These Gold Charts Will Make Your Heart Beat Faster

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February 14, 2014 

By Frank Holmes 

CEO and Chief Investment Officer 

U.S. Global Investors

Gold lovers’ hearts are beating faster this week, as the metal rose above $1,300 an ounce for the first time since November. The precious metal also climbed above its 200-day moving average, which hasn’t happened in about a year.

ISI’s John Mendelson noted earlier this week that the generic gold future “rallied off its mid-December low and has decisively broken out above its downtrend line connecting the descending tops from late August, a near-term positive.” The next price he’s targeting is $1,350, the price gold was at in late October.

Gold Rises Above Its 200-Day Moving Average
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So while gold may correct over the next several months as the metal enters its seasonally weak period of the year, this looks promising for gold investors.

Here are a few more gold charts that just might have your heart beating faster:

1. The Love Trade Endures in the East
In January, 246 tons of gold were withdrawn from the Shanghai Gold Exchange, as China continues expressing its love for the precious metal. This marks a record level of gold deliveries on the exchange as well as a significant increase over the same time last year.

In addition, you can see on the chart below that January’s total also exceeds world mining production for the month.

Chinese Demand for Gold Remains Robust
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As Ralph Aldis, portfolio manager of the Gold and Precious Metals Fund and the World Precious Minerals Fund, says, “Once the metal moves from the West and goes into China, we won’t get that gold back very easily.”

2. Money Supply Grew Faster in January
In the first month of 2014, the M2 money supply, which is a measure of money supply that includes cash, savings and checking deposits, grew faster than the previous two years. In 2012, M2 grew 7.6 percent and in 2013, money supply rose 4.7 percent; at an annualized rate, January’s money supply growth “reached an annualized rate of increase of 8.75 percent,” according to Bloomberg’s Precious Metal Mining team.

This may mean “the U.S. Federal Reserve is trying to resurrect inflation, thus increasing the appeal of gold, the supply of which can only increase about 1.5 percent to 2.5 percent annually,” says Bloomberg.

Increase in Money Supply Boosting Gold?
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Last year, gold started to take it on the chin when the real rate of return went from a negative 0.62 percent in March to a positive 0.54 percent by December. Like I told Jim Goddard from HoweStreet, a positive real rate of return is typically a major headwind for gold.

Listen to the podcast of the radio show now.

Between March and December of 2013, two things happened: 1) Yields rose in anticipation that the Federal Reserve would begin tapering its bond purchases, and 2) the consumer price index declined. However, going forward, I anticipate that CPI will increase, and, given the modest economic growth we’ve been seeing in the U.S. economy, interest rates won’t be able to rise too quickly.

3. Gold Stocks Poised to Rebound After Rare 3-Year Loss
What I think is tremendously powerful for gold stock investors is this chart. At the beginning of January, we took a look back at the annual returns for the Philadelphia Gold & Silver Index. In three decades, there were only three times that gold stocks only saw a consecutive 3-year loss.

Only 3 Times in 3 Decades Gold Stocks Declined 3 Consecutive Years Gold charts
Gold charts

These aren’t the only gold charts to love. See more in my latest presentation from the World Money Show.

Index Summary

  • Major market indices finished sharply higher this week.  The Dow Jones Industrial Average rose 2.28 percent. The S&P 500 Stock Index gained 2.32 percent, while the Nasdaq Composite advanced 2.86 percent. The Russell 2000 small capitalization index rose by 2.93 percent this week.
  • The Hang Seng Composite rose 2.96 percent; Taiwan gained 1.51 percent while the KOSPI advanced 0.92 percent. The 10-year Treasury bond yield rose 6 basis points this week at 2.74 percent.

Domestic Equity Market

The S&P 500 Index roared back this week in a broad-based rally, rising by more than 2 percent and virtually vanquishing the pullback that began in mid-January. Sector performance had a somewhat unusual mix, with both cyclical and defensive areas exhibiting truly mixed relative performance.

S&P Economic Sectors
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Strengths

  • The utility sector led the way this week with particular strength coming from gas utilities, as natural gas prices shot back above $5.
  • The health care sector was not far behind, with strong performances from biotechnology and medical device makers. Strong performers included Alexion Pharmaceutical, Regeneron Pharmaceutical and St. Jude Medical.
  • Goodyear Tire & Rubber was the best performer in the S&P 500 this week, rising 13.73 percent. Goodyear released quarterly earnings results which were ahead of expectations and the company was able to de-lever the balance sheet, which was a positive surprise for the market.

Weaknesses

  • We experienced a broad-based rally this week, with only pockets of weakness. Airlines were weak on the back of significant weather disruptions along much of the East Coast.
  • The fertilizer group was also weak as Monsanto and CF Industries both experienced modest declines for the week.
  • WPX Energy was the worst performer in the S&P 500 this week, falling 9.11 percent. The company announced its capital plan and production guidance for 2014. Production guidance was weaker than expected, while capital expenditure (CAPEX) is expected to rise by 20 to 25 percent.

Opportunities

  • The current macro environment remains positive as economic data remains robust enough to give investors confidence in an economic recovery, but not too strong as to force the Federal Reserve to aggressively change course in the near term.
  • Money flows are likely to find their way into domestic U.S. equities and out of bonds and emerging markets.
  • The improving economic situation could possibly drive equity prices well into 2014.

Threats

  • A short-term market consolidation period after such strong performance over the past six months cannot be ruled out.
  • Higher interest rates are a threat for the whole economy. The Fed must walk a fine line and the potential for policy error is large.
  • A lot of good news may be priced into the market and the economy will need to deliver to maintain the positive momentum in the market.

The Economy and Bond Market

Treasury bond yields were higher this week with the intermediate portion of the yield curve seeing most of the lift. With economic data mixed again and equities rallying, it felt like a “risk on” week, as much as anything driving yields higher. Bad weather was topical again all week and it has definitely had a negative impact on the economy so far this year. While some of the data is being taken with a grain of salt, most investors are giving the economy the benefit of the doubt.

10-Year Treasury Yield
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Strengths

  • China exports jumped 10.6 percent in January, which created some excitement that things are improving, although there are still skeptics regarding the validity of the data.
  • NFIB’s Small Business Optimism Index showed that firms were planning to hire at the highest level since 2007.
  • The University of Michigan Confidence survey was unchanged in February, ahead of expectations.

Weaknesses

  • January retail sales fell 0.4 percent and below expectations. Weather obviously played a role, but it is somewhat difficult to discern the impact exactly.
  • Industrial production declined 0.3 percent in January in another disappointing data point.
  • Industrial production in the European Union fell 0.7 percent in December. Global manufacturing appeared to have hit a rough patch in December and January.

Opportunities

  • In Congressional testimony, Federal Reserve Chairman Janet Yellen reconfirmed her commitment to tapering, and is in no hurry to raise interest rates. This is consistent with the message from prior Chairman Ben Bernanke.
  • Key global central bankers remain in easing mode such as the European Central Bank (ECB), Bank of England and the Bank of Japan. ECB president Mario Draghi vowed to take “decisive action” if needed to combat deflation. Speculation is building that the ECB may take action in March.
  • There are many moving parts to the taper decision and while the Fed began the process, it is very possible that tapering could be delayed if the economy stumbles.

Threats

  • Several emerging market countries are raising interest rates at an aggressive pace to either deal with inflation or a weak currency. It could be the beginning of a new global interest rate cycle for higher rates.
  • Trade and/or currency “wars” cannot be ruled out which may cause unintended consequences and volatility in the financial markets.
  • Puerto Rico was recently downgraded to “junk” status, highlighting the fact that even six years past the financial crisis, the fallout continues.

Gold Market

For the week, spot gold closed at $1,318.64, up $51.37 per ounce, or 4.05 percent. Gold stocks, as measured by the NYSE Arca Gold Miners Index, rose 10.01 percent. The U.S. Trade-Weighted Dollar Index lost 0.69 percent for the week.

Strengths

  • Gold rose to $51 per ounce for the week, breaking above its 200-day moving average for the first time since August 2012. Reports show that the Federal Reserve began 2014 with a sharp increase in M2 money supply. In addition, gold ETF holdings showed a net increase of 22,000 ounces so far this month, reversing the large redemptions from last year.
  • Dundee Precious Metals reported fourth-quarter earnings, beating the consensus and featuring better-than-expected production results. The results beat estimates primarily due to a rebound in Chelopech mine grades, which has exceeded guidance for three consecutive years. Another factor was that most of the improvements to the Tsumeb smelter are realized, and will allow full capacity production in the first quarter. This may prove as an inflection point for Dundee as Chelopech continues to deliver, the Tsumeb overhand is largely removed, and financial liquidity remains healthy.
  • Klondex Mines released drill results from its Fire Creek project which included 166 grams per tonne over 1.5 meters, and 47 grams per tonne over 2.5 meters. The results extended the Joyce and Vonnie veins to depth, and the Joyce vein to the north. In addition, a drill hole intersected a new structure approximately 1,000 feet from existing infrastructure, highlighting the prospect of the Fire Creek deposit. Klondex is expected to release the Fire Creek PEA in the first quarter of 2014. According to M Partners, thanks to the significant underground infrastructure in place and a milling solution secured, the economics are likely to be very robust.

Weaknesses

  • Gold is likely to remain in its 2014 range as sentiment on the U.S. recovery is still very well anchored. According to UBS, gold is in a frustrated market as the metal needs the risk-on, developed market growth story to be challenged in order to rise. Additionally, despite the emerging market turmoil, along with a few weak macro data points in the U.S., it appears investors will not budge. The risk for gold is that the environment makes it neither a clear-cut buy nor a sell.
  • Barrick Gold achieved slightly better fourth-quarter results, while the company’s 2014 guidance appears weaker. Barrick incorporated higher operating costs along with slightly higher capital expenditure. Reserves decreased by 26 percent, significantly higher than prior management indications, while reserve grades increased by a modest 4 percent, according to Dundee Capital Markets analyst Josh Wolfson. The silver lining however, is that the company has dissipated some of the headwinds, and has the opportunity to focus on extracting profitable ounces. This is a move that the sector expects will drive more generalist buying.
  • Iamgold Corporation has reported a strike over redundancy pay packages at its joint venture mines, Sadiola and Yatela, in Mali. Iamgold said its joint venture (JV) partner at the two mines, AngloGold Ashanti, was managing the local operations and remained in dialogue with employees and representatives. Mali, Africa’s third-largest gold producer, will see its production dip in 2014 as AngloGold Ashanti and Iamgold close down the Yatela mine.

Opportunities

  • There is chatter that the Bank of China stockpiled 500 tonnes of gold during recent weakness. A Financial Times article highlights that gold imports and production in China outpace the retail and investment sales data, leading to a 500-tonne gap, which is speculated to have been absorbed by the central bank. In addition, the Gold Forward Offered Rates (GOFO rates) tightened this week across the board, as a shortage of gold bars in London reflected the record Chinese physical off take in January.
  • Paradigm Capital thinks that the recent strong performance in gold should translate into a rotation into equities whose share prices have lagged, starting with those of better quality. Despite the strong showing of the sector year-to-date, share prices have recovered only a small percentage over the past three-year loses, thus leaving a large amount of upside to be captured. As a matter of fact, gold has recovered only about 15 percent of its three-year, high-low spread, and the vast majority of equities have recovered even less.
  • The chatter on private equity approaching the gold sector materialized this week as QKR has agreed to buy AngloGold Ashanti’s Navachab gold mine in Namibia for $110 million, as outside money begins to flow into the sector. QKR is one of the more high profile private equity groups that have amassed about $1 billion in funding, specifically to buy undervalued and turnaround mining assets.

Threats

  • Earlier in the week RBC published a report that highlighted their analysis on the expected negative impact on reserves for most gold producers. The analysis suggested most senior gold producers would cut reserves as much as 8 percent as they updated their reserves with lower gold prices and factored in a sharp reduction in capital expenditures. As reserve updates were announced, it became evident that senior producers went beyond analysts’ expectations and cut reserves up to 37 percent. The flipside is that this exercise allowed miners to identify and concentrate on extracting more profitable ounces, which will more than outpace the value lost to the reserves that were cut.
  • Credit Suisse argues that the recent rally in gold through $1,300 is rather “uninspiring,” and will likely be met by substantial selling from “stale longs of whom there are still many looking for an exit.” The bank’s analysts argue physical demand has been steady and the main driver of the strong upswing is short covering. Against that backdrop, and in the context of a 12 percent rally in U.S. 10-year rates, the gold rally is nothing to write home about.  As such, they maintain a bearish outlook on gold.
  • ABN Amro, the largest Dutch bank by assets, argues that gold will decline as the U.S. dollar strengthens on positive macro data. The bank, which last spring announced  it would not honor its commitments on physical gold deposits but would instead issue paper gold receipts to its customers, says that the positive start gold has seen this year as the best-performing metal, will soon come to an end.

Energy and Natural Resources Market

 

Strengths

  • Commodity imports in China for the month of January set new records in copper and crude oil, partly driven by front-loading ahead of the Chinese New Year. Tight credit conditions and new capacity additions also explain the strength in copper and crude, respectively.
  • China saw its coal imports grow 17.5 percent year-on-year to 35.91 million tonnes in January, according to statistics released by the General Administration of Customs. The figure for last month was higher than the 35.52 million tonnes realized a month prior. According to the statistics, the import value of coal grew 4.9 percent year-on-year to $2.98 billion in January.
  • Refined copper supply is tight and is confirmed by backwardation in the futures curve on the London Metals Exchange. Physical premiums for copper have spiked to ~3c per pound as inventories have tumbled 75 percent to 125.7 thousand tonnes since March 2013.

Weaknesses

  • Chinese steel inventories rose for the eighth-straight week. Chinese steel inventories in warehouses totalled 19.9 million tonnes, 11 percent above the prior week and 10 percent higher from only a year ago.  This compares to a 52-week high of 22.6 million tonnes in mid-March 2013.
  • U.S. steel prices declined for a fifth-straight week. The CRU Weekly Price assessment shows U.S. hot-rolled coil (HRC) at $659 per short tonne ($659/st), down $2/st from last week and $11/st from last year.
  • This week thermal coal prices dropped below $80/t for all three major international benchmarks, a decline of 5 to 10 percent from January highs. The main reason is sluggish demand in both the Atlantic and Pacific basins.

Opportunities

  • Freeport-McMoRan and state-owned PT Aneka Tambang (Antam) have agreed to study building a copper smelter in Indonesia. According to management, the study will last about three months and cover four different areas, including an area near Freeport’s Grasberg operation, for a potential $2.2 billion, 300k ton smelter.
  • China’s Ministry of Environment has announced its target for cutting pollution in 2014. The nationwide emission of sulphur dioxide is planned to fall by 2 percent in 2014 according to the Ministry’s plans, and that of nitrogen oxide (NOx) to come down by 5 percent. The reduction in NOx emissions will put more pressure on larger cities and the general truck fleet to move towards increased platinum group metal (PGM) loadings. For now, the reduction in sulphur-based emissions will mean pressure will be maintained on sinter plants to curtail output, playing into increased use of iron-ore lump and pellets.
  • The steel stock in 29 major cities across China hit a four-year low after the Spring Festival Holiday, news portal yicai.com reported on Wednesday. The news portal cited data from the Beijing Lange Steel Information Research Centre.

Threat

  • Impala Platinum Holdings Ltd. said it is preparing for the strike that has shut South Africa’s biggest mines to last until May, as employers and the largest union made little progress in talks during the first three weeks of the stoppage. The Association of Mineworkers and Construction Union has called more than 70,000 workers out on strike since January 23 at Anglo American Platinum Ltd., Impala and Lonmin Plc, the world’s three largest producers of the metal. The Union is demanding that monthly wages for the lowest-paid underground workers be more than doubled.

Emerging Markets

Strengths

  • The eurozone recovery continues to firm up as GDP data showed that the bloc’s recovery strengthened in the fourth quarter. Eurozone GDP accelerated to 0.3 percent from the third quarter and topped forecasts of a 0.2 percent rise. German GDP also increased and beat expectations. The GDP figures have helped boost European stocks and provide support for emerging market exports.
  • The Czech economy expanded at the fastest pace in more than six years in the fourth quarter after the central bank intervened to weaken the currency. Fourth quarter GDP rose 1.6 percent from the previous quarter, beating expectations for a .06 percent rise. Similarly, Hungary’s fourth quarter GDP rose 2.7 percent from the previous year, beating expectations and posting its best economic growth since 2007.
  • Indonesia’s current account deficit improved to a better than expected 2 percent of GDP in the fourth quarter from 3.8 percent in the third quarter, thanks to a decline in imports with lower domestic demand led by interest rate hikes and weaker currency.  The Indonesian central bank left interest rates unchanged amid better trade balance, stable inflation, and stabilizing currency.

Weaknesses

  • Estonia’s economy unexpectedly came to a halt last quarter as transport revenue and exports weakened.  Gross domestic product had zero growth from a year earlier, the first time the economy stagnated since exiting a recession in the second quarter of 2010. Economic growth in the Baltic nation, slowed to 0.7 percent last year after government spending on construction declined and decreasing trade with Russia cut into transport revenue.
  • Emerging market equity funds continued to face redemptions for the sixteenth consecutive week, although compared to the previous two weeks, the pace of outflows eased. This week’s outflow of $3.05 billion is lower compared to the average $6.30 billion over the last two weeks.
  • Net selling of Asian equities from foreign investors amounted to $1.7 billion over the last three weeks ended Wednesday, February 12, and Taiwan witnessed the heaviest foreign selling in absolute amounts.

Opportunities

  • The sell off that triggered the worst start for emerging market stocks in four years is approaching the end as valuations begin to look attractive, according to Mark Mobius, who oversees more than $50 billion in developing-nation assets. The sell off dragged the benchmark index’s valuation to a low of 8.96 times forward earnings earlier in the month, the cheapest level since August and compared with a multiple of 14 for the MSCI World Index of developed-country equities.

China's Commitment to Combatting Pollution Should Benefit Renewable Energy Industry
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  • China’s decision to spend $1.6 billion this year to reward local governments who make significant progress in controlling air pollution once again epitomizes government policy priority to address environmental degradation.  Indeed, according to BP Energy Outlook 2035, China is expected to surpass the European Union (EU) in terms of renewable energy volume growth.  The local clean energy sector should continue to benefit from this secular transformation.
  • A recent journal article described a novel way to predict excess bond returns on emerging market debt which could be used as proxy for currency-hedged returns for foreign investors. According to the article, bond and equity momentum, as measured by equity flows are two key drivers of excess returns; however, when used together with the term spread, it can robustly estimate excess bond returns. Since equity returns are expected to outperform bond excess returns on the long run, this type of analysis better illustrates opportunities in emerging markets, even during a period of weaker emerging market currencies.

Threats

  • A senior attorney at the EU’s top court issued a formal legal opinion Wednesday which could clear the way for Hungarian courts to change foreign-currency mortgage loans if they find exchange-rate stipulations in the loan contracts unfair. If the Hungarian courts decide to ease the loan conditions with modifying the exchange rates, the consequences of the currency slide would weigh unequally on the private banks.

Emerging Markets Productivity Growth Has Slowed
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  • Productivity growth in the emerging world has decelerated over the past decade even as wage inflation has remained high. According to a recent IHS Research Report, average annual productivity growth in the large emerging markets, which had risen from around 2 percent in the early 2000s to 5 percent right before the 2008 recession, has steadily deteriorated since, to around 3 percent recently. Meanwhile, wage growth continues to be two to three times higher than in the advanced economies. This points to a fundamental deterioration in competitiveness.
  • Seasonal noise surrounding Chinese macroeconomic data release for January due to the timing difference of Chinese New Year from a year ago may be cited as an excuse by short term investors to take profits in outperforming stocks.

Leaders and Laggards

The tables show the weekly, monthly and quarterly performance statistics of major equity and commodity market benchmarks of our family of funds.

Weekly Performance
Index Close Weekly
Change($)
Weekly
Change(%)
XAU 101.99 +9.77 +10.59%
S&P/TSX Canadian Gold Index 200.79 +17.17 +9.35%
Natural Gas Futures 5.21 +0.43 +9.01%
Gold Futures 1,318.50 +55.60 +4.40%
S&P Basic Materials 290.69 +8.53 +3.02%
Hang Seng Composite Index 3,122.00 +89.65 +2.96%
Russell 2000 1,149.21 +32.66 +2.93%
Nasdaq 4,244.03 +118.16 +2.86%
S&P 500 1,838.63 +41.61 +2.32%
DJIA 16,154.39 +360.31 +2.28%
S&P Energy 627.11 +13.90 +2.27%
10-Yr Treasury Bond 2.74 +0.06 +2.24%
Korean KOSPI Index 1,940.28 +17.78 +0.92%
Oil Futures 100.40 +0.52 +0.52%
Monthly Performance
Index Close Monthly
Change($)
Monthly
Change(%)
S&P/TSX Canadian Gold Index 200.79 +32.46 +19.28%
Natural Gas Futures 5.21 +0.84 +19.13%
XAU 101.99 +14.25 +16.24%
Oil Futures 100.40 +7.81 +8.44%
Gold Futures 1,318.50 +72.50 +5.82%
Nasdaq 4,244.03 +61.01 +1.46%
S&P Basic Materials 290.69 +2.54 +0.88%
S&P 500 1,838.63 -0.25 -0.01%
Korean KOSPI Index 1,940.28 -5.79 -0.30%
Russell 2000 1,149.21 -14.22 -1.22%
DJIA 16,154.39 -219.47 -1.34%
S&P Energy 627.11 -9.39 -1.48%
10-Yr Treasury Bond 2.74 -0.13 -4.46%
Hang Seng Composite Index 3,122.00 -332.01 -14.83%
Quarterly Performance
Index Close Quarterly
Change($)
Quarterly
Change(%)
Natural Gas Futures 5.21 +1.55 +42.21%
S&P/TSX Canadian Gold Index 200.79 +27.66 +15.98%
XAU 101.99 +9.38 +10.13%
Oil Futures 100.40 +6.56 +6.99%
Nasdaq 4,244.03 +258.06 +6.47%
Russell 2000 1,149.21 +33.01 +2.96%
S&P Basic Materials 290.69 +7.89 +2.79%
Gold Futures 1,318.50 +29.30 +2.27%
S&P 500 1,838.63 +40.45 +2.25%
10-Yr Treasury Bond 2.74 +0.04 +1.48%
DJIA 16,154.39 +192.69 +1.21%
S&P Energy 627.11 -14.45 -2.25%
Hang Seng Composite Index 3,122.00 -83.34 -2.60%
Korean KOSPI Index 1,940.28 -65.36 -3.26%

Please consider carefully a 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.

With respect to the Fidelity Institutional Money Market Treasury Portfolio, which is distributed by Fidelity Distributors Corporation, an investment in a money market fund is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although money market funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund.

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.

Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk. By investing in a specific geographic region, a regional fund’s returns and share price may be more volatile than those of a less concentrated portfolio.

The Emerging Europe Fund invests more than 25 percent of its investments in companies principally engaged in the oil & gas or banking industries. The risk of concentrating investments in this group of industries will make the fund more susceptible to risk in these industries than funds which do not concentrate their investments in an industry and may make the fund’s performance more volatile.

Because the Global Resources Fund concentrates its investments in a specific industry, the fund may be subject to greater risks and fluctuations than a portfolio representing a broader range of industries.

Gold, precious metals, and precious minerals funds may be susceptible to adverse economic, political or regulatory developments due to concentrating in a single theme. The prices of gold, precious metals, and precious minerals are 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 5 percent to 10 percent of your portfolio in these sectors.

Bond funds are subject to interest-rate risk; their value declines as interest rates rise. Tax-exempt income is federal income tax free. A portion of this income may be subject to state and local income taxes, and if applicable, may subject certain investors to the Alternative Minimum Tax as well. The Near-Term Tax Free Fund may invest up to 20 percent of its assets in securities that pay taxable interest. Income or fund distributions attributable to capital gains are usually subject to both state and federal income taxes. The Near-Term Tax Free Fund may be exposed to risks related to a concentration of investments in a particular state or geographic area. These investments present risks resulting from changes in economic conditions of the region or issuer..

Investing in real estate securities involves risks including the potential loss of principal resulting from changes in property value, interest rates, taxes and changes in regulatory requirements.

Past performance does not guarantee future results.

Some link(s) above may be directed to a third-party website(s). U.S. Global Investors does not endorse all information supplied by this/these website(s) and is not responsible for its/their content.

These market comments were compiled using Bloomberg and Reuters financial news.

Holdings as a percentage of net assets as of 12/31/13:

Alexion Pharmaceutical, Inc.: 0.0%
Regeneron Pharmaceutical, Inc.: Holmes Growth Macro-Trends Fund, 0.44%
St. Jude Medical, Inc.: All American Equity Fund, 1.01%; Holmes Growth Macro-Trends Fund, 0.37%
Goodyear Tire & Rubber Co.: 0.0%
Monsanto Co.: Global Resources Fund, 1.07%
CF Industries Holdings, Inc.: All American Equity Fund, 1.00%
WPX Energy, Inc.: 0.0%
Dundee Precious Metals Inc.: Emerging Europe Fund, 0.70%; Global Resources Fund, 0.27%; Gold and Precious Metals Fund. 3.90%; World Precious Minerals Fund, 2.18%;
Klondex Mines Ltd.: Global Resources Fund, 1.08%; Gold and Precious Metals Fund, 6.15%; World Precious Minerals Fund, 6.46%
Barrick Gold Corp.: Gold and Precious Metals Fund, 2.93%; World Precious Minerals Fund, 0.45%
IAMGOLD Corp.: Gold and Precious Metals Fund, 0.15%; World Precious Minerals Fund, 0.04%
AngloGold Ashanti Ltd.: Gold and Precious Metals Fund, 0.04%; World Precious Minerals Fund, 0.04%
QKR Corp.: 0.0%
Freeport-McMoRan Copper & Gold: Global Resources Fund, 2.73%
Impala Platinum Holdings Ltd.: 0.0%
Anglo American Platinum Ltd.: 0.0%
Lonmin plc: 0.0%

*The above-mentioned indices are not total returns. These returns reflect simple appreciation only and do not reflect dividend reinvestment.

The Dow Jones Industrial Average is a price-weighted average of 30 blue chip stocks that are generally leaders in their industry.
The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies.
The Nasdaq Composite Index is a capitalization-weighted index of all Nasdaq National Market and SmallCap stocks.
The Russell 2000 Index® is a U.S. equity index measuring the performance of the 2,000 smallest companies in the Russell 3000®, a widely recognized small-cap index.
The Hang Seng Composite Index is a market capitalization-weighted index that comprises the top 200 companies listed on Stock Exchange of Hong Kong, based on average market cap for the 12 months.
The Taiwan Stock Exchange Index is a capitalization-weighted index of all listed common shares traded on the Taiwan Stock Exchange.
The Korea Stock Price Index is a capitalization-weighted index of all common shares and preferred shares on the Korean Stock Exchanges.
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 U.S. Trade Weighted Dollar Index provides a general indication of the international value of the U.S. dollar.
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 S&P 500 Energy Index is a capitalization-weighted index that tracks the companies in the energy sector as a subset of the S&P 500.
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The S&P 500 Financials Index is a capitalization-weighted index. The index was developed with a base level of 10 for the 1941-43 base period.
The S&P 500 Industrials Index is a Materials Index is a capitalization-weighted index that tracks the companies in the industrial sector as a subset of the S&P 500.
The S&P 500 Consumer Discretionary Index is a capitalization-weighted index that tracks the companies in the consumer discretionary sector as a subset of the S&P 500.
The S&P 500 Information Technology Index is a capitalization-weighted index that tracks the companies in the information technology sector as a subset of the S&P 500.
The S&P 500 Consumer Staples Index is a Materials Index is a capitalization-weighted index that tracks the companies in the consumer staples sector as a subset of the S&P 500.
The S&P 500 Utilities Index is a capitalization-weighted index that tracks the companies in the utilities sector as a subset of the S&P 500.
The S&P 500 Healthcare Index is a capitalization-weighted index that tracks the companies in the healthcare sector as a subset of the S&P 500.
The S&P 500 Telecom Index is a Materials Index is a capitalization-weighted index that tracks the companies in the telecom sector as a subset of the S&P 500.
The NYSE Arca Gold Miners Index is a modified market capitalization weighted index comprised of publicly traded companies involved primarily in the mining for gold and silver.
The Consumer Price Index (CPI) is one of the most widely recognized price measures for tracking the price of a market basket of goods and services purchased by individuals. The weights of components are based on consumer spending patterns.

The National Federation of Independent Business’s (NFIB) Index of business optimism is based on responses from 1221 member firms.
MSCI World Index is a capitalization weighted index that monitors the performance of stocks from around the world.
The University of Michigan Confidence Index is a survey of consumer confidence conducted by the University of Michigan. The report, released on the tenth of each month, gives a snapshot of whether or not consumers are willing to spend money.
M2 Money Supply is a broad measure of money supply that includes M1 in addition to all time-related deposits, savings deposits, and non-institutional money-market funds.
The London Metal Exchange (LME) is the futures exchange with the world’s largest market in options, and futures contracts on base and other metals.