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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.


  • 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.


  • 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.


  • 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.


  • 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 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