -12.0   31.1
 7 SGGDX First Eagle Gold A   .    1.7    5.4   -0.3    8.2   44.9

August demonstrated a slow and steady optimism growing for gold stocks and funds, as they responded to gold's July gains. XAU reached as high as 100 before slipping back, and all funds gained. Gold held over 430 for the entire month. All but five funds are positive for the last 12 months.

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 August 31, 2005.

                                          nav     nav
fn        Fund                    pos   7/31/05 8/31/05
22 VGPMX Vanguard Prec Metals .   92.1   18.93   19.97
18 USERX US Global Gold Shares.   51.8    7.73    8.25
19 UNWPX US Global World Pr Mns   51.3   15.59   16.54
 8 FKRCX Franklin Gold & PrMt A   48.6   17.81   18.81
20 USAGX USAA Precious Metals .   47.7   14.85   15.76
 2 FGLDX AIM Gold & Pr Mtls Inv   43.9    3.58    3.77
13 OPGSX Oppenheimer Gold A   .   38.1   17.98   18.90
11 MIDSX Midas Fund           .   34.4    1.97    2.10
10 LEXMX ING Precious Metals A.   27.0    6.29    6.66
 5 EKWBX Evergreen Prec Mtls B.   24.5   29.95   31.46
17 TGLDX Tocqueville Gold     .   22.5   31.70   33.03
 6 FSAGX Fidelity Select Gold .   19.3   24.18   25.48
 9 GOLDX Gabelli Gold         .   15.5   14.96   15.77
21 INIVX Van Eck Intl Inv GoldA    8.2    9.16    9.66
 3 BGEIX Amer Cent Global Gold.    5.7   10.90   11.46
 4 INPMX AXP Precious Metals A.    2.6    8.71    9.10
12 OCMGX OCM Gold             .    0.7   10.53   11.00
14 PMPIX Profund Prec Mtls Ultr   -1.5   25.84   27.87
15 RYPMX Rydex Prec Metals    .   -7.7   34.07   35.49
 1 ASA   ASA Ltd              .   -8.2   37.62   38.80
16 SGDAX Scudder Gold & Pr Mt A   -8.8   15.24   15.91
 7 SGGDX First Eagle Gold A   .  -10.1   15.45   15.72

Vanguard (VGPMX) set a new 52 week high and slid back slightly, but still leads the pack by far. Most are above 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 August) 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 .   1458
 6 FSAGX Fidelity Select Gold .    657
 3 BGEIX Amer Cent Global Gold.    620
 7 SGGDX First Eagle Gold A   .    506
17 TGLDX Tocqueville Gold     .    502
 8 FKRCX Franklin Gold & PrMt A    467
 1 ASA   ASA Ltd              .    371
20 USAGX USAA Precious Metals .    319
19 UNWPX US Global World Pr Mns    281
 9 GOLDX Gabelli Gold         .    252
13 OPGSX Oppenheimer Gold A   .    244
21 INIVX Van Eck Intl Inv GoldA    240
15 RYPMX Rydex Prec Metals    .    127
16 SGDAX Scudder Gold & Pr Mt A    119
 2 FGLDX AIM Gold & Pr Mtls Inv    103
10 LEXMX ING Precious Metals A.     82
12 OCMGX OCM Gold             .     70
18 USERX US Global Gold Shares.     68
14 PMPIX Profund Prec Mtls Ultr     63
 4 INPMX AXP Precious Metals A.     62
11 MIDSX Midas Fund           .     52
 5 EKWBX Evergreen Prec Mtls B.     40

Vanguard Precious Metals(VGPMX) continues to be the largest gold fund and has increased its size significantly this year 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.

Profund Precious Metals (PMPIX) led the group this month as gold rallied. All gold funds advanced as gold stocks did well. The volatility of gold stocks' daily movement is increasing, as several jump or dive each day. Since February, gold has moved within a trading range from 446 to 415, cycling up and down four times. Most of this coincides with movements in the dollar, but not all. Investment managers have a difficult time picking the right stocks to invest in, at the right time. Some managers do well, some don't.

Vanguard Precious Metals (VGPMX) maintains its hold as the overall yearly and 52 week leader as it has outpaced the others by far. It also may be reflected in the growth in VGPMX assets under management, now well over a $billion

Katrina's physical destruction is being calculated from many angles. However, positioned at this point in our economy, it may also turn out to be a financial nuke, bad enough to fracture the fragile state of the economy. Predictions will vary, but with the damage to Gulf oil production and transport facilities, combined with refinery and pipeline shutdowns, the increase in the cost of gasoline and shortages will certainly put a damper on the near term economy. Delta Airlines and Northwest Airlines were already on the edge of bankruptcy, and higher jet fuel prices will certainly add to their expenses. This economic drag, combined with the creation of more unfunded government spending, most necessary but some politically expedient, will probably be large enough to put downward pressure on the dollar. In fact, the initial response in the dollar market pushed the dollar down on the last day of August and the first of September. That has already put some upward pressure on metals.

The housing market is once again showing sign of peaking, but sales are still booming. If the boom actually does come to a halt, expect a contraction in spending, and a slowing of the economy no longer supported by mortgage financing. That means a sliding dollar, and probably a rise in gold. The rapid decline in housing stocks may be a sign of things to come.

The behavior of interest rates is indicating that we may be approaching a deflationary environment, not inflationary. The interest rate curve is flattening, meaning that the yield on the long term and near term bonds are close to the same. This week the long bond yield dropped to 4.26%, but the ten year yield is only 4.10%, indicating that there is relatively little expense added for the twenty years difference. Markets don't expect rates to go up in the future, and that's essentially expecting deflation, and no inflation. That is not good for gold.

Today's gold-to-oil ratio is historically ridiculously low, meaning that oil should come down or gold should go up. Oil has very little chance of decreasing much, so the inference is that gold is set up for a significant advance in the not-so-distant future.

On the other hand, the last few times that the gold-to-silver ratio has been this high, caused by high gold and low silver, it was usually a sign of bad things to come in both markets. In addition, the price of gold stocks-to-gold ratio has also been a good signal of an upward turn in the gold market, and it is not giving a signal because gold is already moving up.

A consensus of these signals is that oil will return to $50 or below, gold will come down to the 400-430 range or below, silver will level off around 6.80, and gold stocks will revive after crashing due to gold's slide. Somewhere in there interest rates will bottom, which might be the result of a recession brought on by a housing bubble collapse. Then the ultimate gold rally will launch as interest rates advance and the dollar drops like a brick. This is all assuming that Katrina doesn't have much effect. Upon revaluation, these factors are too mixed to be certain of much at all, except that that dollar will eventually weaken, but maybe not right away.

Good Luck.