In Brazil, the new administration made no bold new statements to affect the currency markets, and there has been no rush to buy dollars as some expected. Whatever damage expected from new policies has apparently already been discounted in the market, and probably won't disturb the gold market in the near future.

The threat of war on Iraq has taken a back seat for the near future as shown by the price of oil falling to $27.22, down 10% in one month. President Bush, rhetoric aside, has been willing to hear Congressional and United Nation opinions without launching an invasion. In addition to this delay, I can't see any military action being taken before January.

The surge in the Dow in October has taken money from bonds and pushed the long bond yield to 5.00% from September's 4.67% value. As mortgage rates jumped back over 6%, there were signs of the housing market cresting. Sales continued to set records, but in many cities the number of for-sale ads increased and remained on the market longer.

The dollar slid for most of the last week, closing at 106.65 and 122.6 yen/dollar. The euro reached .989 as if it were making another run at unity. A consensus of metals analysts feel that the dollar will only get weaker and there are increasing upward biases for gold. Somehow equities are not getting the message.

The U.S. announced another large trade deficit for September, adding to the basic fundamental weakness of the dollar. The annual trade deficit has reached, 4.7% of GDP, the worst of all developed economies. In contrast to this are record trade surpluses by both Argentina and Brazil due to collapsing import markets.

For the month of October, the price of gold fell from 323.9 to as low as 309 before ending the month at 318.0. Silver matched that activity by falling from 4.53 to as low as 4.27 before rebounding back to 4.49. The XAU index, representing gold equities and most gold funds, fell from 69.7 to 59.8 (-14%) before recovering somewhat to 63.4. A few equities such as Agnico Eagle Mines (AEM) dropped almost 25% in one month. By the last week, however, there were signs of recovery.

fn         Fund                   1 mo   3 mo  12 mo   2 yr   3 yr
21 VGPMX Vanguard Prec Metals .   -1.8    7.6   19.9   53.0   31.4
 7 FKRCX Franklin Gold & PrM A.   -5.3    7.0   22.4   44.0   19.3
 1 ASA   ASA Ltd              .   -7.2   12.4   63.2  123.7   66.0
15 SCGDX Scudder Gold & Pr Mt S   -7.6    9.4   36.7   75.9   38.8
14 RYPMX Rydex Prec Metals    .   -7.7    5.3   22.7   66.5   	
16 TGLDX Tocqueville Gold     .   -7.7   10.0   56.2  103.0   57.7
 6 SGGDX First Eagle SGen Gold.   -8.0    7.4   68.7  134.5   63.2
19 USAGX USAA Gold            .   -8.2    8.2   46.1  108.0   49.5
 4 EKWBX Evergreen Prec Mtls B.   -8.3    7.4   39.1   95.8   43.0
13 OPGSX Oppenheimer Gold A   .   -8.6    7.3   21.3   51.7   12.5
12 MNTGX Monterey OCM Gold    .   -9.1    7.7   54.7  130.7   53.2
10 FGLDX INVESCO Gold         .   -9.2    5.1   34.5   69.9   23.5
 9 LEXMX ING Pilgrim Pr Mtls A.   -9.5    7.6   44.3   93.8   31.7
 3 INPMX AXP Precious Metals A.  -10.0    4.3   32.5   57.1   22.0
 8 GOLDX Gabelli Gold         .  -10.1    7.5   51.0  107.9   51.7
 5 FSAGX Fidelity Select Gold .  -10.5    8.2   40.3   85.8   31.5
 2 BGEIX Amer Cent Global Gold.  -10.5    7.0   41.3  111.3   31.8
20 INIVX Van Eck Intl Inv GoldA  -11.5    5.1   53.0  100.2   31.6
11 MIDSX Midas Fund           .  -12.3   11.3   45.5   58.0   -7.2
18 UNWPX US Global World PrecM.  -13.3   -0.5   41.6   56.0  -13.5
17 USERX US Global Gold Shrs  .  -13.8    2.6   44.9   69.5    4.2

While the price of gold advanced over $10 in September, it managed to lose half of that in October. Gold's intraday dip to as low as 309 indicates that the precious metals market still has basic economic weaknesses which will not go away unless conditions warrant a push above 330. Until then, it looks like gold equities are still considered second rate even after a year of solid gains.

For most of October, equities ignored positive gold price activity. In the past, equities were usually in charge, pulling gold back down, but one of these days, equities will be wrong and gold fund values will rebound with a vengeance to match an increasing gold price. At that point you will want to be fully invested.

 fn     Fund                        pos  nav(10-31)
 6 SGGDX First Eagle SGen Gold.   32.9   10.41
12 MNTGX Monterey OCM Gold    .   31.4    7.52
16 TGLDX Tocqueville Gold     .   23.4   20.46
 1 ASA   ASA Ltd              .    8.1   29.95
11 MIDSX Midas Fund           .    6.0    1.28
 8 GOLDX Gabelli Gold         .    4.5    9.48
19 USAGX USAA Gold            .    4.3    9.09
15 SCGDX Scudder Gold & Pr Mt S    3.6    9.34
20 INIVX Van Eck Intl Inv GoldA    3.6    7.85
 5 FSAGX Fidelity Select Gold .    3.5   19.42
 9 LEXMX ING Pilgrim Pr Mtls A.    2.0    4.40
 2 BGEIX Amer Cent Global Gold.   -4.1    7.32
10 FGLDX INVESCO Gold         .   -5.6    2.26
 4 EKWBX Evergreen Prec Mtls B.   -5.7   16.76
21 VGPMX Vanguard Prec Metals .  -16.7    9.96
14 RYPMX Rydex Prec Metals    .  -19.5   25.66
 7 FKRCX Franklin Gold & PrM A.  -24.5   11.00
 3 INPMX AXP Precious Metals A.  -25.7    6.77
13 OPGSX Oppenheimer Gold A   .  -27.4   11.68
17 USERX US Global Gold Shrs  .  -29.3    4.00
18 UNWPX US Global World PrecM.  -37.1    7.46

First Eagle SoGen Gold (SGGDX) and Monterey OCM Gold (MNTGX) continue to lead the group with Tocqueville (TGLDX) close behind. These numbers demonstrate a fund's ability to retain previous advances without falling out of bed when gold has a bad month or two. It's obvious which funds can't hold onto their gains and which can.

 fn    fund                       assets
21 VGPMX Vanguard Prec Metals .   597
 5 FSAGX Fidelity Select Gold .   498
 2 BGEIX Amer Cent Global Gold.   314
 1 ASA   ASA Ltd              .   287
 7 FKRCX Franklin Gold & PrM A.   224
20 INIVX Van Eck Intl Inv GoldA   162
19 USAGX USAA Gold            .   116
15 SCGDX Scudder Gold & Pr Mt S   110
13 OPGSX Oppenheimer Gold A   .   109
18 UNWPX US Global World PrecM.   109
10 FGLDX INVESCO Gold         .   100
 9 LEXMX ING Pilgrim Pr Mtls A.    93
 8 GOLDX Gabelli Gold         .    92
16 TGLDX Tocqueville Gold     .    82
 6 SGGDX First Eagle SGen Gold.    73
17 USERX US Global Gold Shrs  .    66
14 RYPMX Rydex Prec Metals    .    63
 3 INPMX AXP Precious Metals A.    41
11 MIDSX Midas Fund           .    39
12 MNTGX Monterey OCM Gold    .    34
 4 EKWBX Evergreen Prec Mtls B.    22

Except for the last month, these numbers have been increasing across the board as fresh investment capital has been coming back into the gold sector. However, even with a very positive two years for every fund, the total amount of new capital has been relatively small. A change in stock market investment philosophy by a small percentage of investors would give this market a tremendous boost.

fn      fund                      beta
18 UNWPX US Global World PrecM.   1.67
17 USERX US Global Gold Shrs  .   1.61
 1 ASA   ASA Ltd              .   1.47
20 INIVX Van Eck Intl Inv GoldA   1.28
 6 SGGDX First Eagle SGen Gold.   1.25
 8 GOLDX Gabelli Gold         .   1.22
16 TGLDX Tocqueville Gold     .   1.11
 3 INPMX AXP Precious Metals A.   1.11
 2 BGEIX Amer Cent Global Gold.   1.11
 9 LEXMX ING Pilgrim Pr Mtls A.   1.06
19 USAGX USAA Gold            .   1.06
12 MNTGX Monterey OCM Gold    .   1.03
11 MIDSX Midas Fund           .   1.02
 4 EKWBX Evergreen Prec Mtls B.   1.00
10 FGLDX INVESCO Gold         .   0.91
15 SCGDX Scudder Gold & Pr Mt S   0.86
 5 FSAGX Fidelity Select Gold .   0.86
14 RYPMX Rydex Prec Metals    .   0.83
13 OPGSX Oppenheimer Gold A   .   0.67
21 VGPMX Vanguard Prec Metals .   0.65
 7 FKRCX Franklin Gold & PrM A.   0.64

The beta for each fund changes monthly 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. The nav price movement is a direct reflection of the types of equities selected by the fund manager. If you can't stand the thought of big ups and downs, don't buy a fund with a high beta.

The month was almost void of news which could affect gold any more than it already has, and as a result, gold equities didn't seem to have much demand, relatively speaking. While gold was a little weak, giving up $5, it ended the month recovering with a positive uptrend. At some time soon, equities will get the message and funds will regain their upward direction. That is, unless gold falls below 310. That, I believe, is unlikely unless we see some really unexpected news which I cannot imagine.

If the Fed lowers the short term rate next week, then mortgage rates might dip again. However, I cannot see rates getting back under the 5.60% area reached in early October. That means that the refinancing boom is ending, and creating a shortage of new funds for investing into the markets. That will become obvious in November and December if the Dow drops back under 8000.

A test of investor attitudes will be when gold approaches $330. A good sign would be an increase in equity trading volume and increased gold fund buying, which would be immediately reflected by rising fund values. Keep tuned.

There is still some belief by the gold market, that powers-that-be will not allow gold to punch through the 330 level because it will reflect a bad sign for currencies, particularly the U.S. dollar. At some point, market forces will rule, and gold will soar.

Check this opinion from 321gold.com

Although mostly bullish, www.321gold.com provides an excellent source of many opinions on gold.

The currencies in Brazil and Argentina seem to have seen all of the problems and reached equilibrium for now. That means little effect on the dollar and gold prices. On the other hand, if things start to look good, some Brazil citizens may trade their dollars back into their own currency, weakening the dollar and adding an upward push to gold.

When comparing trade surpluses and deficits, we must recognize that a deficit means we have the money to spend, and a surplus such as Argentina may mean that their economy can't afford to buy overseas products due to a lousy crashed currency. This argument presented by half-way analysts disregards an obsessive continuation of deficits which cannot last forever, and can lead to a lousy crashed currency. Argentina and Brazil citizens who were smart enough to convert assets to dollars or gold at the early stages of their currency crash certainly benefited.

Relative to the current price of oil, a historical relationship of one ounce of gold per 15 barrels of oil would equate to a gold price of over $408 for gold.