The dollar fell from 80.90 to 80.24 before a rally took it to 81.92, but then slid to 80.74. Gold prices generally moved in the opposite direction and ended the month going up as the dollar resumed its downward trend. The long bond yield edged up slightly from 4.92% to 5.01% before sliding to 4.83%.

Consumer sales increased in July, and the Dow closed at 13,357, up over 1% for the month, but it experienced high volatility with daily gains or losses of over 100 points several times. Varying reports of the housing market created gyrations daily, but the trend is still down as sales slow. The existing inventory of houses for sale is the highest in 16 years, and home prices dropped 3%.

The subprime mortgage crisis has shut down many sources of investment capital which has been negative for the markets, but the Federal Reserve promised to stay involved to assist in maintaining liquidity, and even lowered the discount rate for bank borrowing. A lowering of the federal funds rate from 5.25% is expected by September 18, but is probably already included in the market. In addition, by the end of the month President Bush promised to help homeowners having trouble making payments.

Oil dropped from 79 to 74 and natural gas prices were down 11% as refinery inventories filled up. Most other commodities gained.

In China, gold production has increased markedly, but not enough to really affect world prices. On the other hand, gold trading in China and the Far East is increasing, which will affect markets. During August, the capitalization of Chinese stock markets exceeded Japan's. Much of this increase is in the Hong Kong stock market, which is now open to Chinese investors.

fn            Fund                1 mo   3 mo  12 mo   2 yr   3 yr
24 GLD   StrtTrks Gold Shrs ETF    1.1    1.5    6.8   55.3       
10 LEXMX ING Precious Metals A.   -1.8   -2.5   13.1  101.3  107.1
22 VGPMX Vanguard Prec Metals .   -2.4   -5.2   19.8   90.0  159.8
20 USAGX USAA Precious Metals .   -3.7   -3.7    6.6  105.9  113.9
 7 SGGDX First Eagle Gold A   .   -4.2   -1.5   -1.7   60.6   59.1
 2 FGLDX AIM Gold & Pr Mtls Inv   -5.0   -2.6    3.0   74.0   82.0
 5 EKWBX Evergreen Prec Mtls B.   -5.0   -3.3    0.3   86.8   95.7
 6 FSAGX Fidelity Select Gold .   -5.0   -0.8    3.0   80.6   90.2
26 HUI   Amex Gold Bugs Index .   -5.2   -2.1   -6.2   66.3   57.8
 8 FKRCX Franklin Gold & PrMt A   -5.2   -4.7    6.0   90.6  100.5
27 XAU   Phlx Gold/Silver Index   -5.3    0.7   -4.1   55.1   48.5
23 GDX   Mkt V Gold Miners ETF.   -5.7   -3.9   -7.2   	        
16 RYPMX Rydex Prec Metals    .   -5.8   -3.1    0.0   63.4   49.6
13 OPGSX Oppenheimer Gold A   .   -5.9   -4.4   14.2  107.7  127.3
 9 GOLDX GAMCO Gold AAA       .   -5.9   -3.1    1.6   83.1   82.5
 4 SGDAX DWS Gold & Prec Mtls A   -5.9   -5.3    0.9   70.5   64.3
25 SLV   iShrs Silver Trust ETF   -6.3  -10.3   -7.0   	         
 3 BGEIX Amer Cent Global Gold.   -6.6   -6.3   -7.1   63.4   61.3
15 INPMX Riversource Prec MtlsA   -7.0   -7.2    1.6   83.0   82.0
 1 ASA   ASA Ltd              .   -7.2   -8.3   -1.5   67.7   62.6
18 USERX US Global Gold Shares.   -7.4   -6.3  -10.9   88.1  110.5
21 INIVX Van Eck Intl Inv GoldA   -7.5   -4.1    3.5   92.9   99.0
17 TGLDX Tocqueville Gold     .   -7.8   -8.2    4.9   78.4   86.8
14 PMPIX Profund Prec Mtls Ultr   -8.1    2.6   -9.2   62.9   49.8
12 OCMGX OCM Gold             .   -8.3   -3.8   -0.5   82.0   75.7
19 UNWPX US Global World Pr Mns  -11.4   -8.8   -1.8   98.7  134.6
11 MIDSX Midas Fund           .  -12.2   -8.8    2.3  122.3  135.5

All gold funds had a down month as bullion (GLD) gained, and Vanguard Precious Metals(VGPMX) and ING Precious Metals (LEXMX) remained at the top of the list.

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 August:

				           nav
fn          Fund                  pos   07/31/07 08/31/07
24 GLD   StrtTrks Gold Shrs ETF   66.5    65.79   66.52
10 LEXMX ING Precious Metals A.   44.7    12.16   11.94
22 VGPMX Vanguard Prec Metals .   32.2    32.43   31.64
13 OPGSX Oppenheimer Gold A   .   30.2    32.70   30.78
20 USAGX USAA Precious Metals .   19.9    28.88   27.80
 2 FGLDX AIM Gold & Pr Mtls Inv   17.8     6.41    6.09
 8 FKRCX Franklin Gold & PrMt A   15.1    33.72   31.98
 9 GOLDX GAMCO Gold AAA       .   12.5    26.20   24.66
27 XAU   Phlx Gold/Silver Index   11.8   148.71  140.77
21 INIVX Van Eck Intl Inv GoldA   11.6    17.02   15.75
 5 EKWBX Evergreen Prec Mtls B.    8.9    55.84   53.04
16 RYPMX Rydex Prec Metals    .    8.0    59.09   55.68
26 HUI   Amex Gold Bugs Index .    7.8   345.04  327.24
 6 FSAGX Fidelity Select Gold .    7.1    35.86   34.06
15 INPMX Riversource Prec MtlsA    6.0    15.05   13.99
14 PMPIX Profund Prec Mtls Ultr    5.4    43.35   39.85
17 TGLDX Tocqueville Gold     .    4.1    52.90   48.79
 7 SGGDX First Eagle Gold A   .    4.0    21.38   20.49
 4 SGDAX DWS Gold & Prec Mtls A    2.9    21.38   20.11
12 OCMGX OCM Gold             .    1.9    18.98   17.41
23 GDX   Mkt V Gold Miners ETF.   -3.9    39.94   37.65
19 UNWPX US Global World Pr Mns   -6.0    29.41   26.07
11 MIDSX Midas Fund           .   -9.4     4.99    4.38
 1 ASA   ASA Ltd              .  -14.4    64.61   59.97
 3 BGEIX Amer Cent Global Gold.  -24.4    19.07   17.81
25 SLV   iShrs Silver Trust ETF  -29.9   128.02  119.98
18 USERX US Global Gold Shares.  -43.4    15.53   14.38

Most funds are still above their 52 week average and holding recent gains, but this month was a real test of support areas.

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 .   3525
 6 FSAGX Fidelity Select Gold .   1346
 3 BGEIX Amer Cent Global Gold.    935
 8 FKRCX Franklin Gold & PrMt A    913
19 UNWPX US Global World Pr Mns    840
17 TGLDX Tocqueville Gold     .    790
 7 SGGDX First Eagle Gold A   .    674
13 OPGSX Oppenheimer Gold A   .    647
20 USAGX USAA Precious Metals .    632
 1 ASA   ASA Ltd              .    602
21 INIVX Van Eck Intl Inv GoldA    401
 9 GOLDX GAMCO Gold AAA       .    377
23 GDX   Mkt V Gold Miners ETF.    324
18 USERX US Global Gold Shares.    212
16 RYPMX Rydex Prec Metals    .    193
14 PMPIX Profund Prec Mtls Ultr    167
 4 SGDAX DWS Gold & Prec Mtls A    164
 2 FGLDX AIM Gold & Pr Mtls Inv    148
10 LEXMX ING Precious Metals A.    138
11 MIDSX Midas Fund           .    136
12 OCMGX OCM Gold             .    102
15 INPMX Riversource Prec MtlsA     82
 5 EKWBX Evergreen Prec Mtls B.     72

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
11 MIDSX Midas Fund           .    1.52
 4 SGDAX DWS Gold & Prec Mtls A    1.23
14 PMPIX Profund Prec Mtls Ultr    1.14
16 RYPMX Rydex Prec Metals    .    1.11
25 SLV   iShrs Silver Trust ETF    1.10
10 LEXMX ING Precious Metals A.    1.09
22 VGPMX Vanguard Prec Metals .    1.03
27 XAU   Phlx Gold/Silver Index    0.99
26 HUI   Amex Gold Bugs Index .    0.99
13 OPGSX Oppenheimer Gold A   .    0.95
23 GDX   Mkt V Gold Miners ETF.    0.94
15 INPMX Riversource Prec MtlsA    0.93
 2 FGLDX AIM Gold & Pr Mtls Inv    0.92
19 UNWPX US Global World Pr Mns    0.91
 8 FKRCX Franklin Gold & PrMt A    0.91
21 INIVX Van Eck Intl Inv GoldA    0.90
20 USAGX USAA Precious Metals .    0.87
 9 GOLDX GAMCO Gold AAA       .    0.87
 1 ASA   ASA Ltd              .    0.87
 7 SGGDX First Eagle Gold A   .    0.86
17 TGLDX Tocqueville Gold     .    0.84
12 OCMGX OCM Gold             .    0.82
 3 BGEIX Amer Cent Global Gold.    0.80
18 USERX US Global Gold Shares.    0.74
 5 EKWBX Evergreen Prec Mtls B.    0.73
 6 FSAGX Fidelity Select Gold .    0.70
24 GLD   StrtTrks Gold Shrs ETF    0.66

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.

Gold equities seem to be following the stock market, meaning that GDX, HUI, and XAU are all in timing with movement in the NASDAQ, and then gold. Gold is sometimes inversely following the dollar, but not always.

If the stock market falls, gold equities also fall, even if gold bullion rises. Since the stocks don't rise, gold's rise will be limited. Only when the gold stocks break away from the Dow and NASDAQ will gold be free to take gold funds to new records. Until then gold funds are tied on a short leash. GDX is a good example because it moves within a minute with QQQQ (NASDAQ), matching rally with rally and dip with dip. The main market with the big money does not think that gold funds and gold are independent of market liquidity, so therefore they aren't, yet. The correlations are inconsistent, but signs are still bullish for gold, and therefore gold stocks, eventually. Friday's gold move was in concert with a jump in the Dow of 116 points and a slipping dollar at 80.74. Perhaps the dollar has to go below 80 to seriously get the message out. When that happens gold should break its leash.

President Bush's comment on the last day of the month intended to assure homeowners that the FHA would start to guarantee some of the risky loans and avoid some foreclosures. Chairman Bernanke said the the Federal Reserve would take action to provide liquidity, not bail out bad loans. What does this really mean? We will probably see a drop in the Fed funds rate to 5.00% since the market has already put the long bond yield at 4.83%. The FHA will make some announcements about loans, but during the next six months billion of dollars in loans will be raised to rates that the Fed can do nothing about. We are looking at short term fixes for a long term problem. Both will harm the dollar and push gold higher. It will be a problem at least through next summer. I do not see how the Dow can keep going up unless money comes from outside the U.S. or the Federal Reserve drops rates below 5% and crashes the dollar.

Silver, as measured by SLV, has dropped to unusually low prices, but seems to be recovering. Gold is setting up a strong support area, preparing for a big move to test 700 and above.