Most of the move was caused by a slide in the dollar, which could turn into a fall or plunge if support does not develop soon. By dropping to 77.71, it set an all time low for the index and looked like a trend with little resistance. The U.S. stock market continued it's rampage, approaching 14,000 and looking like it wanted a currency collapse so stock prices would keep going up. Worldwide liquidity is certainly having an effect on both markets, and dollars are being converted into euros and yen as the euro reached $1.42.

In mid-month, the Federal Reserve committed to a lower interest rate policy in order to rescue an economy threatened by a real estate mortgage loan crisis. Dropping the federal funds rate by .50% to 4.75% signalled a desire to put the short term economy ahead of long term currency considerations, and the gold market noticed.

Inflation hawks saw an increasing money supply, now around 12% annually for the dollar, as a precursor of inflation. Worldwide, markets rallied and gold got on its horse for the long ride up. We are entering the second phase after several years of slow gain.

Meanwhile home foreclosures jumped in August as new mortgage rates came into effect for many sub prime mortgage holders, and mortgage companies began to roll over. New home sales dropped to a seven year low. Unsold homes inventory is huge.

Oil jumped to over 82 to post another all time high, but then fell back slightly. The gold bullion holdings of GLD, the largest gold exchange traded fund (ETF) is around 580 tons, supposedly stored in London. They now have more bullion than most countries.

Base metals continue to rise in price with lower inventories and continuing demand. China's growth is not slowing, maintaining a steady demand for most commodities. Inflation is here, but not being measured and reported to the ordinary citizen.

fn            Fund                1 mo   3 mo  12 mo   2 yr   3 yr
14 PMPIX Profund Prec Mtls Ultr   32.2   38.5   46.7   57.3   78.5
 1 ASA   ASA Ltd              .   24.7   15.9   34.1   67.3   85.8
 6 FSAGX Fidelity Select Gold .   24.6   24.9   37.3   78.9  117.2
11 MIDSX Midas Fund           .   23.7   12.9   43.8  115.9  163.1
 9 GOLDX GAMCO Gold AAA       .   23.1   20.5   39.8   80.0  106.6
18 USERX US Global Gold Shares.   22.9   17.9   22.8   89.6  126.3
 5 EKWBX Evergreen Prec Mtls B.   22.5   20.4   36.5   83.4  117.0
13 OPGSX Oppenheimer Gold A   .   22.4   18.5   55.2  113.6  152.6
 8 FKRCX Franklin Gold & PrMt A   22.3   17.8   42.0   86.6  127.5
21 INIVX Van Eck Intl Inv GoldA   22.3   17.9   39.9   90.2  120.1
 3 BGEIX Amer Cent Global Gold.   21.7   18.7   25.8   61.6   78.9
12 OCMGX OCM Gold             .   21.5   18.3   36.1   82.4   95.6
19 UNWPX US Global World Pr Mns   21.4   11.6   33.6   99.2  146.5
 4 SGDAX DWS Gold & Prec Mtls A   21.3   16.2   34.7   72.9   79.5
17 TGLDX Tocqueville Gold     .   21.3   13.5   38.0   79.9  108.8
20 USAGX USAA Precious Metals .   21.0   18.5   42.5  103.8  141.9
23 GDX   Mkt V Gold Miners ETF.   20.5   19.7   27.2  	         
 7 SGGDX First Eagle Gold A   .   20.4   21.6   28.2   64.3   78.6
26 HUI   Amex Gold Bugs Index .   20.1   19.3   30.8   60.3   69.8
27 XAU   Phlx Gold/Silver Index   19.9   24.1   31.4   49.4   65.5
16 RYPMX Rydex Prec Metals    .   18.3   17.8   33.9   59.1   59.8
 2 FGLDX AIM Gold & Pr Mtls Inv   18.1   16.5   35.0   71.1   98.3
15 INPMX Riversource Prec MtlsA   17.7   10.0   35.3   78.4   94.7
22 VGPMX Vanguard Prec Metals .   14.3    7.2   46.1   83.0  172.7
25 SLV   iShrs Silver Trust ETF   13.8   10.6   19.2  	         
10 LEXMX ING Precious Metals A.   10.7    7.6   40.3   79.3  107.3
24 GLD   StrtTrks Gold Shrs ETF   10.5   14.4   23.6   57.4       

Profunds Precious Metals Ultra (PMPIX) surged to the top using leverage and took over the top spot in just two months. ASA jumped partly because of South African stocks benefiting from the fall in the dollar as compared to the rand. It has become more difficult to pick the top fund since they are changing places with each other every month.

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 September:

				           nav
fn          Fund                  pos   08/31/07  09/28/07
 5 EKWBX Evergreen Prec Mtls B.  100.0    53.04   64.95
 8 FKRCX Franklin Gold & PrMt A  100.0    31.98   39.11
 9 GOLDX GAMCO Gold AAA       .  100.0    24.66   30.36
12 OCMGX OCM Gold             .  100.0    17.41   21.16
13 OPGSX Oppenheimer Gold A   .  100.0    30.78   37.68
20 USAGX USAA Precious Metals .  100.0    27.80   33.63
21 INIVX Van Eck Intl Inv GoldA  100.0    15.75   19.26
22 VGPMX Vanguard Prec Metals .  100.0    31.64   36.17
17 TGLDX Tocqueville Gold     .  100.0    48.79   59.18
 6 FSAGX Fidelity Select Gold .  100.0    34.06   42.43
 3 BGEIX Amer Cent Global Gold.   99.3    17.81   21.67
11 MIDSX Midas Fund           .   99.0     4.38    5.42
24 GLD   StrtTrks Gold Shrs ETF   96.8    66.52   73.51
10 LEXMX ING Precious Metals A.   96.4    11.94   13.22
18 USERX US Global Gold Shares.   95.9    14.38   17.68
 1 ASA   ASA Ltd              .   95.8    59.97   74.80
 2 FGLDX AIM Gold & Pr Mtls Inv   95.5     6.09    7.19
23 GDX   Mkt V Gold Miners ETF.   91.0    37.65   45.35
19 UNWPX US Global World Pr Mns   90.6    26.07   31.64
16 RYPMX Rydex Prec Metals    .   89.8    55.68   65.85
 7 SGGDX First Eagle Gold A   .   89.7    20.49   24.66
14 PMPIX Profund Prec Mtls Ultr   87.6    39.85   52.67
15 INPMX Riversource Prec MtlsA   86.1    13.99   16.46
26 HUI   Amex Gold Bugs Index .   85.4   327.24  392.97
27 XAU   Phlx Gold/Silver Index   84.1   140.77  168.75
 4 SGDAX DWS Gold & Prec Mtls A   73.0    20.11   24.40
25 SLV   iShrs Silver Trust ETF   49.7   119.98  136.55

With this surge in gold, funds have all approached their 52 week high, and ten closed the month at a new high. The change in nav between these two columns is evidence of major improvements in gold funds in just one month.

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
22 VGPMX Vanguard Prec Metals .    4029
 6 FSAGX Fidelity Select Gold .    1677
 3 BGEIX Amer Cent Global Gold.    1138
 8 FKRCX Franklin Gold & PrMt A    1117
19 UNWPX US Global World Pr Mns    1019
17 TGLDX Tocqueville Gold     .     958
 7 SGGDX First Eagle Gold A   .     811
13 OPGSX Oppenheimer Gold A   .     792
20 USAGX USAA Precious Metals .     764
 1 ASA   ASA Ltd              .     751
21 INIVX Van Eck Intl Inv GoldA     491
 9 GOLDX GAMCO Gold AAA       .     465
23 GDX   Mkt V Gold Miners ETF.     390
18 USERX US Global Gold Shares.     261
16 RYPMX Rydex Prec Metals    .     229
14 PMPIX Profund Prec Mtls Ultr     220
 4 SGDAX DWS Gold & Prec Mtls A     199
 2 FGLDX AIM Gold & Pr Mtls Inv     175
11 MIDSX Midas Fund           .     168
10 LEXMX ING Precious Metals A.     152
12 OCMGX OCM Gold             .     123
15 INPMX Riversource Prec MtlsA      97
 5 EKWBX Evergreen Prec Mtls B.      88

We now have five funds over a billion dollars in assets, with TGLDX approaching.

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    1.52
11 MIDSX Midas Fund           .    1.37
27 XAU   Phlx Gold/Silver Index    1.19
26 HUI   Amex Gold Bugs Index .    1.16
16 RYPMX Rydex Prec Metals    .    1.15
 4 SGDAX DWS Gold & Prec Mtls A    1.11
23 GDX   Mkt V Gold Miners ETF.    1.05
10 LEXMX ING Precious Metals A.    1.02
 2 FGLDX AIM Gold & Pr Mtls Inv    1.02
25 SLV   iShrs Silver Trust ETF    0.99
13 OPGSX Oppenheimer Gold A   .    0.98
 8 FKRCX Franklin Gold & PrMt A    0.98
20 USAGX USAA Precious Metals .    0.95
22 VGPMX Vanguard Prec Metals .    0.93
 9 GOLDX GAMCO Gold AAA       .    0.92
21 INIVX Van Eck Intl Inv GoldA    0.88
 6 FSAGX Fidelity Select Gold .    0.88
 3 BGEIX Amer Cent Global Gold.    0.88
 5 EKWBX Evergreen Prec Mtls B.    0.87
 1 ASA   ASA Ltd              .    0.86
15 INPMX Riversource Prec MtlsA    0.83
19 UNWPX US Global World Pr Mns    0.82
18 USERX US Global Gold Shares.    0.82
12 OCMGX OCM Gold             .    0.81
24 GLD   StrtTrks Gold Shrs ETF    0.79
17 TGLDX Tocqueville Gold     .    0.78
 7 SGGDX First Eagle Gold A   .    0.77

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.

Profund (PMPIX) jumped ahead of everyone else this month but had to come from near the bottom. Still, PMPIX is now the top fund over the last 12 months.

Nine more, ASA(ASA), Fidelity(FSAGX), Midas(MIDSX), GAMCO(GOLDX), US Global Gold Shares(USERX), Evergreen(EKWBX), Oppenheimer(OPGSX), Franklin(FKRCX), and Van Eck(INIVX) all gained more than 20% in September.

The market reaction to the Fed's decrease in the discount rate was that of traders working the market, not economic minds considering what it really meant behind closed doors. With the worst in the housing market yet to come, and with no decrease in the trade deficit in sight, the economy weakens at a rapid rate and only drastic policy changes can rescue it.

Trading mentality saw it as a chance to surf the wave to new highs, keeping in the back of their minds that there may be a time to bail out. When that comes, expect thousands of traders to exit at once. All equities, including gold funds will come down. The current charts look a lot like 1987, when a falling dollar crashed the market. Gold funds will also have a bad month.

Europe is not happy with the rise in the Euro, which threatens their exports to North America, and a rally in the dollar from these lows would puncture the gold rally.

In the eyes of the FED, rescuing the economy overruled any consideration of the long term inflation sure to come with such a large infusion of new cash into the economy. Gold responded instantly.

The fact that the long bond yield jumped to 4.94% illustrated the bond market's belief that lower rates are not assured.

The rise in T-bill yields indicates selling of U.S. debt, a result of the belief that the dollar is destined to drop further.