 U.S. Global Investors' Gold Shares Fund and World
Precious Minerals Fund
Portfolio
Commentaries
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.
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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
August 2005
321gold Inc
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