In the same three days, the long bond weakened, pushing the yield up to 4.89% and the average 30 year mortgage rate up slightly to 5.72%. These numbers are still below August's numbers. The lower rates have continued to give the housing and borrowing binge another boost, fueling U.S. consumer buying essential to the world economy. The latest trade deficit of $50 billion is an indication of this binge, which won't slow down until the dollar declines enough to cause a difference in consumer attitude.

The Dow closed the month at 10,080 after spending some time below the 10,000 mark. In general, the economy was apparently making positive strides in the face of less obvious fundamental problems. Political spin for the coming election seems to be shaping all economic news which the American public is allowed to see from the major media.

In Iraq, the death toll of U.S. soldiers continues as a waste, or as the price of freedom, depending upon which side you are on. In any case, while the war is still the number one item mentioned in the political discussions, segments of economic reality will come to the forefront before election day, and the recent rise in gold may be the beginning as smart money is starting to take a more assertive position.

The price of oil closed the month at an all time high of 49.64 due to the unremitting demand from all corners of the globe coinciding with distribution restrictions caused by four hurricanes and a rebellion in Nigeria, not to mention a few pipeline explosions in Iraq. Oil is destined to go higher.

The July trade deficit came in at over $50 billion but had little notice from the financial press. The dollar slipped to 87.34 from last month's 88.40 and the euro climbed from 1.2002 to 1.2435.

Fannie Mae was recently caught fudging its financial reporting to give its corporate officers better bonuses. Since this borders on the criminal, it may eventually have a negative effect upon the housing market by restricting future mortgage transactions supported by Fannie Mae.

fn       Fund                     1 mo   3 mo  12 mo   2 yr   3 yr
18 UNWPX US Global World PrecM.   15.5   14.6   33.0  103.1  227.1
17 USERX US Global Gold Shrs  .   14.4   13.6   20.5   71.9  184.9
15 SGDAX Scudder Gold & Pr M A.   11.1   13.9   18.6  104.1  195.1
11 MIDSX Midas Fund           .   10.8   13.8   11.3   48.9  136.4
14 RYPMX Rydex Prec Metals    .   10.7   17.7   16.5   48.3   92.7
 9 LEXMX ING Precious Metals  .   10.6   12.2   11.1   43.6  127.4
20 INIVX Van Eck Intl Inv GoldA   10.6   15.8   12.5   53.9  156.1
 4 EKWBX Evergreen Prec Mtls B.   10.4   14.6   21.1   77.0  167.0
13 OPGSX Oppenheimer Gold A   .   10.1   15.1   18.2   62.6  122.1
 3 INPMX AXP Precious Metals A.   10.0   10.5   10.9   60.1  123.4
 2 BGEIX Amer Cent Global Gold.    9.7   15.2   11.8   50.8  134.7
12 OCMGX Monterey OCM Gold    .    9.2   15.1    9.8   51.8  152.1
 1 ASA   ASA Ltd              .    9.1   19.1    3.0   38.6  149.4
 5 FSAGX Fidelity Select Gold .    9.1   15.1    4.2   31.2  105.4
21 VGPMX Vanguard Prec Metals .    8.9   14.0   19.9   73.0  119.4
 8 GOLDX Gabelli Gold         .    8.7   15.0    9.9   58.1  166.0
16 TGLDX Tocqueville Gold     .    8.5   13.7   13.2   63.8  182.4
10 FGLDX INVESCO Gold & Pr Mtl.    8.4   14.0   19.9   56.0  125.9
 7 FKRCX Franklin Gold & PrM A.    7.8   13.3   13.9   59.4  105.1
 6 SGGDX First Eagle Gold     .    7.2   16.4   14.5   53.4  179.8
19 USAGX USAA Gold            .    7.0    9.7   12.2   72.0  172.7

U.S. Global led the way with two funds, World Precious Minerals(UNWPX), and Gold Shares(USERX), which to be fair, have similar portfolios. Over the two year period, UNWPX and Scudder Gold(SGDAX) are well ahead of the rest.

The three month leader is ASA Ltd (NYSE-ASA) with its heavily loaded portfolio of South African mines, and a serious gold advance has always had a strong showing by ASA.

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 September 30, 2004.

fn        Fund                    pos     nav
21 VGPMX Vanguard Prec Metals .   68.0   15.98
 6 SGGDX First Eagle Gold     .   60.8   16.72
10 FGLDX INVESCO Gold & Pr Mtl.   59.3    3.75
18 UNWPX US Global World PrecM.   48.1   15.68
 1 ASA   ASA Ltd              .   39.7   42.78
16 TGLDX Tocqueville Gold     .   35.4   34.20
13 OPGSX Oppenheimer Gold A   .   35.4   19.44
 7 FKRCX Franklin Gold & PrM A.   33.9   18.26
 4 EKWBX Evergreen Prec Mtls B.   33.4   31.57
11 MIDSX Midas Fund           .   32.4    2.06
 2 BGEIX Amer Cent Global Gold.   27.6   12.11
14 RYPMX Rydex Prec Metals    .   27.1   41.20
15 SGDAX Scudder Gold & Pr M A.   24.7   19.25
20 INIVX Van Eck Intl Inv GoldA   23.2   10.79
 8 GOLDX Gabelli Gold         .   19.1   16.53
 5 FSAGX Fidelity Select Gold .   17.0   26.69
17 USERX US Global Gold Shrs  .   13.4    7.95
19 USAGX USAA Gold            .   10.7   15.44
 3 INPMX AXP Precious Metals A.    9.3   10.82
12 OCMGX Monterey OCM Gold    .    8.0   12.28
 9 LEXMX ING Precious Metals  .    3.7    6.98

This indicator shows that many funds have regained their recent losses and all are above their 52 week averages.

Vanguard(VGPMX), First Eagle(SGGDX) and INVESCO Gold(FGLDX), while being on the low end of the monthly gains, are still among the best at retaining gains over the past twelve months, which is an indication of prudent stock selection in my book. Some funds have not been so fortunate.

The following list shows the approximate size of funds as measured in total assets under management in $millions. (As of the end of September) 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 .   708
 2 BGEIX Amer Cent Global Gold.   704
21 VGPMX Vanguard Prec Metals .   676
16 TGLDX Tocqueville Gold     .   523
 6 SGGDX First Eagle Gold     .   483
 7 FKRCX Franklin Gold & PrM A.   450
 1 ASA   ASA Ltd              .   409
 8 GOLDX Gabelli Gold         .   289
19 USAGX USAA Gold            .   287
18 UNWPX US Global World PrecM.   264
20 INIVX Van Eck Intl Inv GoldA   264
13 OPGSX Oppenheimer Gold A   .   235
14 RYPMX Rydex Prec Metals    .   172
15 SGDAX Scudder Gold & Pr M A.   137
10 FGLDX INVESCO Gold & Pr Mtl.   113
 9 LEXMX ING Precious Metals  .    90
12 OCMGX Monterey OCM Gold    .    76
 3 INPMX AXP Precious Metals A.    69
17 USERX US Global Gold Shrs  .    69
11 MIDSX Midas Fund           .    57
 4 EKWBX Evergreen Prec Mtls B.    44

American Century Global Gold (BGEIX) is getting close to taking over from Vanguard Precious Metals(VGPMX) and Fidelity Select Gold(FSAGX) as the largest fund in assets, primarily due to its portfolio gaining more over the past few months.

While these numbers have increased over the past year, a total of several hundreds of millions of dollars in assets were lost in April, partially recovered during the summer, and significantly increased in September. This recent advance, while dramatic, may tend to bring more investors back into gold 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.

fn        fund                    beta
18 UNWPX US Global World PrecM.   1.31
 3 INPMX AXP Precious Metals A.   1.22
13 OPGSX Oppenheimer Gold A   .   1.20
15 SGDAX Scudder Gold & Pr M A.   1.20
 5 FSAGX Fidelity Select Gold .   1.16
17 USERX US Global Gold Shrs  .   1.16
19 USAGX USAA Gold            .   1.15
12 OCMGX Monterey OCM Gold    .   1.13
14 RYPMX Rydex Prec Metals    .   1.13
 2 BGEIX Amer Cent Global Gold.   1.05
11 MIDSX Midas Fund           .   1.05
 8 GOLDX Gabelli Gold         .   1.03
20 INIVX Van Eck Intl Inv GoldA   1.00
 1 ASA   ASA Ltd              .   0.94
 9 LEXMX ING Precious Metals  .   0.94
10 FGLDX INVESCO Gold & Pr Mtl.   0.94
 4 EKWBX Evergreen Prec Mtls B.   0.94
 7 FKRCX Franklin Gold & PrM A.   0.89
21 VGPMX Vanguard Prec Metals .   0.87
16 TGLDX Tocqueville Gold     .   0.83
 6 SGGDX First Eagle Gold     .   0.79

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.

With all this good news, the advance in gold from 410 to 418 was accomplished in the last three days of the month and pushed the market into an overbought condition. Although the immediate continuation of this move is in doubt for the short term, its quickness and intensity indicates that something may be brewing that is not obvious in the news. Perhaps it has something to do with the G7 governments meeting with the IMF and World Bank this week.

Over the long term the preponderance of evidence is pointing toward a weaker dollar and higher gold prices. With gold stocks and funds mostly still under January values and gold now positive, it's time for stocks to move up just to match gold's progress. If gold should punch higher with this rally, say past 430, we will be off to the races.

The manipulation of financial reporting numbers by Fannie Mae could be an important brake on mortgage lending, at least until it is straightened out. Otherwise, the housing boom continues to create more credit for the credit economy.