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Investor Alert

5 Takeaways from the Vancouver Natural Resources Conference
August 1, 2014

By Frank Holmes
CEO and Chief Investment Officer
U.S. Global Investors

Last week I was happy to speak at the Vancouver Natural Resources Conference in beautiful British Columbia. I also had the pleasure of listening to a variety of presentations by some of the most influential names in the investment world, and met a few new faces along the way.
Here is what I took away from this year’s visit to Vancouver:

Facebook1) London’s dirty little secret. My good friend Robert Friedland, executive chairman and founder of Ivanhoe Mines, painted a startling picture of an increasingly polluted London, England, during his speech last week. Did you know the city’s air pollution is now worse than Beijing’s? Not only that, Paris hit life-threatening pollution levels this year and the World Health Organization even stated that pollution is the world’s single-biggest environmental health risk. Hard to believe, isn’t it?

Friedland says the answer to healthier air is the “new gold,” or platinum group metals (PGMs).
By using PGMs in catalytic convertors, harmful diesel emissions can be better controlled and less carbon monoxide is produced. As urbanization continues, investors should remain aware of inevitable pollution in larger cities, and in turn, that the use of PGMs will help minimize these effects. Demand should rise as supply lowers, pushing the metals’ prices higher.

Earlier this year I wrote that platinum and palladium looked very compelling, and the metals continue to be relevant in both the auto industry and medical industry. 

2) Russia is America’s biggest problem, according to Marin Katusa of Casey Research. Not only does Russia produce more oil and natural gas than any other country, it’s also exerting control over the uranium sector. America has long been the number one consumer of uranium, and at one time was the largest producer, but that’s all changing. The American uranium stockpile has been reduced to an amount that will last roughly three more years.

The U.S. Department of Energy (DOE) used to release a certain amount of uranium into the market each year, but in 2013 the DOE began dumping what little uranium the U.S. does have and selling it to the spot market at a lower cost. President Barack Obama did this in order to raise enough money to pay for previous cleanups.

There isn’t enough uranium left to fulfill our needs if you compare the amount the U.S. produces with the amount the U.S. requires. It’s not only America. Much of the world is looking for sources of uranium to meet demand factors. The World Nuclear Organization shows in the chart below that one reason for the shortfall in uranium supply from mines is that early production went straight into military inventories and civil stockpiles.

World Uranium Demand Outpacing Mine Supply
click to enlarge

We need Russia, whether we like it or not. When it comes to commodities such as uranium, it’s important to be aware of how performance rotates each year, giving you a leg up on finding commodities with upside potential. Looking into 2015, Marin says uranium could make big moves.

An American Energy Renaissance - Special Energy Report U.S. Global Investors

3) Energy is the most consistent story of our lifetime. Karim Rahemtulla, Chief Resource Analyst at Wall Street Daily, used this statement to emphasize the ongoing strength we are seeing in the energy sector. He says better technology is leading to new finds from Brazil all the way to the Mediterranean, and even with controversial techniques like fracking, it’s easy to see just how much oil and gas have been recovered across various shale plays in the last few years. The production numbers are unbelievable.

U.S. Global Investors released a Special Energy Report detailing the American energy renaissance we are currently living through, along with ways to benefit from this tremendous growth. Karim says the growth will continue: industrial

Located in Souther British Columbia is Gold Mountain Mining's Elk Project, an open pit gold mine

4) One in every 3,000 projects actually becomes a working mine – I visited two of these. The Saturday following the conference I joined other CEOs, hedge fund managers, newsletter writers and curious investors on a special trip to see two open pit mines in Southern British Columbia. What an experience it was. Marin Katusa of Casey Research organized this trip that took our group of around 50 to see gold and copper mines. Elk Project of Gold Mountain Mining Corp.

This type of “boots on the ground” experience helps form the tacit knowledge investors and fund managers need to stay curious about the sectors and companies they invest in. I believe implicit knowledge – sticking simply to data and numbers – can only get you so far. Being able to see the Elk Project up close was remarkable – this company is organized and entrepreneurial, and has reported good potential for open pit mining operations such as this one. The Elk Project plans to expand its existing resources using an aggressive drill program.

5) Innovation and technology at Copper Mountain Mining. The second stop on our trip was the open pits at Copper Mountain Mining’s operations. Copper Mountain processes around 35,000 tonnes a day, requiring the company to use bigger, more innovative and more efficient equipment. During our tour we saw one of the pits, which was 200 meters deep. But what I found most impressive was the infrastructure and equipment the company uses.

The Haul trucks at Copper Mountain use tires costing $40,000 apiece. Copper Mountain CEO, Jim O'Rourke

Copper Mountain has haul trucks with high-efficiency diesel engines and hydraulic front-loading shovels with 42-cubic-meter buckets. The tires alone have a price tag of $40,000, and are equipped with microchips to measure temperature and pressure data remotely.

The property is also run by a computerized control system, which tracks everything from the crusher to the water system and even the truck traffic on site. 

Companies like Copper Mountain are moving fast, making things happen and using new technology to regenerate life into one of the oldest mines in BC. Investors should pay attention to companies such as this, which are making enormous strides and adding credibility to their names.

These trends all have important implications on where to find investment opportunities. Sometimes you have to dig a little deeper and put yourself in the middle of the action, and other times it’s simply about staying curious to learn about what is going on right in front of you. I encourage my readers and shareholders to stay curious to learn, because with curiosity comes improvement and opportunity.

If you were unable to attend the conference last week, I invite you to download my presentation, From Asia with Love – The Ups & Downs in the World of Resources.

Discover the 4-Star Gold and Precious Metals Fund

Index Summary

  • Major market indices finished down this week.  The Dow Jones Industrial Average fell 2.75 percent. The S&P 500 Stock Index dropped 2.69 percent, while the Nasdaq Composite fell 2.18 percent. The Russell 2000 small capitalization index fell 2.61 percent this week.
  • The Hang Seng Composite rose 0.65 percent; Taiwan fell 1.83 percent and the KOSPI advanced 1.93 percent.
  • The 10-year Treasury bond yield rose two basis points to 2.49 percent.
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Domestic Equity Market

The S&P 500 Index had the worst week of the year, falling 2.69 percent. Energy stocks led the way down, falling more than 4 percent while telecommunication services was the relative winner, falling a little more than 1 percent. The market fell 2 percent on Thursday and many market observers were searching for “the” reason for the selloff, but it is likely just another ordinary pullback, similar to ones we have experienced for the past 18 months.

S&P Economic Sectors
click to enlarge


  • The telecommunication services sector outperformed this week on the back of an IRS ruling allowing Windstream to spin off some wireline and real estate assets into a REIT structure, which will free up cash flow at the remaining operating company to reinvest back into the business. The stock rose 9.27 percent. 
  • It was an ugly week for most areas of the market but we did see some strength in casinos and gaming, certain retailers and refiners.
  • Family Dollar was the best performer in the S&P 500 this week, rising 25.04 percent. Dollar Tree agreed to acquire Family Dollar in a “friendly” cash and stock deal.


  • The energy sector was the worst performer this week. Exploration & production companies along with energy service names were the hardest hit, but virtually the entire sector sold off. The sector has been an outperformer in recent months and at this point it looks like normal profit taking.   
  • The industrials sector also underperformed this week. As highlighted last week, numerous defense and aerospace companies underperformed along with many diversified or general industrial companies. Worst performers included, Eaton Corp., Pentair, L-3 Communications and Rockwell Automation.
  • Genworth Financial was the worst performer in the S&P 500 this week, falling by more than 20 percent. The company announced it is conducting a comprehensive review of its long-term-care insurance reserves. The concern is the company may have inadequately reserved for potential liabilities.


  • While earnings season is winding down we still have quite a few significant reports out next week. Key companies reporting next week include Michael Kors, Disney, CVS and Archer-Daniels-Midland.
  • Health care names have been strong in recent weeks. Key names to watch this week include Tenet Healthcare, Actavis and Mylan as all three report earnings.
  • The path of least resistance for the market appears higher as this “classic” bull market phase of grinding higher with low volatility remains intact for now.


  • Volatility has been remarkably low and this bull market has been an abnormally smooth ride. This calmness won’t last forever and late summer to early fall has traditionally been more volatile.   
  • Michael Kors, Coach and Ralph Lauren all report next week. All three have been under pressure recently on concerns about the health of the low-end luxury market.
  • Geopolitical tensions are on the rise with the downing of a civilian jetliner in Ukraine, a ground war in Gaza and more Russian sanctions. The market has been able to shrug off these events so far but an escalation could be the catalyst for a long-awaited correction. 

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The Economy and Bond Market

Treasury yields were mixed this week as generally good economic data was offset by equity market volatility and geopolitical risk. The ISM Manufacturing Index hit a 3-year high in July, nonfarm payrolls continued to grind ahead, gaining 209,000 in July and second-quarter GDP rose a better than expected 4 percent. The Federal Reserve also had a Federal Open Market Committee (FOMC) meeting this week, continuing the gradual reduction of quantitative easing and staying the course on interest rates. Overall, long-term rates rose a few basis points while shorter maturities tended to fall a few basis points.       

ISM Manufacturing PMI Surprises to the Upside
click to enlarge


  • The consistency with which the FOMC is moving is constructive for the market. This week’s meeting was very predictable and the Fed is gradually preparing the market for a shift in policy.
  • Second-quarter GDP expanded by 4 percent, well ahead of the 3 percent expectations and the first quarter was revised higher as well.
  • The ISM manufacturing PMI has historically been an excellent leading indicator for the economy and it just hit a three-year high


  • The employment cost index (ECI) rose 0.7 percent in the second quarter, which was the largest increase since 2008. This caused some concern in the market about inflation implications.
  • News out of South America added to both global growth concerns and geopolitical risks. Argentina selectively defaulted on bond payments as the country is still in negotiations with creditors. Brazil’s growth forecasts were cut for the ninth week in a row and economic growth expectations for 2014 have now dipped below 1 percent.
  • Housing data remains disappointing with pending home sales falling 1.1 percent in June. The S&P/Case-Shiller 20 city home price index rose 9.3 percent year-over-year but has been trending steadily lower.


  • Geopolitical tensions remain elevated with the downing of a civilian jetliner in Ukraine, a ground war in Gaza and more Russian sanctions. Bonds could benefit from a flight to safety in this environment which is largely what occurred over the past several weeks. 
  • With a light economic calendar next week and earnings reports beginning to wind down, geopolitical risks may take center stage.
  • With key global central banks back into easy policy mode and inflation trending lower in many parts of the world, the path of least resistance for bond yields likely remains down.


  • The economy does have some positive momentum and appears poised to continue to build on that as we move solidly into summer. With the European Central Bank (ECB) and Bank of Japan taking the global lead in easy monetary policy the Fed may transition to a tighter policy sooner than many expect.
  • Economic data has been relatively strong and the market could refocus on that next week.  
  • Several Fed speakers in recent weeks have indicated a shift in Fed thinking toward normalizing interest rates. The threat is this occurs sooner than the market currently expects, which is mid-2015.

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World Precious Minerals Fund - UNWPX • Gold and Precious Metals Fund - USERX

Gold Market

For the week, spot gold closed at $1293.33, down $13.82 per ounce, or 1.06 percent. Gold stocks, as measured by the NYSE Arca Gold Miners Index, lost 2.11 percent. The U.S. Trade-Weighted Dollar Index rose 0.34 percent for the week.

Date Event Survey Actual Prior
July 30 U.S. Second Quarter GDP 3.0% 4.0% -2.1%
July 30 U.S. July FOMC Rate Decision 0.25% 0.25% 0.25%
Aug 1 U.S. July ISM Manufacturing 56.5 55.8 56.3
Aug 1 U.S. July Change in Non-Farm Payrolls 230K 209K 298K
Aug 7 UK BoE Interest Rate Decision 0.5% - 0.5%
Aug 7 ECB Main Refinancing Rate 0.15% - 0.15%
Aug 7 U.S. Intial Jobless Claimes 305K - 302K
Aug 8 China July Trade Balance 26.00B - $31.6B


  • Gold prices rose the most in two weeks after U.S. employers added fewer workers than forecast last month, increasing pressure on the Federal Reserve to maintain lower interest rates. In addition, a Bloomberg survey shows gold traders and analysts have turned bullish on gold prices, as tension over Ukraine and the Middle East escalate. Lastly, flows into exchange-traded products backed by precious metals turned positive for the year. These products took in around $540 million in July, fully reversing the net outflow of $319 million in the six months through June.
  • Goldcorp Inc. reported second quarter earnings that beat analysts’ estimates after costs fell more than expected. Production of 648,000 ounces edged out estimates as a result of better performance at Pinos Altos, which reported higher throughput and grades. The company also reiterated its 2014 production guidance of 2.95 to 3.10 million ounces, while all-in costs are expected to be at the low end of its guidance.
  • Northern Star Resources Ltd. reported record quarterly production of 115,820 ounces, together with record revenue, becoming the second-biggest, Australian-listed gold producer. The company also reiterated guidance for 550 to 600 thousand ounces in 2015. Similarly, Lake Shore Gold reported its quarterly results highlighting its view that the cash cost reductions are likely sustainable, as they appear to be a result of operations reaching steady state at Timmins West, as well as widening of the ore body at Bell Creek with mining moving deeper.


  • Gold declined to a six-week low before Friday’s U.S. jobs report as a result of stronger U.S. economic data and the continuation of the U.S. dollar breakout. Wednesday’s GDP report for the second quarter showed the economy grew 4 percent in real terms from last year, beating analysts’ expectations for a 3 percent rise. The U.S. dollar also found support after the Federal Open Markets Committee (FOMC) meeting, where it was decided the Fed will continue to taper its bond purchases as planned, while keeping an eye on labor slack. Lastly, ISM Manufacturing expanded in July at the fastest pace in more than three years, showing U.S. factories will help power the economy after a second-quarter rebound.
  • Alamos Gold Inc. reported disappointing second quarter earnings on lower-than-expected production. At Mulatos, its main operation, Alamos’ production was impacted by lower-than-expected heap leach grades and recoveries, as well as fewer tonnes milled. Given the limited high grade mill feed and anticipated rainy season in July, production is expected to be materially weighted on the fourth quarter, leaving little margin for error. In similar fashion, OceanaGold missed earnings expectations on lower-than-expected production and higher costs.
  • Newmont Mining Corp. announced it has reached a construction decision on its Merian project in Suriname. The company expects to invest as much as $1 billion, even as it struggles to reduce operating costs amid a weak gold price environment. The Merian project, which is expected to start up in late 2016 and produce 300,000 to 400,000 ounces per year, has not managed to convince investors that it has the margins and profitability to turn around the miners’ outlook. Just this week, yet another example of capital misallocation in the precious metals space was uncovered; Coeur Mining announced it will delay its construction decision at its La Preciosa mine in Mexico. The asset was acquired last year for nearly $450 million, but at today’s prices it does not provide the expected profitability.


  • Adam Graf of Cowen and Company published his second M&A report on the gold space this week. The report sees miners’ balance sheets improving going into 2015, with the average Net Debt to Capital across the top six North American producers possibly being reduced by as much as 25 percent, thus allowing for acquisitions. Since last November’s report, several juniors have advanced their assets, however, with little effect on share price. As a result, Graf believes this disconnect provides a unique opportunity for seniors to purchase less risky assets at relatively the same price versus a year ago. Some of his preferred takeout candidates include Pretium Resources, Seabridge Gold, Imperial Metals, and Romarco.

Spending Capacity of Large North American Gold Producers
click to enlarge

  • Calibre Mining Corp. announced that B2Gold increased its equity ownership in Calibre to approximately 15.2 percent, following the exercise of common share purchase warrants. The proceeds will be used to advance Calibre’s Montes de Oro project in Nicaragua, a country in which B2Gold has extensive experience, thus giving a vote of confidence to the future success of Calibre. In addition, Calibre continues to advance its Eastern Borosi project where IAMGOLD has an option.
  • The Swiss National Bank (SNB) posted record profits of 16.1 billion francs for the first half of the year, as its gold holdings climbed in value. The news brought forward discussion on a 2011 Swiss public initiative which seeks to institute a policy so that the SNB holds at least 20 percent of its reserves in gold, a level that would require the SNB to purchase a large amount of gold in the open market. The initiative would also block the sale of gold holdings by the SNB. The initiative is not surprising considering earlier studies have shown that, for a portfolio of foreign currencies, gold is the best diversifier and enhances the portfolio’s risk-adjusted return. Central banks in many parts of the world have realized the value of gold within their portfolios, which is why central banks have been net gold buyers since 2010.

Central Bank Buying and Selling of Gold
click to enlarge


  • The recent breakout of the U.S. dollar has posed strong headwinds for commodities, especially gold. This pressure is unlikely to stop in the short term as other major currencies continue to weaken, namely the euro and the British pound, as European sovereign yields reach multi-century to all-time lows. These yields, while absurd to some, are a direct response to the threat of deflation in the eurozone, which just this week posted its lowest inflation number since 2009. As such, speculators who have been on the short side of the gold trade are given more incentives to double down on their short calls and add short-term pressure to the gold price.

The Dollar Breaks Out Above Its Highest Point Since October
click to enlarge

  • The president of the Democratic Republic of Congo (DRC) has fired the chief executive of the country’s state mining company Gecamines, alleging gross negligence in the sale of mining assets to foreign investors. According to criticism from the International Monetary Fund (IMF), there are concerns that major projects had been sold for considerably less than their market value. There is a threat for companies with legitimate assets in the DRC to face delays, investigations and even court proceedings as part of a broader investigation into these allegations.
  • Productivity is now the top business risk facing mining and metals companies, according to Ernst&Young’s annual report on risks to the industry. The report highlights that long-term profitability required a business-wide response to this threat. This risk is compounded by dwindling ranks of geosciences professionals, which has impaired mining companies’ ability to respond to dramatic fluctuations in commodity prices, according to HSBC. The risk that made the top ten in this year’s report is reliable access to water and energy. The report highlighted that rising energy costs and competing water demands will become a more notorious business risk, especially for operators in Chile, Peru and South Africa.

An American Energy Renaissance: Read the Special Energy Report for Frank Holmes

Energy and Natural Resources Market


Strong U.S. Dry Gas Production Growth
click to enlarge



  • Strong economic data coming from the U.S. and China, the largest consumers of copper, has led traders to take net long positions in the futures market for only the fifth time in two years, which should be supportive for pricing moving forward. Lundin Mining outperformed over the prior five days.
  • U.S. oil and gas refiners advanced this week as West Texas Intermediate (WTI) crude saw its biggest weekly decline in seven months, further extending the spread with Brent crude. Both Valero Energy Corp and Marathon Petroleum were up on the week during volatile trading in the broader market. 
  • Despite general commodity weakness, silver-related equities managed to outperform on a relative basis due to the metal’s use in industrial applications. Silver Wheaton was relatively unscathed on the week versus other natural resources industry groups. 


  • The abrupt decline in WTI crude prices this week in response to equity market volatility took its toll on upstream oil producers and service providers. Sanchez Energy and Patterson Energy fell approximately 10 percent over the prior five days.   
  • Nickel prices saw their largest weekly decline since May as the dollar’s rally turned investors’ attention away from the metal as an alternative investment. The significant decrease in nickel prices also led the metal to see its largest monthly decline since November.
  • A strong U.S. dollar, moderate inflation, and strong economic data out of the U.S. and China has led a decrease in gold prices for the third-straight week. However, gold still maintains a certain amount of appeal as the global economic outlook remains uncertain and geopolitical tensions continue.


  • Speculation that demand for iron ore imports in China may be improving has led the steel making material to its second-straight monthly increase. Rising supplies from Australia and Brazil has led to the closure of higher cost production mines in China. According to the China Metallurgical Mining Enterprise Association, between 20 percent and 30 percent of Chinese mines have been closed. The fall in supply and uptick in demand from China will serve to boost iron ore moving forward.
  • According to Barclays, commodity assets under management increased to $325 billion in June. The news signals the flow of money into metals and energy as investors grow optimistic over future global growth prospects.
  • Lead prices have been on the rise on account of increased future demand. According to Morgan Stanley, consumption will exceed output by 279,000 metric tons this year. The short supply is on the back of limited future mine production, while the strong demand stems from boosts in manufacturing. For example, Ford Motor Co. reported last week that it will introduce 23 new models worldwide this year.


  • Natural gas is expected to continue its decline as meteorologists forecast below-average temperatures across the U.S. Cooler weather would limit power demand, thus crippling the demand for natural gas. The news has pushed natural gas futures to an eight-month low.
  • Coal continues its decline amid news that China is seeking to curb air pollution. The policy will help cut coal imports of power plants by 2 percent this year according to Goldman Sachs.
  • Copper prices are taking a hit as inventories tracked by the Shanghai Futures Exchange showed substantial supply. Deliverable stockpiles in July climbed 37 percent, while orders to remove copper from warehouses fell to the lowest amount since July 10. 
Frank Talk Insight for Investors
July 31, 2014
Gold Mining Stocks Are Beating Bullion: A Win-Win
July 28, 2014
Second Quarter Earnings: Marching Toward a Strong Recovery
July 24, 2014
Desperately Seeking a Cheaper Kilowatt Hour
A Blog by Frank Holmes, C.E.O. and Chief Investment Officer

China Region Fund - USCOX  •  Emerging Europe Fund - EUROX

Emerging Markets



  • Saudi Arabia was the best-performing market this week, as emerging market and Middle Eastern funds turned bullish toward Saudi Arabian stocks. This came on news that the market will open to foreign direct investment. The Saudi market regulator announced last week that it planned to open the bourse, the biggest in the Arab world, to direct investment by foreign institutions. Even if Saudi Arabia is not included in a major MSCI equity index before 2017, analysts want to be ahead of the curve following strong second-quarter earnings announcements that coincided with the announcement.
  • Chinese A-Shares and the Hong Kong markets were among the best performers in Asia this week, as market expectations of further credit easing by Chinese policymakers drove $2.1 billion of equity inflows to China during the week ending July 30, the largest weekly fund influx since April 2008.
  • Telecommunications was the best-performing sector in emerging markets this week, led by South Korean telecommunication providers. Government policy measures to increase dividend payouts of state-run companies via tax incentives helped gather the momentum.


  • Brazil was the worst-performing emerging market for the week, with the Brazilian real dropping heavily on news that the central bank refrained from a rollover of foreign-exchange swap contracts supporting the currency. The news coincides with reports showing the country posted a primary budget deficit for a second-straight month, thus limiting additional fiscal spending. In addition, industrial production fell for the fourth-straight month, which has affected companies’ earnings, and led to numerous disappointments over the course of earnings season.
  • Technology was the worst-performing sector in emerging markets this week, driven by Taiwanese semi-conductor companies on rising investor concerns that growth prospects may have been fully reflected in stock valuations.  
  • The consumer staples sector underperformed the emerging market complex for the week, led lower by Eurocash, a Polish operator of cash and carry stores, whose shares sold off following a report by its direct competitor showing a collapse in margins. Investors used this report to piece together a softening of retails sales data in Poland.


  • Iran has a good chance of becoming investable within the next six to18 months, according to RenCap. Following a targeted easing of sanctions announced by the U.S. government this week, investor access to the country may be expanding now that President Rouhani, a figure strongly associated with the reformist camp, proves his willingness to cooperate with the West. RenCap shows that, unlikely as it may sound, the local stock market capitalization is roughly $170 billion (similar to Poland), while daily trading volumes are around $150 million (much greater than Greece). In addition, Iran has a broad manufacturing base, similar to that of Turkey. Unlike Turkey however, it has 9 percent of the world’s oil reserves and a sizeable current-account surplus.
  • Erste Bank is a screaming buy at €19 since the stock is worth €23, according to UBS’ Matteo Ramenghi. Back in early July, Ramenghi recommended that investors buy Erste after shares collapsed on the bank’s announcement of a Hungarian foreign mortgage levy, as well as a €1.4 billion hit in Romania. According to Ramenghi, the 30-percent selloff was way overdone when considering Erste’s solid capital ratios, leaving a well-capitalized, growing bank trading at a very cheap 0.9X multiple to tangible equity. Perhaps Ramenghi is right; Erste is up 7 percent from the trough, while the rest of the central European banks are melting down.

The Worst May Be Over: Erste Bank Moves Up from 52-Week Low
click to enlarge

  • Recent history suggests Chinese property developers may continue their positive price momentum against easing credit policies. This possible movement is due to tight correlations between money supply growth and property sector valuations in China, as well as experiences in 2008 and 2011 to 2012, when Chinese authorities loosened monetary policy to protect economic growth.  Near-term catalysts include further media coverage of easier mortgage lending, looser home purchase restrictions and potentially strong sales in the fall.

Credit Loosening in China Historically Enhances Valuation for Property Sector
click to enlarge


  • According to The Economist, “After months of disjointed action, America and Europe finally put together a tough and coordinated package of sanctions.” The recent article featured in the publication goes on to elaborate how the sanctions against state-controlled banks present the biggest and most immediate threat to Russia’s economy. These banks have around $15 billion in bonds denominated in dollars, euros and Swiss francs that will need to be rolled over before 2017. The new sanctions will severely limit the lenders’ ability to refinance this debt through Western capital markets. The likely result is a reduction in the banks’ capital, which will force a severe reduction in lending and cripple the already ailing economy.
  • MSCI Inc. has announced that it will introduce indices that exclude Russia. These include the MSCI ACWI ex-Russia and the MSCI Emerging Markets ex- Russia. With sources of debt financing all but eliminated, and with active managers rushing through the exits, the news by MSCI Inc. is the latest blow to the Russian market. MSCI Inc. gauges are tracked by passive investors managing about $9 trillion, thus leading to drastic reallocation of passive funds out of Russia, and completing the triage for fund outflows. U.S. Global Investors no longer has exposure to Russia in our Emerging Europe Fund.
  • Since the Second-Child Policy was approved in China earlier this year, eligible couples have been slow to embrace the looser restrictions based on provincial statistics.  Growth prospects of China’s mass consumer sector, such as infant food and diapers, has significantly diminished due to structural migration to e-commerce and rising competition to name brands. 

View Our Brief History of the Production and Application of Silver

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
Korean KOSPI Index 2,073.10 +39.25 +1.93%
10-Yr Treasury Bond 2.49 +0.03 +1.09%
Hang Seng Composite Index 3,352.18 +21.67 +0.65%
Natural Gas Futures 3.80 +0.02 +0.40%
Gold Futures 1,294.70 -10.60 -0.81%
S&P/TSX Canadian Gold Index 198.52 -2.27 -1.13%
XAU 99.49 -2.10 -2.07%
Nasdaq 4,352.64 -96.92 -2.18%
Russell 2000 1,114.86 -29.86 -2.61%
S&P 500 1,925.15 -53.19 -2.69%
DJIA 16,493.37 -467.20 -2.75%
S&P Basic Materials 307.35 -8.97 -2.84%
S&P Energy 697.87 -29.94 -4.11%
Oil Futures 97.62 -4.47 -4.38%
Monthly Performance
Index Close Monthly
Korean KOSPI Index 2,073.10 +57.82 +2.87%
S&P/TSX Canadian Gold Index 198.52 +1.59 +0.81%
XAU 99.49 -1.85 -1.83%
S&P Basic Materials 307.35 -7.10 -2.26%
Nasdaq 4,352.64 -105.10 -2.36%
S&P 500 1,925.15 -49.47 -2.51%
Gold Futures 1,294.70 -37.10 -2.79%
DJIA 16,493.37 -482.87 -2.84%
S&P Energy 697.87 -29.66 -4.08%
10-Yr Treasury Bond 2.49 -0.13 -5.10%
Oil Futures 97.62 -6.86 -6.57%
Russell 2000 1,114.86 -84.64 -7.06%
Natural Gas Futures 3.80 -0.56 -12.88%
Hang Seng Composite Index 3,352.18 -332.01 -14.83%
Quarterly Performance
Index Close Quarterly
Hang Seng Composite Index 3,352.18 +278.11 +9.05%
XAU 99.49 +6.49 +6.98%
S&P/TSX Canadian Gold Index 198.52 +12.63 +6.79%
Korean KOSPI Index 2,073.10 +113.66 +5.80%
Nasdaq 4,352.64 +228.74 +5.55%
S&P Basic Materials 307.35 +7.45 +2.48%
S&P 500 1,925.15 +44.01 +2.34%
S&P Energy 697.87 +11.84 +1.73%
DJIA 16,493.37 -19.52 -0.12%
Gold Futures 1,294.70 -8.80 -0.68%
Russell 2000 1,114.86 -13.94 -1.24%
Oil Futures 97.62 -2.14 -2.15%
10-Yr Treasury Bond 2.49 -0.09 -3.56%
Natural Gas Futures 3.80 -0.88 -18.78%

Please consider carefully a 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.

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% 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.

Fund portfolios are actively managed, and holdings may change daily. Holdings are reported as of the most recent quarter-end. Holdings as a percentage of net assets as of 6-30-2014:

Ivanhoe Mines Ltd.: Global Resources Fund, 0.18%
Gold Mountain Mining Corp.: 0.0%
Copper Mountain Mining Corp.: 0.0%
Eurocash SA: 0.0%
Erste Bank Group AG: Emerging Europe Fund, 5.63%
Windstream Holdings Inc.: 0.0%
Family Dollar Stores Inc.: 0.0%
Dollar Tree Inc.: 0.0%
Eaton Corp.: 0.0%
Pentair Plc: 0.0%
L-3 Communications Holdings Inc.: 0.0%
Rockwell Automation Inc.: 0.0%
Genworth Financial Inc.: 0.0%
Michael Kors Holdings Ltd.: 0.0%
Walt Disney Co.: 0.0%
CVS Caremark Corp.: 0.0%
Archer-Daniels-Midland Co.: Global Resources Fund, 1.01%
Tenet Healthcare Corp.: All American Equity Fund, 0.99%
Actavis Plc: All American Equity Fund, 1.41%
Mylan Inc.: All American Equity Fund, 0.98%; Holmes Macro Trends Fund, 0.99%
Coach Inc.: 0.0%
Ralph Lauren Corp.: 0.0%
Goldcorp Inc.: Gold and Precious Metals Fund, 0.07%; World Precious Minerals Fund, 0.07%
Northern Star Resources Ltd.: Gold and Precious Metals Fund, 2.50%; World Precious Minerals Fund, 0.24%
Lake Shore Gold Corp.: Gold and Precious Metals Fund, 0.66%
Alamos Gold Inc.: World Precious Minerals Fund, 0.06%
OceanaGold Corp.: Gold and Precious Metals Fund, 1.60%; World Precious Minerals Fund, 0.94%
Newmont Mining Corp.: Global Resources Fund, 0.01%; Gold and Precious Metals Fund, 0.12%; World Precious Minerals Fund, 0.11%
Pretium Resources Inc.: World Precious Minerals Fund, 3.07%
Seabridge Gold Inc.: 0.0%
Romarco Minerals, Inc.: World Precious Minerals Fund, 1.00%
Imperial Metals Corp.: Gold and Precious Metals Fund, 1.34%; World Precious Minerals Fund, 1.37%
Calibre Mining Corp.: Global Resources Fund, 0.01%; World Precious Minerals Fund, 0.14%
IAMGOLD Corp.: Gold and Precious Metals Fund, 0.10%; World Precious Minerals Fund, 0.09%
Lundin Mining Corp.: Global Resources Fund, 1.22%; Gold and Precious Metals Fund, 0.88%; World Precious Minerals Fund, 0.45%
Valero Energy Corp.: 0.0%
Marathon Petroleum Corp.: All American Equity Fund, 1.12%
Silver Wheaton Corp.: Global Resources Fund, 1.31%; Gold and Precious Metals Fund, 1.18%; World Precious Minerals Fund, 0.39%
Sanchez Energy Corp.: Global Resources Fund, 1.93%; Holmes Macro Trends Fund, 1.45%

*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.
The S&P 500 Materials Index is a capitalization-weighted index that tracks the companies in the material sector as a subset of the S&P 500.
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 ISM manufacturing composite index is a diffusion index calculated from five of the eight sub-components of a monthly survey of purchasing managers at roughly 300 manufacturing firms from 21 industries in all 50 states.
The S&P/Case-Shiller Index tracks changes in home prices throughout the United States by following price movements in the value of homes in 20 major metropolitan areas.

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Net Asset Value
as of 08/01/2014

Global Resources Fund PSPFX $9.80 -0.12 Gold and Precious Metals Fund USERX $7.50 0.06 World Precious Minerals Fund UNWPX $7.11 0.04 China Region Fund USCOX $8.26 -0.03 Emerging Europe Fund EUROX $8.07 0.03 All American Equity Fund GBTFX $32.53 -0.02 Holmes Macro Trends Fund MEGAX $23.47 No Change Near-Term Tax Free Fund NEARX $2.25 No Change U.S. Government Securities Ultra-Short Bond Fund UGSDX $2.00 No Change