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

It’s been a challenging week for gold investors. As I often say, investing, like life, is about managing expectations. Over the past 11 years during gold’s spectacular bull run, investors should remember that price action can go both ways. What helps is to look at the historical rise and fall of gold.  For example, looking at the past decade of one-day 5 percent drops in gold, you can see that this event is pretty rare. In 2006, gold dropped more than 5 percent in a day only two times. In 2008, there were three such events. Another one occurred at the end of this February.

One-Day 5 Percent Drop in Gold Rare Over Last Decade

Gold Price Drops Greater than 5%	1-Day Change	What Happens 1 Month Later
2/29/2012	-5.1%	-1.7%
12/1/2008	-6.0%	14.4%
10/22/2008	-5.3%	9.6%
10/10/2008	-6.9%	-12.2%
6/13/2006	-7.0%	17.4%
5/15/2006	-5.2%	-14.8%

The 1.7 percent drop experienced over the past month shouldn’t surprise gold investors given the seasonal pattern for gold. Whereas gold rises nearly 2 percent in both January and February, over the past 11 years, it’s been a non-event for gold to correct in March.

In addition, it’s a good reminder that bullion has historically been less volatile than the stock market: the 12-month rolling volatility over the past 10 years for gold was 13 percent. For the S&P 500 Index, the 12-month rolling volatility over the same period was 19 percent.

This March, there seemed to be one main driver eight thousand miles away negatively affecting gold prices. I often say that government policy is a precursor to change, and fiscal government policy strongly affected the Love Trade in India last month. To trim its current account deficit, India’s finance minister proposed doubling the customs tax on the precious metal. It was soon reported that jewelers closed shops in protest.

As a result, gold imports into the world’s largest gold market fell 55 percent.

It’s not the customs tax that has the gold shops boycotting, says UBS Investment Research firm. Jewelers’ “prime gripe is with the new 1 percent excise duty on unbranded jewelry” leading to a greater recording of gold transactions, which means more regulation and red tape. What’s so egregious to jewelers is the excise tax will be retroactive so those shop owners holding old gold stocks will have to pay duty on those as well, says UBS.

I believe this is only a temporary sell-off for India. As I often discuss in my presentations, traditional festivals and holidays drive gold demand in India because of their strong history with gold. With their love for the yellow metal, Indians hold the belief that gold “will perpetually rise,” although there are certain buyers that wait for a “psychologically important $1,600 level,” keeping in mind the strength of the rupee, says UBS.

While the seasonal Love Trade period for gold generally falls between August and February, an important holiday is coming up which has historically driven higher sales of gold. Akshaya Tritiya festival occurs on April 24 this year. This is an important occasion for Hindus, celebrated annually in late April or early May, depending on the Hindu calendar. Buying and wearing of gold jewelry is important on this day, as UBS says it’s one of the two “biggest gold buying events” in the Hindu calendar. The second event is Dhanteras, which occurs during the peak seasonality period for the yellow metal.

How important is this festival for the gold market? UBS analyzed the buying data from India last year when Indians celebrated Akshaya Tritiya festival on May 6. It found that “physical sales to India peaked four days beforehand.” Also, “sales were consistently above average for 13 working days” before the festival because local banks and jewelers restocked their inventory.

Two factors need to change to help sales in India this year, warns UBS. The firm says the jewelers’ strike needs to end, and, according to one local who talked with UBS, it would help gold sales if the price of oil would reverse—this would “relieve some of the current account pressure and perhaps allow for more flexibility with regard to gold imports.”

What won’t change over the long-term is Indians’ gold-buying behavior: Indians “have an extensive cultural tie to gold” and this “is not changing,” says UBS.

Fear Trade for Gold is Still Alive
The world has been experiencing the largest liquidity boom, as the central banks’ seven-month easing binge continues. Over this time, ISI counted 127 different stimulative policies, such as printing money, lowering interest rates and other easing measures, taken by governments around the world.

The policy shifts helped carry the equity market a long way from the low on March 9, 2009. At the time, we noted in a special Investor Alert that there were significant government policy changes that signaled the market had hit rock bottom. According to USA Today, from the 2009 bottom through the end of the first quarter, the S&P 500 Index increased more than 100 percent. No wonder U.S. equity investors are singing.

However, the side effect of the abundance of printing by the central banks in the U.S., Europe, Japan and England has bloated balance sheets amounting to nearly $9 trillion. This is double the amount that it was three and a half years ago, says Ian McAvity in his recent Deliberations on World Markets, as the printing presses have pumped our monetary system full of liquidity. This is merely “kicking the can down the road,” as central banks will have to deal with the overhang later, says Ian.

This has historically been a strong positive catalyst for gold. An analyst at the Economics and Finance Fanatic blog put together a visual that illustrates just how strong of a catalyst the nonstop printing of money is. The chart compares the U.S. adjusted monetary base since 1990 with the “surging” price of gold. As you can see below, the amount of money in the U.S. system climbed to extraordinary heights since 2008, with gold following the same path.

The economic challenges of the U.S. and eurozone “promise to be a prolonged one with sluggish economic growth,” says the blog, and easy monetary policies will likely be the remedy for awhile. I believe this provides a strong case that any pullback in the gold price appears to be a buying opportunity. Ian says, “Tax uncertainty, festering toxic debt that’s out there but out of sight and impossible debt service ability looming? I’ll stick with gold and sleep better at night.”

U.S. investors might sleep better at night with an allocation to gold in the face of continued negative real interest rates. The chart below shows how gold has historically climbed when interest rates fell below zero percent, with a “strong correlation from 1977-84, and again recently when rates turned negative in early 2008,” according to Desjardins Capital Markets.

The U.S. has not made any cuts in entitlements which make up 60 percent of the deficit. There have been no changes in fiscal policy and no change in current monetary policy. Ian McAvity says these factors together make “the most powerful argument in favor of converting that paper into gold.”

What would have to change to make me turn bearish? I believe the following three actions would need to be taken:

1. Real interest rates would have to increase 2 percent above the CPI in the U.S. and Europe
2. GDP per capita in Chindia would need to fall, negatively affecting the Love Trade
3. Substantial fiscal cuts would need to be made in entitlement programs in the U.S. and Europe

I believe there is a low probability of these events occurring any time soon, so in this environment, gold should thrive.

Have a happy holiday weekend.

Read Other Commentary on Gold:

Why Gold Can Go the Distance
The Enduring Popularity of Gold
60 Minutes Airs India’s Love for Gold
 

 

 

Index Summary

• The major market indices headed lower this week. The Dow Jones Industrial Index fell 1.15 percent. The S&P 500 Stock Index decreased 0.74 percent, while the Nasdaq Composite finished 0.36 percent lower.


• Barra Growth outperformed Barra Value as Barra Value finished 1.57 percent lower while Barra Growth fell 0.03 percent. The Russell 2000 closed the week with a loss of 1.46 percent.


• The Hang Seng Composite rose 0.72 percent; Taiwan dropped 3.70 percent, while the KOSPI rose 0.73 percent.


• The 10-year Treasury bond yield fell to 2.18 percent, falling 3 basis points for the week.
  
   

Domestic Equity Market

The S&P 500 Index fell 0.74 percent this week driven in large part by cyclical sectors as concerns mounted over a global economic slowdown.

Strengths

• Within the S&P 500 Avon Products was the best performer, rising by more than 20 percent as Coty, Inc. is seeking to buy Avon for $10 billion.


• Bed Bath & Beyond was the second-best performer this week rising by more than 9 percent on a better-than-expected fourth quarter earnings report.


• The technology sector eked out a small gain as Apple, Priceline and Mastercard were among the best performers in the S&P 500 this week.
   

Weaknesses

• The energy sector was the worst performer this week as global macro concerns dominated, even though oil prices were roughly flat for the week.


• The financial sector was also weak as macro concerns surrounding Europe and European banks resurfaced.


• First Solar was the worst performer this week, falling by more than 16 percent as the solar industry faces many obstacles.
   

Opportunities

• The market continues to grind higher irrespective of recent news. The “trend is your friend” until this pattern changes.

Threats

• The S&P 500 is arguably overbought in the short term and could be vulnerable to profit-taking.

The Economy and Bond Market

Treasury yields changed little this week, but the general direction was down as global economic data was weaker than generally expected. European concerns resurfaced this week as 10-year Spanish government bond yields spiked to the highest level this year on tepid demand at this week’s auction. Spain has become the focus in the markets with a difficult budget situation and already high unemployment. This is a reminder that many of the difficulties facing the markets have not been resolved and are likely to surface again as we move through the year.
 

Strengths

• The ISM Manufacturing Index rose in March and was ahead of expectations, indicating continuing economic expansion in the manufacturing area.


• The non-Manufacturing ISM Index fell in March, but remains well into expansion mode.


• The four-week average for the weekly initial jobless claims continues to make new lows and is viewed as a positive leading indicator for the overall economy.

Weaknesses

• Global manufacturing data disappointed as eurozone PMI remained weak and continued to indicate contraction in manufacturing.


• Construction spending fell 1.1 percent in February even as weather was conducive to growth.


• Eurozone retail sales fell 0.1 percent in February as austerity and high unemployment take their toll.

Opportunities

• Over the past couple of weeks, bonds have staged as investors reassessed the global growth outlook. That trend appears likely to continue as long as China is comfortable with slower growth.

Threats

• Rising oil and gasoline prices combined with liquidity implications of global easing, led by Europe, may raise the prospect of a reappearance of higher inflation going forward.

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

Gold Market

For the week, spot gold closed at $1,631.23 down $37.12 per ounce, or 2.2 percent. Gold stocks, as measured by the NYSE Arca Gold BUGS Index, fell 6.8 percent. The U.S. Trade-Weighted Dollar Index jumped 1.3 percent for the week.
 

Strengths

• Following the release of Fed minutes that indicated sentiment towards renewed stimulus programs was not immediately pressing, the pullback in bullion prices stimulated strong physical demand from India on Wednesday. Dealers reported that buying demand was the strongest since March 14. Historically, Indian buyers have been fairly price-sensitive to buying when they perceive pricing is at bargain levels.


• Randgold Resources, Mali's largest investor, and AngloGold Ashanti, Africa's largest gold producer, said on Wednesday they had enough supplies of fuel to sit out any immediate changes in the way they do business with respect to the coup d’état in Mali.


• Mark Bristow of Randgold Resources said the company, which sources two-thirds of its gold from Mali, had no problem bringing in fuel and shipping gold despite border closures by the 15-state Economic Community of West African States designed to squeeze Mali's economy. Gold companies with mines in Mali are playing down the risk of border closures and fallout from sanctions imposed on the West African nation after a coup last month.

Weaknesses

• Gold’s recent decline has also been based on India’s nationwide jeweler’s strike to protest a tax on non-branded ornaments. The strike is in its 19th day today. The country was the world's second-largest bullion consumer in the fourth quarter.


• Gold imports into India tumbled more than 55 percent in March. The president of the Bombay Bullion Association notes that the country imported just 15 to 20 tonnes of gold in March as compared to the 45 to 55 tonnes that is usually imported on a monthly basis. He added that the high price of the precious metal also deterred fresh purchases in the first quarter.


• The combined jewelers strike in India plus the comments that the Federal Reserve was unlikely to provide more stimuli for the economy, sent many gold stocks to 52-week lows this week. In addition, this situation was exacerbated by a large fund complex in Canada that had a change in ownership, with the new management instituting wholesale changes for many of the firm’s portfolios, dumping millions of shares of gold-mining and oil stocks.

Opportunities

• An upcoming Hindu festival, Akshaya Tritiya, held on April 24, may be the catalyst that brings the jeweler’s strike in India to an end and moves gold prices higher in April. In terms of important festivals, the Akshaya Tritiya festival and Dhanteras are the two biggest gold-buying events in the Hindu calendar. These are essential buying occasions that jewelers won't want to miss, especially after the strike-inflicted drop in revenues in March.


• According to an analysis of the Chinese gold market, growth in aggregate demand from jewelry buyers, private investors, and the People's Bank of China will continue to outpace growth in total supply from mine production and secondary sources. Furthermore, it suggests that the country's gold production and consumption are both far higher than figures suggest, but also that this gold will not find its way back on to the global marketplace.


• With both domestic supply and demand relatively price inelastic, the market will require a growing stream of imports, which will be available only at higher prices. Despite bullion prices having moved up from $300 to more than $1,600 over the last decade, world gold mine production is essentially unchanged.

Threats

• The Mozambican government is seeking to guarantee that the sale of shares in mining companies whose assets are in the country should bring financial benefits to the country. A team of officials from the Ministries of Mineral Resources and of Finance has been set up to work on how to tax these sales. The new law, which is expected to be submitted to the country’s parliament, will stipulate that the transmission of mining rights and titles must obligatorily take place in Mozambique and any public offer of shares must be announced in the Mozambican press.


• Ongoing conflicts in Eritrea and the threat of additional sanctions pose significant risks to the country’s mining sector and those companies operating within the borders. The country is currently the target of U.N. sanctions, its hostilities with neighboring Ethiopia have reignited in recent months, it faces serious infrastructure issues (particularly with regards to water), and its authoritarian government’s military and geopolitical ambitions are unsustainable. So while Eritrea’s mineral deposits are attractive, it will remain one of the riskier mining jurisdictions in Africa for the foreseeable future.


• A Romanian court annulled a zoning plan that further delayed the development of Gabriel Resources’ Rosia Montana project. The project has been a favorite for a number of non-governmental organizations to rally around to prevent the development of the mine. Reacting to the news today, Gabriel’s share price plunged 23 percent.
   

Energy and Natural Resources Market

Strengths

• Saudi Arabia is likely to maintain high oil production in the event consumer countries release emergency stocks, but it will not seek to lure buyers for more oil by discounting its crude, industry sources said. Spare capacity has fallen below 2 million barrels per day which typically is a sign of a tight oil market.


• Palm oil gained to the highest level in more than a year on speculation that buying from China, the biggest user of cooking oils, may increase when local markets reopen this week after a three-day holiday. June-delivery palm oil rose as much as 1.2 percent to 3,574 ringgit ($1,167) a metric ton on the Malaysia Derivatives Exchange, the highest for a most-active contract since March 9 last year. Financial markets in China were closed from April 2 for public holidays. Palm oil advanced 2.9 percent in two days after a U.S government survey showed soybean acreage in the world’s largest producer will decline. Palm oil and soybean oil are substitutes in food and fuel uses.


• Also in agriculture, soybeans jumped 3.5 percent after the U.S. Department of Agriculture cut the acreage to 73.9 million acres which is the lowest since 2007. Soybeans advanced 17.1 percent in the first quarter and were the best-performing agriculture commodity year to date as dry weather conditions in South America hurt crops.


• The Sun reports that stores are hiking the price of Easter eggs — even though the cost of producing them has fallen. Since peaking two years ago, cocoa prices have plunged by a third. But Easter egg favorites are still up in price.

Weaknesses

• A slump in coal exports contributed to another monthly trade deficit for Australia. Exports were down to their lowest level in a year at A$24.4 billion as coal exports plunged 21 percent to A$3.4 billion, the lowest since March 2011. Hard coking coal exports were down $597 million, 27 percent, hurt by volumes down 27 percent. Thermal coal export volumes were down 16 percent and prices were down 4 percent, implying a 19 percent drop in dollar terms.


• While gold producers in Mali signal mining operations have so far gone unaffected by a recent military coup d'état and an ongoing rebel insurgency in the country's north, juniors, intermediates and majors alike have suspended work at Malian exploration projects citing, among other reasons, fuel-supply risk and flight of foreign personnel. The latest notice of suspension of exploration operations comes from intermediate producer IAMGOLD.


• Bloomberg news reported waning demand for gasoline is putting the U.S. on course to miss a target for ethanol use for the first time, signaling no let-up in the slide in prices. A 2007 U.S. law requires refiners to mix 13.2 billion gallons of renewable products with motor fuels in 2012, up 4.8 percent from last year. Gasoline demand averaged over four weeks fell 3.8 percent from a year earlier, the U.S. Energy Department reported this week.
  
   

Opportunities

• Global food prices rose in March for a third successive month, driven by gains in grains and vegetable oils, the United Nations' Food and Agriculture Organisation (FAO) said on Thursday, putting food inflation firmly back on the economic agenda. Food prices hit record highs in February 2011 and stoked protests connected to the Arab Spring wave of civil unrest in some north African and middle eastern countries. They then receded but started to grow again in January. An FAO index that measures monthly price changes for a food basket of cereals, oilseeds, dairy, meat and sugar, averaged 215.9 points in March, up from a revised 215.4 points in February, FAO data showed. Its Cereal Price Index averaged 227 points in March, up from February, with maize prices showing gains, supported by low inventories and a strong soybean market, the FAO said. "You can see prices in the near term rising even further," FAO's senior economist and grain analyst Abdolreza Abbassian told Reuters before the index update.


• China is mulling a new round of subsidies for the home appliance sector that may help support copper demand this year according to Hu Xiaohong, an official with China Household Electrical Appliances Association. Subsidies for the purchase of energy-saving models of air conditioners and televisions are being considered. Last year, air-conditioner manufacturers were the second-largest consumers of copper in China, behind the power sector comprising 15 percent of consumption.


• Chinese aluminum producer Chalco is said to be buying a controlling stake in a Mongolian coal miner. Chinese aluminum producer Chalco has agreed to buy 56-60 percent of SouthGobi Resources at $4.89/share (a 29 percent premium over SouthGobi’s closing price) from Ivanhoe Mines. Chinese miners have increased initiatives to acquire overseas natural resources assets as the deal suggests. Chalco is diversifying its exposure out of aluminum and is investing in other resources as well; however, this coal will help in securing coal for its aluminum production, too.


• In coking coal, BHP Billiton has declared force majeure on coal shipments from its Bowen Basin coal mines in Australia due to a continued workers' strike and heavy rainfall. The industrial action at the BHP Billiton-Mitsubishi Alliance (BMA) operated Bowen Basin coal mines has clearly intensified, adding to the rolling work stoppages experienced since June 2011. BMA-operated coal mines together produced 38.2 million tonnes of coking coal, accounting for 14 percent of the global coking coal trade and 29 percent of Australian coking coal exports in 2011.
   

Threats

• Despite some confusion, an industry ministry official said this week that Indonesia plans to impose a 25 percent export tax on coal and base metals this year, jumping to 50 percent in 2013, as the major producer of raw materials looks to boost domestic investment and take a bigger slice of mining profits. If imposed, the tax would add to a raft of regulations announced this year that have caused confusion in Indonesia's mining sector and worried foreign investors. It would hit the profits of both national and foreign-owned companies and could also raise costs for importers. India, a major buyer of Indonesian coal, said it would raise concerns about the proposed tax with Jakarta.


• States hoping to capitalize on their energy booms are running into resistance from local officials who want to be able to police the noise and industrialization that accompany oil-and-gas drilling. Last Thursday, seven towns collectively sued Pennsylvania in state court to overturn a law passed in February that prevents them from using their zoning authority to regulate oil-and-gas development. The day before, an Ohio state senator introduced legislation to grant local officials more control over where companies can drill. The municipalities are fighting laws that bar them from regulating drilling, enacted by state lawmakers who feared towns would stunt job-creation and a stream of tax revenue.


• Agrimoney reported that “U.S. corn stocks may fall over 2011-12 up to 50 percent more than officials are currently factoring in,” analysts said, as they reacted to data showing inventories weaker-than-expected at the mid-year stage. The U.S. Department of Agriculture has forecast a 327 million bushel drop in inventories, to 801 million bushels, over the current season, depleted by resilient domestic and export demand following a disappointing harvest. However, investors expected the figure to be revised after inventory data, released on Friday, showed stocks as of March 1 at a multi-year low of 6.0 billion bushels, and below market forecasts.


• Argentina’s Neuquen Province has revoked oil and gas concessions held by three companies, Tecpetrol, Argenta Argentina and Petrobras, because the companies had not invested enough in production at the oil fields, the province said in a statement. The concessions will be given to the provincial government's oil and gas company, Gas y Petroleo del Neuquen.
   

April 4, 2012 The Blue Chips of China	April 3, 2012 Time to Pay the Piper	April 2, 2012 3 Trends to Watch for Global Investors

Emerging Markets

Strengths

• The Hungarian PMI surged above expectations in March to 56.8, the strongest reading in the last thirteen months, reflecting the positive impact of the opening of the brand new Daimler AG plant. The Czech manufacturing PMI has also improved.


• Brazil’s consumer prices rose 0.21 percent in March from February, the government’s statistics agency said in a report distributed in Rio de Janeiro today. Economists surveyed by Bloomberg had expected inflation of 0.37 percent, according to the median forecast of 50 analysts.


• Chilean consumer prices rose 0.2 percent in March from the previous month, less than analysts’ forecast, bringing annual inflation back within the central bank’s target range for the first time in four months.


• China official March PMI was 53.1 versus the estimate of 50.8, rising 2.1 from February; new orders were up 4.1 points at 55.1 percent. Nevertheless, due to seasonality, March’s PMI is usually 3 points better than February’s, therefore, the market is cautious about the better-than-expected PMI for last month. PMI above 50 indicates industrial activities are expanding.


• China’s March non-manufacturing PMI was 58 versus 48.4 in February, indicating consumer consumption may be resilient.


• Philippines inflation eased to 2.6 percent on a year-over-year basis in March from 2.7 percent in February. A base-year comparison suggests inflation in the country will remain subdued in April. However, inflation trends should turn up from mid-year driven by a resumed rise in oil and commodity prices and strengthening domestic demand.


• March housing transactions increased 40 percent in Beijing, and similar increases were also seen in other tier 1 and tier 2 cities. Some analysts say buyers are encouraged by the fact that the Chinese government had historically failed in curbing housing prices, but others say March sales volume is always the equivalent of combined sales of January and February in the year and March of this year didn’t see better volume than prior years.


• Indonesia’s parliament did not pass the fuel raise bill which was to remove the fuel subsidy and raise fuel prices by 33 percent.
  
   

Weaknesses

• The Russian central bank chairman said the liquidity deficit faced by the financial industry is the “new norm” this year. One of the reasons is a continued capital outflow. Russians spent $12 billion on foreign property last year, compared with $5.5 billion a year in 2007 and 2008, according to the chairman.


• Colombian policy makers meeting last month were divided over the need to raise interest rates further to keep inflation in check. Analyst Brian Lesmes, at Grupo Bancolombia in Bogota, said that though inflation and credit demand have eased, further tightening may be needed to cool household demand.


• Thailand inflation edged up to 3.4 percent year-over-year in March from 3.3 percent in February, but base-year comparison suggests inflation in the country will remain subdued in April.


• Indonesia is to discuss an export tax on coal and base metals, which is negative for local materials companies but good for global coal and base metal producers.


• Taiwan may implement a capital gains tax on stock trading profits.
   

Opportunities

• Citigroup Inc. raised South African equities to overweight, the equivalent of a buy, on expected strong earnings growth and companies’ expansion into Africa’s fast-growing frontier markets, the bank said.


• In the last decade, Indonesia has restored stable economic growth and, therefore, has improved its wealth. With opportunities to build vast infrastructures and industrial complex, foreign direct investments (FDI) now are returning to the country. The increasing FDI has driven up demand for industrial estate and building materials, such as cements.
   

Threats

• Brazil's tax agency said on Wednesday that intra-company commodities exports and imports by multinational traders must be settled using international prices. The country’s Federal tax authority said the measures are aimed at ending "price manipulation" of inter-company imports and exports that allow multi-national companies to evade local taxes.


• Peru is renegotiating with Mexico to cut natural gas shipments after allocating gas reserves to its domestic industry, a Peruvian government official said. Approximately half of the shipments will be cut, the president of state oil contracting agency Perupetro said this week.


• The Chinese economy is still in the process of a soft landing, but the policy response may fall behind the curve. In 2012, corporate revenue growth is predicted to be much slower than 2011, with gross margins also expected to be lower due to weaker demand and a rise in input costs.
   

Leaders and Laggards

The tables show the performance of major equity and commodity market benchmarks of our family of funds.

Weekly Performance

Index	Close	Weekly Change($)	Weekly Change(%)
DJIA	13,060.14	-151.90	-1.15%
S&P 500	1,398.08	-10.39	-0.74%
S&P BARRA Value	633.57	-10.11	-1.57%
S&P BARRA Growth	757.02	-0.26	-0.03%
S&P Energy	528.72	-9.71	-1.80%
S&P Basic Materials	230.77	-3.37	-1.44%
Nasdaq	3,080.50	-11.07	-0.36%
Russell 2000	818.18	-12.12	-1.46%
Hang Seng Composite Index	2,861.67	+20.48	+0.72%
Korean KOSPI Index	2,028.77	+14.73	+0.73%
S&P/TSX Canadian Gold Index	311.36	-25.04	-7.44%
XAU	165.30	-10.16	-5.79%
Gold Futures	1,631.90	-40.00	-2.39%
Oil Futures	103.09	+0.07	+0.07%
Natural Gas Futures	2.10	-0.03	-1.41%
10-Yr Treasury Bond	2.18	-0.03	-1.36%

Monthly Performance

Index	Close	Monthly Change($)	Monthly Change(%)
DJIA	13,060.14	+300.99	+2.36%
S&P 500	1,398.08	+54.72	+4.07%
S&P BARRA Value	633.57	+21.44	+3.50%
S&P BARRA Growth	757.02	+32.96	+4.55%
S&P Energy	528.72	-16.65	-3.05%
S&P Basic Materials	230.77	+3.92	+1.73%
Nasdaq	3,080.50	+170.18	+5.85%
Russell 2000	818.18	+31.09	+3.95%
Hang Seng Composite Index	2,861.67	-332.01	-14.83%
Korean KOSPI Index	2,028.77	+28.41	+1.42%
S&P/TSX Canadian Gold Index	311.36	-46.57	-13.01%
XAU	165.30	-20.56	-11.06%
Gold Futures	1,631.90	-43.00	-2.57%
Oil Futures	103.09	-1.61	-1.54%
Natural Gas Futures	2.10	-0.26	-11.04%
10-Yr Treasury Bond	2.18	+0.24	+12.19%

Quarterly Performance

Index	Close	Quarterly Change($)	Quarterly Change(%)
DJIA	13,060.14	+644.44	+5.19%
S&P 500	1,398.08	+117.02	+9.13%
S&P BARRA Value	633.57	+46.76	+7.97%
S&P BARRA Growth	757.02	+69.59	+10.12%
S&P Energy	528.72	-3.19	-0.60%
S&P Basic Materials	230.77	+10.78	+4.90%
Nasdaq	3,080.50	+410.64	+15.38%
Russell 2000	818.18	+65.89	+8.76%
Hang Seng Composite Index	2,861.67	+275.41	+10.65%
Korean KOSPI Index	2,028.77	+165.03	+8.85%
S&P/TSX Canadian Gold Index	311.36	-65.11	-17.29%
XAU	165.30	-23.72	-12.55%
Gold Futures	1,631.90	+6.30	+0.39%
Oil Futures	103.09	+1.28	+1.26%
Natural Gas Futures	2.10	-0.88	-29.66%
10-Yr Treasury Bond	2.18	+0.19	+9.27%

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.

An investment in a money market fund is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks 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.

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The Eastern European 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. 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.

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. Each 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. Bond funds are subject to interest-rate risk; their value declines as interest rates rise. The tax free funds 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.
Past performance does not guarantee future results.

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

Holdings as a percentage of net assets as of 03/31/12:

Avon Products, Inc.: 0.0%
Coty, Inc.: 0.0%
Bed Bath & Beyond, Inc.: 0.0%
Apple, Inc.: 0.0%
Priceline.com, Inc.: All American Equity Fund, 1.21%; Holmes Growth Fund, 1.29%
Mastercard, Inc.: All American Equity Fund, 3.56%; Holmes Growth Fund, 2.92%
First Solar, Inc.: 0.0%
Randgold Resources Ltd: Gold and Precious Metals Fund, 2.74%; World Precious Minerals Fund, 2.53%; Global Resources Fund, 1.45%
AngloGold Ashanti Ltd: Gold and Precious Metals Fund, 1.72%; World Precious Minerals Fund, 0.44%
Gabriel Resources, Ltd.: 0.0%
IAMGOLD Corp.: Gold and Precious Metals Fund, 1.48%; World Precious Minerals Fund, 0.57%
Chalco: 0.0%
SouthGobi Resources Limited: 0.0%
Ivanhoe Mines Ltd.: Global Resources Fund, 0.19%
BHP Billiton Ltd: 0.0%
Tecpetrol: 0.0%
Argenta Argentina: 0.0%
Petrobras: 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 S&P BARRA Growth Index is a capitalization-weighted index of all stocks in the S&P 500 that have high price-to-book ratios.
The S&P BARRA Value Index is a capitalization-weighted index of all stocks in the S&P 500 that have low price-to-book ratios.
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 MSCI Russia Index is a free-float weighted equity index developed in 1994 to track major equities traded in the Russian market.
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 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.
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 ISM Services Non-Manufacturing Index is a national non-manufacturing index based on a survey of roughly 370 purchasing executives in industries including finance, insurance and real estate (or FIRE), communications and utilities. This sister of the Purchasing Managers’ Index measures service-sector activity.
The Purchasing Manager’s Index is an indicator of the economic health of the manufacturing sector. The PMI index is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment.
The FAO (Food and Agriculture Organization of the United Nations) Cereal Price Index is a measure of the monthly change in international prices of certain food commodities.