Meanwhile, the Dow Industrials Index rallied to test its all-time high, punching up through 11730 before falling back to 11679. The NASDAQ was up 3.33%, closing at 2258, but was far from its high. Consumer confidence increased for the month as the price of oil dropped below 60 but recovered back to 62.91. Natural gas surged 21% to 5.62 in one week, but down 10% for the month. Average gasoline prices responded to overproduction by falling from 3.10 to 2.50, further increasing public optimism.

The dollar started at 85.05 and gained slowly to 86.03, trading in a narrow range. Gold did not seem to be affected by the dollar's slow climb, and there seems to be a divergence from the normal inverse relationship. In fact, the dollar rallied even with interest rates declining. The long bond yield rose slightly from 4.88% to 4.95% before sliding to 4.69% and closing at 4.76%. Not much movement as the dollar and gold did not pay much attention. Something unusual is driving and depressing gold prices. One guess is that gold is once again following movements in oil prices.

Revised figures for the 2nd quarter GDP showed a gain of 2.6%, not as good as originally thought. The low numbers are certainly being affected by the slowdown in the housing market, where inventories continue to get larger. The lower interest rates and decrease in mortgage rates should provide some support under the slide, but the trend is set, and the economy will eventually respond to a lack of consumer cash.

As we approach the upcoming election, expect economic news to be good and the dollar to steady. The Dow is looking good, reaching for a new high, but the NASDAQ is shaky.

fn            Fund                1 mo   3 mo  12 mo   2 yr   3 yr
22 VGPMX Vanguard Prec Metals .  -6.2   -6.7   25.3   86.7  113.39
 6 FSAGX Fidelity Select Gold .  -6.6   -3.0   30.3   58.2   62.33
 7 SGGDX First Eagle Gold A   .  -7.7   -4.3   28.2   39.3   57.64
17 TGLDX Tocqueville Gold     .  -7.8   -5.9   30.3   51.3   70.46
 1 ASA   ASA Ltd              .  -8.4  -10.7   23.5   37.2   35.03
 8 FKRCX Franklin Gold & PrMt A  -8.7   -5.9   31.4   60.2   77.84
16 SGDAX Scudder Gold & Pr Mt A  -9.1   -6.3   28.4   33.3   56.30
21 INIVX Van Eck Intl Inv GoldA  -9.5   -4.2   35.9   57.3   76.55
20 USAGX USAA Precious Metals .  -9.6   -4.8   42.9   69.7   88.99
 2 FGLDX AIM Gold & Pr Mtls Inv  -9.9   -4.6   26.7   46.9   76.20
13 OPGSX Oppenheimer Gold A   .  -9.9   -3.8   37.6   62.7   83.62
 5 EKWBX Evergreen Prec Mtls B. -10.0   -5.9   34.3   59.0   90.53
 3 BGEIX Amer Cent Global Gold. -10.2   -7.5   28.4   42.2   60.23
 9 GOLDX Gabelli Gold         . -10.5   -7.9   28.7   47.7   60.87
10 LEXMX ING Precious Metals A. -10.7   -6.7   27.8   47.7   63.11
18 USERX US Global Gold Shares. -10.8   -7.0   54.4   84.3  122.07
19 UNWPX US Global World Pr Mns -10.8   -7.2   49.1   84.6  145.41
12 OCMGX OCM Gold             . -11.2   -8.1   34.0   43.7   57.85
 4 INPMX Riversource Prec MtlsA -11.7   -6.0   31.9   43.9   59.57
15 RYPMX Rydex Prec Metals    . -11.7   -7.3   18.8   19.4   38.16
11 MIDSX Midas Fund           . -11.9   -6.9   50.2   83.0  103.78
14 PMPIX Profund Prec Mtls Ultr -18.2  -18.7    7.2   21.7   34.77

Vanguard (VGPMX) and Fidelity (FSAGX) held the top spot due to losing less than the others. That's due to their more conservative portfolios, partially due to their size.

All funds had a bad month, and Profund (PMPIX) had a leveraged bad month. All are still maintaining a 52 week advance, but Profund is getting close. If gold reverses, PMPIX will recover quickly.

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 September 29.

				      nav
fn          Fund                  pos  08/31/06  09/29/06
 6 FSAGX Fidelity Select Gold .   41.9   35.77   33.41
18 USERX US Global Gold Shares.   39.7   16.14   14.40
21 INIVX Van Eck Intl Inv GoldA   38.4   17.07   15.44
22 VGPMX Vanguard Prec Metals .   38.1   29.02   27.21
19 UNWPX US Global World Pr Mns   37.3   30.02   26.78
20 USAGX USAA Precious Metals .   37.0   28.47   25.75
 5 EKWBX Evergreen Prec Mtls B.   32.5   55.67   50.10
 7 SGGDX First Eagle Gold A   .   30.9   24.65   22.74
11 MIDSX Midas Fund           .   30.4    4.28    3.77
13 OPGSX Oppenheimer Gold A   .   29.7   31.12   28.03
 2 FGLDX AIM Gold & Pr Mtls Inv   29.6    6.05    5.45
 8 FKRCX Franklin Gold & PrMt A   28.0   31.83   29.06
 4 INPMX Riversource Prec MtlsA   26.8   15.69   13.86
16 SGDAX Scudder Gold & Pr Mt A   26.2   24.02   21.84
17 TGLDX Tocqueville Gold     .   24.5   51.28   47.27
12 OCMGX OCM Gold             .   24.3   19.19   17.05
 9 GOLDX Gabelli Gold         .   22.7   26.73   23.91
10 LEXMX ING Precious Metals A.   22.4   11.17    9.97
 3 BGEIX Amer Cent Global Gold.   19.4   19.17   17.22
15 RYPMX Rydex Prec Metals    .   17.4   55.68   49.18
 1 ASA   ASA Ltd              .    1.2   62.23   57.00
14 PMPIX Profund Prec Mtls Ultr  -15.3   46.33   37.91

Fidelity (FSAGX) deserves credit for holding most of its summer gains, still well above its 12 month average. Profunds (PMPIX) has slipped below its 52 week 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 .   3392
 6 FSAGX Fidelity Select Gold .   1225
 3 BGEIX Amer Cent Global Gold.    904
 7 SGGDX First Eagle Gold A   .    815
17 TGLDX Tocqueville Gold     .    786
 8 FKRCX Franklin Gold & PrMt A    764
19 UNWPX US Global World Pr Mns    657
 1 ASA   ASA Ltd              .    551
20 USAGX USAA Precious Metals .    526
13 OPGSX Oppenheimer Gold A   .    492
 9 GOLDX Gabelli Gold         .    387
21 INIVX Van Eck Intl Inv GoldA    330
15 RYPMX Rydex Prec Metals    .    186
16 SGDAX Scudder Gold & Pr Mt A    177
18 USERX US Global Gold Shares.    150
 2 FGLDX AIM Gold & Pr Mtls Inv    142
10 LEXMX ING Precious Metals A.    118
11 MIDSX Midas Fund           .    107
12 OCMGX OCM Gold             .    101
14 PMPIX Profund Prec Mtls Ultr     92
 4 INPMX Riversource Prec MtlsA     81
 5 EKWBX Evergreen Prec Mtls B.     67

Even after losing a bunch of asset value, Vanguard is still the largest by far. The total value of assets lost this month from gold funds was in excess of a $1 billion. The gold and silver ETFs have been sucking up money designated for gold investments, and funds are for gold equity investments.

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           .   1.48
14 PMPIX Profund Prec Mtls Ultr   1.47
18 USERX US Global Gold Shares.   1.43
19 UNWPX US Global World Pr Mns   1.20
20 USAGX USAA Precious Metals .   1.17
22 VGPMX Vanguard Prec Metals .   1.12
 5 EKWBX Evergreen Prec Mtls B.   1.10
10 LEXMX ING Precious Metals A.   1.09
 3 BGEIX Amer Cent Global Gold.   1.09
 8 FKRCX Franklin Gold & PrMt A   1.07
 9 GOLDX Gabelli Gold         .   1.07
21 INIVX Van Eck Intl Inv GoldA   1.07
12 OCMGX OCM Gold             .   1.05
 4 INPMX Riversource Prec MtlsA   1.02
13 OPGSX Oppenheimer Gold A   .   1.01
 2 FGLDX AIM Gold & Pr Mtls Inv   0.94 
 1 ASA   ASA Ltd              .   0.92
15 RYPMX Rydex Prec Metals    .   0.92
17 TGLDX Tocqueville Gold     .   0.89
16 SGDAX Scudder Gold & Pr Mt A   0.83
 6 FSAGX Fidelity Select Gold .   0.79
 7 SGGDX First Eagle Gold A   .   0.76

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 portfolio management policies of different funds. 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 more amplified returns in an up market.

Except for Profunds (PMPIX), the difference between funds this month was not much. All lost asset value, to be expected as gold plunged.

With the correction of all metals from their highs, gold dropped under 600 and could go further. However, current conditions were oversold at the end of the month enough to create a rally. How far this rally carries takes a good guess. XAU has given up almost all of its gains for 2006, but gold is still up $80. Somehow gold shares are not matching gold. Or gold is too optimistic.

Analysts' opinions about the near future for gold and gold funds is mixed from a cataclysmic tumble to 480 to a big rally which started this week. Since gold and silver have been following the commodities boom and correction, we should keep an eye on the price of oil, which is still sliding. Rallying slightly from 59.50, oil shows no serious sign of taking off without a natural disaster or man-made disruption of oil supplies. If you believe that oil will go back to $40 and gasoline will go back to 1.80, then gold funds may not be for you.

The situation in the Middle East has settled down to a status quo not dramatic enough to make an effect upon the daily news. The markets have almost forgotten a war is going on. We are being setup for another event which will create new disruptions, soon.

There are a few analysts that think that central banks are getting even with gold bugs with some recent under the table selling. The long term fundamentals for gold and currencies have not changed. All currencies are being inflated.

XAU has been dropping much more than the price of gold would suggest, but one reason is the poor performance of Newmont (NEM), which is falling like a brick.

The dollar has found a trading range between 84.6 and 86.1 but gold is not paying much attention. In the long run, however, gold cannot sustain a rally if the dollar goes much higher.