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July 17, 2014
Domestic and Indian Gold Rally Points to a Strong Second Half

Earlier this week we reported that gold, defying expectations, is one of the best-performing commodities of the year so far.

And now we’ve learned that gold bullion imports by India climbed a stunning 65 percent last month after the country’s central bank allowed more investors to buy foreign bullion. Imports rose to $3.12 billion in June from $1.89 billion this time last year.

India is the world’s second-largest consumer of gold after China, accounting for approximately 25 percent of all gold consumption. Gold is the country’s second-largest import item after oil.
This news comes closely on the heels of the recent election of Prime Minister Narendra Modi, whose Bharatiya Janata Party (BJP) seeks to loosen import restrictions and other government regulations that tend to stifle economic growth. The rally also coincides with the Indian wedding season, which typically ends on July 7 and 8.

More importantly, what this news could portend is a stronger-than-normal second half of the year for the gold market. Data points going back 35 years confirm the probability of gold gaining strength in the second half, thanks largely to international celebrations such as Diwali, Ramadan and Christmas. This year in particular looks very promising indeed.

Keep your eyes on real interest rates.
Recently I chatted with Daniela Cambone during my weekly Gold Game Film program on Kitco. I pointed out that, with the end of the Indian wedding season, we’re historically due for a slight correction in the gold market. But whereas last year saw a huge contraction and liquidation of gold around this time, the gold bullion exchange-traded funds (ETFs) around the world this year actually expanded.

Daniela and I also looked ahead at the gold market in the coming months. One of the points I shared dealt with the strong correlation between gold performance and real interest rates, which you arrive at after subtracting inflation from the nominal interest rate.

If we go back to when gold was at $1,900 [in August 2011], the negative real interest rates were 200 basis points. Then by December of last year, it went to plus 50 basis points. Now it’s gone negative again, and gold is rallying. And I think that that’s a key factor when we look forward, and I think we’re going to continue to have negative real interest rates. So when inflation starts to rise like it did in the ‘70s, [the Federal Reserve isn’t] going to be able to lift rates as fast as the inflationary rate because it will stifle the economy dramatically.


click to enlarge

One last point I want to emphasize is our perennial suggestion to investors: 5 percent exposure to gold bullion, 5 to gold stocks, and rebalance each year for an overall 10 percent weighting in your portfolio.

Last year the stock market boomed, whereas bullion disappointed and gold stocks dramatically underperformed. Had investors taken their profits in the stock market and rolled it into gold, they would have done exceptionally well this year.

That continues to be our discipline here at U.S. Global Investors, and the recent gold rally, domestically and in India, substantiates this position.

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. By clicking the link(s) above, you will 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.

Past performance does not guarantee future results.

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July 14, 2014
2014 Commodities Halftime Report

What a difference six months can make.  After a disappointing 2013, the commodities market came roaring back full throttle, outperforming the S&P 500 Index by more than 4 percentage points and 10-year Treasury bonds by more than 6.

Commodities Are The Best Performers for First Half of 2014
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Leading the rally was nickel, delivering a 37.14 percent return, followed by palladium (17.70 percent) and gold (10.90 percent). Nickel also saw the largest gain from last year, climbing more than 55 points to settle close to $19,000 per metric tonne. Gold jumped 38 percentage points to $1,327 an ounce, and palladium rose 16 points to $843 an ounce.

At the back of the herd lagged lead, copper and wheat, which was the best performer only two short years ago.

Below you can see the 2014 halftime edition of our periodic table of commodity returns, which has proven to be a perennial favorite among our investors.

The Periodic Table of Commoditiy Returns
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That commodity prices often fluctuate so wildly supports the need to have your investments in the resources space diversified and actively managed by an experienced team of professional investors. Simply put, there are far too many worldly factors—some of them political, others acts of God, all tugging and pulling at the market in tandem—for any one person to reasonably keep track of. It’s important to have a limber group of managers and analysts with the expertise and diligence to monitor and anticipate the most pressing global trends.  

What we know is that now many investors have become bullish on resources. At a conference in New York at the end of last month, Credit Suisse polled 350 investors and found that 42 percent of them were planning to be overweight in commodities in the coming months. For some perspective, when the same question was asked of them the previous year, only 19 percent had a rosy attitude toward commodities.

As I said, what a difference six months—or, in this case, a year—can make. With money flowing back into commodities, the market is finally trying to reverse the downtrend that we’ve been up against since 2011.

Commodities Markets on the Rise
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Nickel
As usual, government policy is often a precursor to change. Nowhere did we see this adage in action more transparently this year than in Indonesia, whose government shocked the market in January by enacting an outright ban on nickel ore exports. Because the Southeast Asian country is the world’s second-largest producer of nickel ore, accounting for about a fifth of global supply, any alteration to its export policy was bound to send far-reaching ripples throughout the market.

Nickel prices have soared this year as a result of supply shortageChina, one of the leading importers of not just Indonesian nickel but other global raw materials as well, reacted by stockpiling the silvery-white metal, 75 percent of which is used worldwide in stainless steel production. This in turn encouraged investors to drive prices even higher out of fear of a supply shortage.

A repeal of the export ban is unlikely to happen in the near-term, as both Indonesian presidential contenders, Joko Widodo and Prabowo Subianto, who are both claiming victory in the recent election, favor its continuation. We will keep our eyes on nickel, as a correction might very well come when and if the ban is ever rescinded.

Palladium and Platinum
Prices of the platinum group metals (PGMs) hit three-year highs following the double whammy of a five-month-long miner strike in South Africa and trade sanctions against Russia, the world’s leading producer of palladium. Fear of a shortage in PGMs, which are essential to the production of catalytic converters in automobiles, drove prices skyrocketing.

This comes at a time when U.S. auto sales have surged to 16.9 million in June alone, an increase of 9.2 percent over the same time last year. Auto manufacturing is expected to grow 10.3 percent in the third quarter, according to International Strategy & Investment (ISS).

Increase in Platinum & Palladium Prices, Compared to Rise in Number of U.S. Auto Sales
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Although the labor strike ended last month, PGM production cannot reasonably resume within the next three to five months. And with a separate strike underway, this one led by the National Metalworkers of South Africa, country leaders fear yet another economic setback that has already threatened a third of South Africa’s manufacturing output.

Gold
Our Gold and Precious Metals Fund (USERX), rated four stars by Morningstar,* continues to excel because we intimately understand the dynamics of both the Love and Fear Trade in the global goldmarket. We also know how to read and act on China’s positive purchasing managers index (PMI), which has recently hit a six-month high of 51. Any number over 50, of course, indicates strong growth in the manufacturing sector. China is already the world’s largest producer andconsumer of gold, and because its middle class is swelling in rank—the country is expected to have over 670 million middle class citizens early next decade—gold sales should remain robust.

Besides China, other global drivers of gold consumption at this time include India and the Middle East. Diwali—otherwise known as the Indian Festival of Lights—Christmas and other international celebrations encourage generous giving of gifts, of which gold jewelry is one of the most traditional and popular. Ramadan, scheduled to end on July 28, involves a type of alms-giving called zakat, which is one of the Five Pillars of Islam. Zakat is obligatory for all observant Muslims, who handsomely give precious metals such as gold to those in economic hardship.

As I told Catherine Murray on BNN’s Business Day PM back in May:

So we’re coming to that trough on a seasonal pattern, and that seasonal pattern is predominated by what I call the Love Trade, where you have jewelry demand, et cetera, coming out of Asia, Middle East and India... And this is the first time that we had what they call the Flash HSBC PMI. And this is very important for job creation and GDP per capita rising, and that’s highly correlated with consumption of gold for the jewelry trade. So the second half [of 2014] looks great, and I think it’s also very important for all exports of any resources.

Crude Oil
Although not one of the top leaders in the first half, crude oil deserves a shout-out. Its 7.06 percent annual return is closing in on the 7.19 percent return in 2013, when oil was the second-best performer. Because of unrest in Iraq, North Sea Brent crude has set a record for trading between $107 and $112 a barrel for 12 consecutive months, handily beating the 170 consecutive days in 2008 when it traded over $100 a barrel.

In its monthly energy report, the U.S. Energy Information Administration (EIA) forecasts that 2015 will represent the highest level of West Texas Intermediate (WTI) crude production since 1972. Global consumption of oil, driven largely by China once again, is expected to reach 94 million barrels a day (bbl/d) by the end of next year.

World Liquid Fuels Production and Consumption Balance
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Global Resources Fund (PSPFX) portfolio manager Brian Hicks reiterates these points on why we are bullish in light of the current domestic oil production boom:

Within our portfolio, we are investing heavily in the shales through upstream oil and gas companies, oil services companies and equipment companies. Shale is transformational; it is really changing the energy landscape. Almost overnight, companies are developing resources that are long-lived and repeatable. Remember, only five years ago we were talking about peak oil. Now, we're producing roughly 8.4 million bbl/d. That's the highest we've seen since the mid-'80s. It is a trend that is going to continue.

Always Remaining Vigilant
Even though the commodities market has so far exceeded everyone’s expectations this year, especially following a lackluster 2013, a correction could occur with little warning. That’s why the portfolio managers of PSPFX, USERX and our World Precious Minerals Fund (UNWPX) are constantly looking out for opportunities and threats as well as ensuring that the fund is optimally diversified to protect against changes in the market.

For now, however, it appears as if resources could continue their strong performance for at least the near-term and hopefully much longer.

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.

*Morningstar Overall Rating™ among 71 Equity Precious Metals funds as of 6/30/2014 based on risk-adjusted return.

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. By clicking the link(s) above, you will 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.

Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk. 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% to 10% of your portfolio in these sectors. Because the Global Resources Fund concentrates its investments in specific industries, the fund may be subject to greater risks and fluctuations than a portfolio representing a broader range of industries.

The Reuters/Jefferies CRB Index is an unweighted geometric average of commodity price levels relative to the base year average price. The HSBC Flash China Manufacturing PMI is published a week ahead of the final HSBC China PMI every month. It analyzes 85-90 percent of the responses to the Final PMI from purchasing executives in more than 400 small, medium and large manufacturers, both state-owned and private enterprises.

Morningstar Ratings are based on risk-adjusted return. The Morningstar Rating for a fund is derived from a weighted-average of the performance figures associated with its three-, five- and ten-year (if applicable) Morningstar Rating metrics. Past performance does not guarantee future results. For each fund with at least a three-year history, Morningstar calculates a Morningstar Ratingä based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a fund’s monthly performance (including the effects of sales charges, loads, and redemption fees), placing more emphasis on downward variations and rewarding consistent performance. The top 10% of funds in each category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars and the bottom 10% receive 1 star. (Each share class is counted as a fraction of one fund within this scale and rated separately, which may cause slight variations in the distribution percentages.)

Diversification does not protect an investor from market risks and does not assure a profit.

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June 23, 2014
Ah, the Power of Mean Reversion

The chatter last week was gold. The precious metal flew up $45 an ounce on Thursday, surprising investors, the media and markets alike.

Gold-Is-Still-Looking-GoodIf we look back just six months ago, gold was sitting at record lows, signaling that it was in extremely oversold territory. This was the time that many investors let fear take over and dismissed the fundamental reasons for owning gold: as a portfolio diversifier and store of value.

With the price spike this week, however, some of the perpetual gold naysayers suggested the metal had shifted to overbought status. Spot gold was up nearly 3 percent for the week, while gold stocks were up around 7 percent. So is gold overbought?

Some see gloom and doom. We see the bounce we said was coming. Based on our historical observations and the math of the markets, gold is not overbought, in our opinion, but is simply reverting to its mean. This mean reversion has shown that eventually, both gold stocks and gold bullion will move back to their historical averages. Right now, as you can see from the chart below, gold stocks have seen a reversal to the long-term mean, but we are still waiting for gold bullion to do so as shown in the second chart.

Total-Foreign-Direct-Investment-Into-Colombian-Commodity-Sectors
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Total-Foreign-Direct-Investment-Into-Colombian-Commodity-Sectors
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Similarly, for gold bullion to reach overbought territory it would need another 20 percent move, and for gold stocks to be overbought they would need another 30 percent move.

There is always an emotional bias against gold, whether it is soaring high or dipping low, and that is why it’s important to manage these emotions when positioning a portfolio. At U.S. Global Investors we look objectively at the action of both gold stocks and gold bullion by monitoring these long-term data points and paying attention to buy and sell signals based on the trend of mean reversion.  

Additionally, I remind investors that moderation is key when it comes to gold. Your exposure should be 5 percent to gold stocks, 5 percent to gold bullion, while rebalancing annually.

Another reason that gold is moving is it’s beginning its seasonal cycle, driven by cultural gold buying. The demand of gold reflected over the next several months and characterized by the purchase of the metal for cultural celebrations and religious holidays, I refer to as the Love Trade.

If you look at the chart below, you will see that July marks the beginning of the Love Trade with the celebration of Ramadan.

Total-Foreign-Direct-Investment-Into-Colombian-Commodity-Sectors
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The Indian Festival of Lights comes after, followed by wedding season and, of course, Christmas.

This seasonal pattern is one of the most powerful drivers for gold demand. Monitoring this pattern, while remaining aware of other fundamentals to gold, such as mean reversion and a prudent 10-percent portfolio weighting (5 percent in gold stocks and 5 percent in gold bullion, while rebalancing annually), are imperative to understand when investing in gold. These trends allow us to manage short-term swings, small or large, that usually cause more concern than they are truly worth in the long term.

If you’re curious to learn more about the trends in resources, I will be speaking July 22-25, at theSprott Vancouver Natural Resource Symposium. You’ll be able to take a front row seat to learn why experts in the field believe next year will be one of the most opportune times in history to invest in natural resources.

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. By clicking the link above, you will be directed to a third-party website. U.S. Global Investors does not endorse all information supplied by this website and is not responsible for its content. Diversification does not protect an investor from market risks and does not assure a profit.

The NYSE Arca Gold BUGS (Basket of Unhedged Gold Stocks) Index (HUI) is a modified equal dollar weighted index of companies involved in gold mining. The HUI Index was designed to provide significant exposure to near term movements in gold prices by including companies that do not hedge their gold production beyond 1.5 years.

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June 16, 2014
Gold Investors: Let This Cycle Be Your Guide

U.S. Global Investors recently welcomed Doug Peta, an economist from BCA research, to our offices. He presented some interesting research regarding the Fed Funds Rate Cycle, and in turn, what that research could mean for gold. I wanted to share points from his presentation, as well as our own in-house research, to help you understand the positivity we see for the precious metal looking towards 2015.

Where are we now?
Below is a chart from BCA showing the Fed Funds Rate Cycle. In essence, this chart neatly illustrates what the interest rate cycle imposed by the U.S. Federal Reserve looks like. The red circle indicates where we are right now: Phase IV, also known as the “easing” phase of the monetary policy that was enacted in 2008 in the U.S., better known as quantitative easing (QE).

The Fed Funds Rate Cycle
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As we know, the Fed enacted QE to stimulate our nation’s economy. Right now we’re benefitting from our placement in Phase IV of this cycle because it is in this phase that the Fed is able to keep interest rates low, keep reserve requirements low and continue printing money. Similarly, when money is “easy,” businesses can find funding for projects and consumers have easier access to credit.

Historically, Phase IV (as well as the shift towards Phase I) are the best for equity investors because stocks usually rise during these two positions in the cycle.

Why these phases are good for gold, too.
We have been in Phase IV of the Fed Funds Rate Cycle for a few years now, and are expected to remain here into 2015. Eventually the Fed will have to start tightening again and raise rates, although the numbers should remain relatively low for a while. Once this begins, we will move into Phase I.

When it comes to the performance of gold and gold stocks, history indicates good times are ahead based on where we are in the cycle. Take a look at the tables below showing median returns during the cycle dating back to 1970 and 1971. You’ll see that for gold and gold stocks, Phase IV and Phase I both show the highest median returns.

Returns During Fed Funds Rate Cycle
Spot Gold, From June 1971 TSE Gold Miners, From July 1970
Phase Median Phase Median
Phase I (Easy, Hiking) 11.8% Phase I (Easy, Hiking) 16.2%
Phase II (Tight, Hiking) 2.2% Phase II (Tight, Hiking) -8.8%
Phase III (Tight, Cutting) -4.3% Phase III (Tight, Cutting) -15.9%
Phase IV (Easy, Cutting) 9.2% Phase IV (Easy, Cutting) 24.2%
Note: Excluding the two-month Phase II period spanning the October ’87 stock market crash.
Past performance does not guarantee future results.
Source: BCA, U.S. Global Investors

The reason for the high returns during these two phases is because of “easy money.” Tight money, which is what Phase II and III are based upon, is typically bad for gold investors. When money is tight, we don’t have inflation, and investors don’t need to turn to gold as a hedge against inflation. Without inflation there is no need to hedge.

Another reason we’ve traditionally seen gold investors benefitting during Phases IV and I of the cycle is that when money is easy, interest rates are low, meaning less opportunity cost for holding the precious metal. To help illustrate, imagine putting your money in a savings account and earning 5 percent on it. Well, the opportunity cost of keeping gold under your mattress would be giving up that 5 percent that you could be earning elsewhere. When your savings account yields next to nothing, some reason, why not just buy some gold?

This pattern is worldwide.
The trends we see in the Fed Funds Rate Cycle are not only U.S. specific. This same idea carries through to the stimulative policies of the European Central Bank and Japan. More countries around the world are applying monetary stimulus programs much like the U.S., while moving away from more restrictive policies. Remember that restrictive policies relate to tightening, which is bad for gold, and stimulative policies relate to easing, which is good for gold.

Right now, gold could use a pick-me-up, and here’s why. Over the last several years we’ve seen slowing money supply growth in many E7 countries. E7 refers to seven countries with emerging economies including China, India, Brazil, Mexico, Russia, Indonesia and Turkey. It’s these countries that drive the Love Trade for gold, primarily China and India, which purchase the metal for religious and cultural celebrations.

Money Supply Growth Has Slowed in E7 Countries
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With less money being spent or borrowed, not only did the Love Trade begin to slow, global GDP growth also began to slow as you can see below.

Global GDP Growth Expected to Rise in Second Half of 2014
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The good news is, as we see various countries applying monetary stimulus, including emerging markets, we can expect this to contribute to global GDP growth. In 2014, global GDP is expected to grow by 3.2 percent, according to the World Bank's latest projections.

Similarly, the money supply of the United States has been a steady grower and the money supply in the E7 countries is also expected to reverse course; right now it is growing again but at a slower rate. The U.S. data suggests that a new easing cycle is starting in Europe, Japan and emerging markets.  A pickup in economic activity in the E7, especially the big gold consumers, is yet another positive sign for the yellow metal.

Real interest rates are headed lower for most of the world as well. As money supply grows, countries eventually feel inflationary pressures. This will hold true in the U.S. as we move into 2015 and back into Phase I. All of these changes can lead to a declining confidence in paper money, yet another good sign for gold.

An interesting side note.
I have noticed that recent articles in both Money Magazine and the New York Times use an array of gold images to illustrate wealth. It seems that while some may debate whether gold is money, gold remains an enduring symbol of wealth.

Money magazine and the New York Times portray gold as wealth.

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. By clicking the link above, you will be directed to a third-party website. U.S. Global Investors does not endorse all information supplied by this website and is not responsible for its content. This news release may include certain “forward-looking statements” including statements relating to revenues, expenses, and expectations regarding market conditions. These statements involve certain risks and uncertainties. There can be no assurance that such statements will prove accurate and actual results and future events could differ materially from those anticipated in such statements.

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.M3 money supply is the broadest monetary aggregate, including physical currency, demand accounts, savings and money market accounts, certificates of deposit, deposits of eurodollars and repurchase agreements.

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June 12, 2014
South Africa Strike Boosts Platinum Prices, Opens Opportunity for American Producer

All eyes are on South Africa, where a labor strike, now in its fifth month, has brought a halt to the production of platinum and palladium. As a result, platinum prices have inched up 8.25 percent this year to just under $1,500 an ounce, while palladium prices have surged 19.28 percent to over $850 an ounce, a three-year high.

The downside to this activity is that even before the strike broke out in January, platinum and palladium had supply issues. A British geological survey, in fact, placed the platinum group metals (PGMs) on its supply risk index in 2012, ranking them 13th among 41 “endangered” elements of economic value. One of the primary reasons for this is that approximately 80 percent of palladium and 70 percent of platinum production is concentrated in only two countries, South Africa and Russia.

Now, with the former country in the throes of its costliest strike ever and the latter experiencing economic sanctions because of its aggression against Ukraine, the world faces an even greater shortage risk of the precious metals.

Stocks are running low.
The worldwide demand for palladium is strong, driven predominantly by the automotive industry, which uses 67 percent of the metal’s global supply to manufacture catalytic converters, or mufflers. Because a growing number of countries are tightening carbon emission standards, the demand for the metal is increasing. So too are supply deficits, which might soon reach a 30-year high.

The largest South African producers have so far managed to make good on their deliveries by tapping into their reserves. But the well is drying up fast.

“We probably have another six to eight weeks to go before producers run really low on material they’ve stockpiled,” Standard Bank analyst Walter de Wet told Reuters in late May.

Even if a firm resolution were reached this week between top PGM producers and the Association of Mineworkers and Construction Union (AMCU), the group leading the strike, active mining wouldn’t resume for at least another three months.

“AMCU members are steadfast,” Joseph Mathunjwa, President of the AMCU, told Reuters, “and we are not turning back” on the demand for a wage hike to 12,500 rand ($1,200) a month.

Neither, it seems, are the producing companies, who claim they can’t meet the AMCU’s wage demands without being forced to slash jobs and shutter mines.

At the same time, companies are eager to resume production, having already lost a combined $2 billion. For each day the strike drags on, 10,000 ounces of platinum and 5,000 ounces of palladium are lost.

As of this writing, the production companies have offered the AMCU a wage deal which Mathunjwa has yet to sign, despite urges from his fellow mine workers.

When one door closes…
As worrisome as this news might sound, there is a silver—or, shall I say, platinum—lining. The strike in South Africa and Western tensions with Russia have given Stillwater Mining Co., the only U.S. producer of PGMs, an opportunity to grow its global market share.

The company, which we own in our Global Resources (PSPFX) and Gold and Precious Metals (USERX) Funds, announced in a press release last month that it has agreed to a five-year, multimillion-dollar refining and sales contract with Johnson Matthey, the third-largest manufacturer of auto catalysts in the world.

“We believe that this agreement provides numerous benefits to both parties at a time in the PGM industry when supplies are constrained and demand for our products continue [sic] to grow,” noted Mick McMullen, Stillwater’s president and CEO.

Located in Billings, Montana, Stillwater extracts its PGMs from the J-M Reef in southern Montana, the only known large-scale source of the rare metals in the U.S. The mine contains some of the world’s highest-quality ore grades.

Although McMullen sees the strike in South Africa as an opening to a stronger foothold in the global PGM market, he is hesitant to ramp up production too impulsively. Speaking with the Wall Street Journal, he explained that he would prefer to keep production costs down to maximize shareholders’ returns.

Stillwater’s net income in the first quarter, $19.6 million, was up 34 percent from the same time a year ago.

To receive the latest updates on this story, be sure to follow our Investor Alert.

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.

Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk. Because the Global Resources Fund concentrates its investments in specific industries, 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% to 10% of your portfolio in these sectors.

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

Fund portfolios are actively managed, and holdings may change daily. Holdings are reported as of the most recent quarter-end. Holdings in the Global Resources Fund as a percentage of net assets as of 03/31/2014: Stillwater Mining Company 0.95%. Holdings in the Gold and Precious Metals Fund as a percentage of net assets as of 03/31/2014: Stillwater Mining Company 0.26%.

By clicking the link(s) above, you will 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.

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Net Asset Value
as of 07/22/2014

Global Resources Fund PSPFX $10.25 0.04 Gold and Precious Metals Fund USERX $7.75 -0.04 World Precious Minerals Fund UNWPX $7.28 -0.08 China Region Fund USCOX $8.26 0.10 Emerging Europe Fund EUROX $8.23 0.04 All American Equity Fund GBTFX $32.99 0.15 Holmes Macro Trends Fund MEGAX $23.90 0.16 Near-Term Tax Free Fund NEARX $2.26 No Change U.S. Government Securities Ultra-Short Bond Fund UGSDX $2.00 No Change