The dollar index closed under 85 from last month's 87.34 as the euro climbed to 1.2798 and the yen 105.8 yen/dollar. The dollar has now fallen for five consecutive weeks. The Dow dipped below the 10,000 mark but recovered well to close at 10,027, partially assisted by the price of oil backing down from the $55 area to close at 51.78. Interest rates remained low as the long bond yield settled at 4.79%. The 30 year mortgage rate averaged a low 5.64% as the housing market continued to climb in most markets. New home sales increased 7% over last year's September. Consumer confidence slipped in October, but probably not home buyers.

Inflation, however, is not dead. Construction metals such as copper and tin resumed their price climbs late in the month as the commodity index is now up 36% for the year. Natural gas, for example, has soared this year and heating bills will give homeowners a jolt if they heat with gas (or oil).

The war in Iraq continues and was one of the top issues in the election rhetoric, which has probably undermined the dollar during the last month. There is worldwide uncertainty over who the next president will be. Once the election results are known, which may be after some time in court, the dollar may strengthen, pushing gold back down.

There is increasing talk about an American exchange traded gold fund (ETF) to go along with the many other ETF's available in other sectors. This would provide another investment/trading vehicle for investing in gold assets.

fn       Fund                     1 mo   3 mo  12 mo   2 yr   3 yr
 5 FSAGX Fidelity Select Gold .    2.6   20.0   -2.4   50.4  114.9
 4 EKWBX Evergreen Prec Mtls B.    2.5   19.8    6.5   97.7  177.9
11 MIDSX Midas Fund           .    2.4   19.9    3.4   74.0  153.1
 2 BGEIX Amer Cent Global Gold.    2.4   20.6    4.7   72.6  144.5
20 INIVX Van Eck Intl Inv GoldA    2.3   21.6    4.6   78.0  172.3
18 UNWPX US Global World PrecM.    2.3   23.2   11.2  139.5  239.0
19 USAGX USAA Gold            .    2.3   16.2    0.6   91.5  184.7
 8 GOLDX Gabelli Gold         .    2.1   19.3    0.5   79.6  173.7
 7 FKRCX Franklin Gold & PrM A.    2.0   16.9    6.5   71.8  115.8
21 VGPMX Vanguard Prec Metals .    1.9   15.1   11.0   79.5  123.9
16 TGLDX Tocqueville Gold     .    1.9   18.8    2.1   80.8  183.5
 9 LEXMX ING Precious Metals  .    1.6   17.8    2.2   61.1  134.0
13 OPGSX Oppenheimer Gold A   .    1.5   18.9    3.9   80.6  129.5
15 SGDAX Scudder Gold & Pr M A.    1.5   20.5    0.2  124.2  214.3
 3 INPMX AXP Precious Metals A.    1.4   17.2   -2.2   80.3  138.9
17 USERX US Global Gold Shrs  .    1.3   22.2    5.6  101.9  192.7
 6 SGGDX First Eagle Gold     .    0.7   16.6    8.6   67.9  186.6
12 OCMGX Monterey OCM Gold    .    0.5   18.8   -0.8   67.8  159.6
10 FGLDX INVESCO Gold & Pr Mtl.    0.0   15.7    7.9   71.9  131.3
14 RYPMX Rydex Prec Metals    .   -1.2   17.9    6.7   58.6   96.0
 1 ASA   ASA Ltd              .   -2.5   19.2   -1.9   45.6  137.6

Fidelity Select Gold(FSAGX) led the pack for the first time in years with Evergreen Precious Metals(EKWBX) close behind. ASA Limited (ASA) was hurt by appreciation of the rand currency. Otherwise, gold funds had another good month. The 12 month statistics are now competing with last fall's major advance and don't look so good, but the last four months have been excellent.

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 October 29, 2004.

fn        Fund                    pos     nav
21 VGPMX Vanguard Prec Metals .   80.4   16.29
 6 SGGDX First Eagle Gold     .   65.3   16.83
10 FGLDX INVESCO Gold & Pr Mtl.   59.3    3.75
18 UNWPX US Global World PrecM.   58.1   16.04
 4 EKWBX Evergreen Prec Mtls B.   48.1   32.35
16 TGLDX Tocqueville Gold     .   47.7   34.84
 7 FKRCX Franklin Gold & PrM A.   46.6   18.63
11 MIDSX Midas Fund           .   45.9    2.11
13 OPGSX Oppenheimer Gold A   .   42.7   19.74
 2 BGEIX Amer Cent Global Gold.   40.7   12.40
20 INIVX Van Eck Intl Inv GoldA   36.3   11.04
15 SGDAX Scudder Gold & Pr M A.   31.5   19.53
 8 GOLDX Gabelli Gold         .   30.3   16.87
 5 FSAGX Fidelity Select Gold .   29.6   27.39
 1 ASA   ASA Ltd              .   24.7   41.71
19 USAGX USAA Gold            .   21.4   15.79
14 RYPMX Rydex Prec Metals    .   20.8   40.70
17 USERX US Global Gold Shrs  .   19.6    8.05
 3 INPMX AXP Precious Metals A.   15.4   10.97
 9 LEXMX ING Precious Metals  .   12.8    7.09
12 OCMGX Monterey OCM Gold    .   10.4   12.34

This indicator shows that most funds have regained losses from last spring and all are well above their 52 week averages. They are all still down for 2004.

The following list shows the approximate size of funds as measured in total assets under management in $millions. (As of the end of October) 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 .    726
 2 BGEIX Amer Cent Global Gold.    721
21 VGPMX Vanguard Prec Metals .    689
16 TGLDX Tocqueville Gold     .    532
 6 SGGDX First Eagle Gold     .    486
 7 FKRCX Franklin Gold & PrM A.    459
 1 ASA   ASA Ltd              .    399
 8 GOLDX Gabelli Gold         .    295
19 USAGX USAA Gold            .    294
18 UNWPX US Global World PrecM.    270
20 INIVX Van Eck Intl Inv GoldA    270
13 OPGSX Oppenheimer Gold A   .    239
14 RYPMX Rydex Prec Metals    .    170
15 SGDAX Scudder Gold & Pr M A.    139
10 FGLDX INVESCO Gold & Pr Mtl.    113
 9 LEXMX ING Precious Metals  .     92
12 OCMGX Monterey OCM Gold    .     76
 3 INPMX AXP Precious Metals A.     70
17 USERX US Global Gold Shrs  .     70
11 MIDSX Midas Fund           .     58
 4 EKWBX Evergreen Prec Mtls B.     45

The big three funds, Fidelity(FSAGX), American Century(BGEIX), and Vanguard(VGPMX) are being chased by Tocqueville Gold(TGLDX), a recent newcomer.

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 and October. This recent four month advance, coinciding with gold's attempt to break through 430, may 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 the dollar at a new low, interest rates still very low, and the euro and yen at new highs, statistics would say that these extremes are due for corrections. Laws of economics say that savings will increase when interest rates rise and, under current conditions, probably not until then. Therefore when support for the dollar weakens enough so new government treasury auctions are having difficulties being covered by foreign cash, domestic savings will be necessary and interest rates will rise, probably much more than we can immediately imagine.

During October, the price of gold slowly advanced from 418 to 428 with one dip to 413. Downward corrections had difficulties and were short lived. The gold market demonstrated that it wanted to go up but strained when it reached over the 425+ area. It seems to expect a correction from a stronger dollar at any moment, specifically after the election with a resulting correction in gold prices.

However, the long term trend for gold is still definitely up and any pause in this trend will tend to be temporary. There is no easy way to get rid of the trade deficit and its international currency effects. A lower dollar is inevitable with either President Bush or President Kerry and that means higher gold.