| August 24, 2005
Spot gold closed the month of July at $429.80, down $5.70
or 1.31 percent. Equity markets, as measured by the S&P
500 Index were up, gaining 3.60 percent. The U.S. trade-weighted
dollar continued its rebound for the fifth consecutive month,
climbing 0.29 percent.
Strengths
• A gold bullion sale by the Portuguese
Central Bank didn’t hurt the price of the commodity.
Buyers seem more comfortable with these price levels, and
the worst seems to be over.
Weaknesses
• July was a rocky month for the gold
stocks in general. Earnings reports weren’t positive,
as higher costs hampered results.
• Up to this point, 2005 can be tagged
as a bull market for commodities. Gold seems to be the outlier
for this category, lagging all other commodities, as it
has fallen 2 percent for the year.
Opportunities
• Looking forward, August is a very
good month historically, as the prices for the Christmas
buying season start to effect bullion prices.
• Revaluation of the Chinese Renminbi
gives that currency more purchasing power, making gold a
cheaper purchase for the Chinese consumer.
Threats
• With the likelihood of the Federal Reserve possibly
reaching its interest rate equilibrium level with the next
hike in rates, the Dollar will lose an important catalyst
to push it higher.
• Rising interest rates are a significant
threat to equity valuations.
• With the looming threat of a long
strike in the Gold Mining sector in South Africa, many mining
companies will see their costs significantly increased.
We may see some of these companies be forced out of business,
creating opportunities for the rest of the world’s
producers.
• Lack of earning growth for the gold
sector despite higher prices.
For the month of July, the Philadelphia Gold
& Silver Index fell 2.42 percent.
*** Returns are quotes as price return
in the home currencies of each index. Ex. S&P/TSX Canadian
Gold Capped Sector Index is calculated using Canadian Dollars.
Please consider carefully the fund’s
investment objectives, risks, charges and expenses. For
this and other important information, obtain a fund prospectus
by visiting www.usfunds.com or by calling 1-800-US-FUNDS
(1-800-873-8637). Read it carefully before investing. Distributed
by U.S. Global Brokerage, Inc.
The S&P 500 Stock Index is a widely recognized
capitalization-weighted index of 500 common stock prices
in U.S. companies.
The Philadelphia Stock Exchange Gold and Silver
Index (XAU) is a capitalization-weighted index that includes
the leading companies involved in the mining of gold and
silver.
The S&P/TSX Canadian Gold Capped Sector
Index is a modified capitalization-weighted index, whose
equity weights are capped 25 percent and index constituents
are derived from a subset stock pool of S&P/TSX Composite
Index stocks.
The FTSE/JSE African Gold Mining Index is
a market capitalization weighted index.
Holdings in the Gold Shares and World Precious
Minerals Fund as a percentage of net assets as of June 30,
2005:
Gold Fields Mineral Services: (0.00%)
Gold funds may be susceptible to adverse
economic, political or regulatory developments due to concentrating
in a single theme. The price of gold is subject to substantial
price fluctuations over short periods of time and may be
affected by unpredicted international monetary and political
policies. We suggest investing no more than 3% to 5% of
your portfolio in gold or gold stocks.
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