 U.S.
Global Investors' Gold Shares Fund and World Precious Minerals
Fund
Portfolio
Commentaries
July 2005
Spot gold closed the month
of June at $435.50, up $18.25 or 4.37 percent. Equity markets,
as measured by the S&P 500 were essentially unchanged, shedding
only 0.01 percent. The U.S. trade-weighted dollar continued its
rebound for the fourth consecutive month, climbing 1.52 percent.
Strength
- June was a very strong month
for gold, with the price of bullion closing out the month with
five consecutive weeks of positive gains.
- The catalyst for the move
in gold centered largely on the votes in France and the Netherlands
to reject the adoption of the new European Union (EU) constitution.
- This led to weakness in the
euro and in turn made gold more attractive as a currency. For
the month, the gold price in Euros climbed 7.2 percent, in Yen
terms it rose about 6.5 percent, and in Dollar terms it gained
4.4 percent.
Weakness
- On average, relative to historic
price action to gold, the share price performance for the gold
stocks should have been better this past month.
- The World Gold Council reported
central banks sales jumped 113.5 to 254 tonnes in the prior quarter.
- By the end of the month, net-long
position on gold futures had risen to fairly high levels, perhaps
signaling the end of the current rally.
Opportunity
- The rejection by the French
and Dutch of the EU constitution has created a wave of buying
in the gold market as assets are shifted out of the Euro into
gold.
- 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.
- Phillip Klapwijk of Gold Fields
Mineral Services stated that gold could reach $480 to $500 per
ounce in the second half of the year. He also mentioned that
the U.S. Dollar is still fundamentally flawed.
Threat
- Rising interest rates are
a significant threat to equity valuations.
- Continued strength in the
U.S. Dollar.
- Lack of earning growth for
the gold sector despite higher prices.
For the month of June, the
Philadelphia Gold & Silver Index rose 7.81 percent and the
S&P/TSX Canadian Gold Capped Sector Index gained 9.81 percent.
The FTSE/JSE African Gold Mining Index moved up 6.18 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.
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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.
Frank Holmes
Chairman/CEO/CIO
of U.S. Global Investors Inc
July 2005
321gold Inc
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