Gold on Sale, Says the Rational Investor

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

The leveraged gold futures derivatives market is knocking down the precious metal, yet in massive contrast, this drop has ignited a shopping frenzy according to gold coin dealers. I spoke with several friends and industry experts this week who confirmed the record sales numbers for the month. In fact, American Gold Eagle sales reached 161,500 ounces in July, the highest monthly figure since April 2013. What gives?

Gold often attracts conspiracy theories when it falls so abruptly, especially on Mondays. Interestingly, in a recent article on Zero Hedge, ABC Bullion out of Sydney, Australia, details some of the speculation behind the precious metal’s beat down, which I’ve also discussed in my blog.

Price manipulation, or a “bear raid,” could be a factor. Last week, gold prices experienced a mini “flash crash”—the first one in 18 months—after five tonnes of the metal appeared on the Shanghai market. Whether front-running or fat fingers are to blame, the sell order for what many are calling a bear raid was initially thought to have originated in China, but we now believe it came from New York City.

Did investors anticipate China’s negative flash purchasing managers’ index (PMI) last week? China is the largest consumer of gold, and the PMI is a useful leading indicator of commodities demand as well as job growth.

What about the Greek crisis? This type of debt fear crisis often has the effect of boosting the price of gold, but we didn’t see that happen. Did European Central Banks sell gold down to dampen the psychological impact of the event? Understating the seriousness of the debt crisis may have prevented investors from seeking gold as protection.

Conspiracy theories or not, I believe none of this tarnishes gold’s sustainable allure. It’s important to look at the two key demand drivers for gold: the Fear Trade and the Love Trade. The Fear Trade is related to money supply and negative real interest rates. The Love Trade comes from the purchase of gold due to cultural affinity and the rising GDP per capita in Asia and the Middle East.

I’ve always advocated, and continue to advocate, a 10 percent weighting: 5 percent in gold stocks and 5 percent in bullion, then rebalance every year.

From Crisis to Opportunity

Take a look at the chart, which shows the bearish trend is obvious.

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And yet many investors are still buying. In an interview this week with Money Metals Exchange and in talking to Bart Kitner, founder of Kitco, both conversations confirmed that smart investors are enthusiastically buying gold during this downdraft in prices.

Rational Investors Know a Deal When They See One, and Feel One

With so much gloom and doom in the media surrounding gold right now, you might wonder why coin sales are soaring at multiyear highs. The reason is pretty simple: Gold is on sale.

High net worth individuals and other savvy investors realize that even now, as herds of people are rushing for the exit, owning gold is one of the best ways to manage systemic risk. They follow that Greeks had their cash in banks frozen like in Cyprus only a few years ago.

Ray Dalio, founder of Bridgewater Associates, said it best: “If you don’t own gold, you know neither history nor economics.”

Indeed, some investors fail to take a long-term perspective on gold. Their sentiment toward the metal extends only as far back as the most recent selloff, induced by the strong U.S. dollar, weak global manufacturing activity and fears that interest rates will soon rise.

Many investors have that “sinking feeling” with a deterioration in global PMI, leading economic indicators, falling commodity prices and the threat of rising U.S. interest rates. Many have raised their cash levels due to decelerating global growth prospects. I’ve written that bad news is good news because when governments accelerate monetary policy, this can be a good opportunity for investors to add to their gold exposure.

I’m not the only one who takes this position. Besides the investors gobbling up American Gold Eagles, central banks around the world continue to buy, hold and repatriate bullion. The U.S. Federal Reserve maintains its 8,133 tonnes, the most of any central bank. Germany, the Netherlands and other countries have brought home mounds of the yellow metal in the last 12 months. China has increased its reserves 60 percent in the last six years. And Texas is in the early stages of establishing its own gold depository, the first state to do so. If there were no faith left in the metal, why would banks even bother with it?

At the same time, massive amounts of paper money are still being printed. In fact, the International Monetary Fund has asked the Bank of Japan to be ready to increase its monetary stimulus further, according to Bloomberg. Let the paper printing roll! In the U.S., where quantitative easing was supposed to have ended back in October, the Fed’s balance sheet is still within 0.3 percent of its all-time high, according to Sovereign Man.

Based on Historical Volatility Models Gold Is Extremely Oversold

Before the bottom fell out, gold’s support seemed to have been around $1,150, whereas the resistance trend line was breaking down. The descending triangle pattern, seen below, indicates that demand was weakening and downside momentum was gathering force. 

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A useful tool that traders and analysts use is Bloomberg’s relative strength indicator (RSI). Below is gold’s RSI over the same one-year period. It shows that gold has passed below the 30 mark into oversold territory. When this happens, many analysts see it as a buying opportunity. Between November 3—the last time gold fell this significantly below 30—and January 20, the yellow metal ended up rallying 13 percent.

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A similar tool we use to identify buy and sell signals is the price oscillator, which I often explain while speaking at conferences. This tool measures how many standard deviations an asset’s value has moved from its mean (and in which direction). When the number crosses above two standard deviations, it’s often interpreted as an opportunity to take some profits, and when it crosses below negative two, it might be a good time to think about accumulating.

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Love Trade and Fear Trade: Gold’s Tailwinds and Headwinds

I always look at two demand factors for gold, the Fear Trade and the Love Trade. The Love Trade is the purchase of gold for weddings, anniversaries and cultural celebrations while the Fear Trade is gold’s reaction to monetary and fiscal policies, particularly real interest rates.

Historically, the Love Trade has been on the upswing starting around this time—late July and early August—in anticipation of international festivals and holidays such as Diwali, Christmas and the Chinese New Year. But as you can see in the oscillator chart above, gold is down 1.4 standard deviations for the 10-year period. This suggests gold may be at an attractive level to accumulate, and gold stocks can offer grater beta when gold begins to revert to its mean.

The Fear Trade on the other hand involves the Fear Trade and real interest rates (inflation – CPI = real interest rates). Several times in the past I’ve explained how gold tends to benefit when real interest rates turn negative. When the rate of inflation exceeds the yield on a five-year Treasury note, it makes gold much more attractive to many investors.

At this time, the five-year Treasury yield sits at 1.58 percent while inflation is crawling along at 0.1 percent. This means that real rates are a positive 1.48 percent—a headwind for gold. As I told Daniela Cambone during this week’s Gold Game Film, the U.S. has some of the highest real rates of return in the world right now.

To see gold gain traction again, not only do we need to see negative real interest rates in the U.S. we need to see rising real GDP per capita in China and rising PMI in China.

On a final note, there appears to be a battle between the debt markets and equity markets. The debt market yields suggest rates will not be rising next month or quarter, while equity markets suggest they will. I think the bond market is more accurate. With a struggling global economy and commodity deflation odds favor rates will not rise soon in America, and gold will revert back to the mean.

Index Summary

• The major market indices finished up this week.  The Dow Jones Industrial Average was up 0.69 percent. The S&P 500 Stock Index gained 1.16 percent, while the Nasdaq Composite rose 0.78 percent. The Russell 2000 small capitalization index was also up 1.03 percent this week.
• The Hang Seng Composite fell 2.73 percent this week; while Taiwan lost 1.17 percent and the KOSPI fell 0.77 percent.
• The 10-year Treasury bond yield rose 8 basis points to 2.18 percent.

Domestic Equity Market

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Strengths

• The best performing sector in the S&P 500 Index this week was utilities, as government bond yields fell. The S&P 500 Utilities Index rose 3.87 percent this week.
• Durable goods orders during the month of June were higher than what analysts forecast, according to data released this week. With orders contracting in May, the recent reading is a much welcomed improvement and should benefit industrials. 
• The Employment Cost Index (ECI) for the second quarter was much weaker than expected, rising only 0.2 percent. While weaker inflationary signals may postpone a rate hike from the Federal Reserve, in general, inflationary pressures are positively associated with global growth.

Weaknesses

• Energy was the worst performing sector this week as crude oil continues to test its 52-week lows. The S&P 500 Energy Index fell 0.43 percent this week.
• The U.S. economy grew by 2.3 percent in the second quarter, according to official data released this week. While this expansion is a positive sign following the first-quarter contraction, the growth rate underperformed analyst expectations.
• Commodities still remain very depressed and continue to be a troubling sign for the overall global recovery. The Bloomberg Commodities Index fell 1.61 percent this week.

Opportunities

• The ISM manufacturing purchasing managers’ index (PMI) for the month of July will be released next week. The PMI reading has found positive footing and another increase could create more confidence in the manufacturing sector.
• Factory orders data for the month of June will be released next week and analysts are expecting an increase of 1.7 percent.
• With the U.S. dollar’s strength intact, investors are still able to find comfort in domestically-oriented consumer stocks.

Threats

• U.S. consumers are feeling less confident, according to the Conference Board’s Consumer Confidence Index, which fell sharply for the month of July.

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• The U.S. dollar remains the largest threat to companies with a high degree of foreign revenue exposure.
• The global slowdown in commodities is clearly a troubling sign for the market, and concerns throughout the Chinese economy can be linked to this slowdown. 

The Economy and Bond Market

Financial markets took a break from recent volatility, and global stocks generally climbed back after a string of daily losses ending Monday. The yield on the 10-year U.S. Treasury note dipped to 2.18 percent Friday, and the yield on Germany’s 10-year bund stood at 0.64 percent. Oil prices remained weak, with U.S. West Texas Intermediate and international Brent crude oil priced near $48 and $53 per barrel, respectively.

Strengths

• GDP growth in the second quarter was driven by a 2.9 percent rebound in consumer spending. Goods consumption was particularly robust, up 4.8 percent, due to strong demand for automobiles. Residential and intellectual property investment also saw healthy growth of 6.6 percent and 5.5 percent, respectively.
• Core capital goods orders posted a solid 0.9 percent month-over-month rebound in June, suggesting a pick-up in shipments and capex spending in the third quarter.
• Employers in the U.S. added an estimated 200,000 jobs in July, holding the jobless rate at a seven-year low.

Weaknesses

• Consumer confidence fell to 90.9 in July, falling significantly from 99.8 in June.  The drop comes after missing expectations of 100.0 and is now settling in the lowest level of confidence since last September.
• Pending home sales fell 1.8 percent month-over-month in June, dropping from a downwardly revised 0.6 percent month-over-month gain in May. This was below expectations of a 0.9 percent month-over-month increase and represents the first monthly decline since December.
• Russia’s central bank cut its key interest rate by one-half percentage point to 11 percent, the fifth rate cut this year. The central bank is focused on ending Russia’s first recession in six years, but must strike a balance between stimulating the economy and containing consumer price inflation, currently at 15.8 percent, fed by the ruble’s 19-percent fall versus the U.S. dollar since mid-May.

Opportunities

• The mid-2000’s “conundrum years” in the bond market may provide a roadmap for how the near future could play out. Treasury investors suffered losses during the period of rapid increase in the Fed Funds Rate Discounter, which occurred prior to the start of the rate hike cycle. However, once this phase was complete, the Treasury index provided a positive return for much of the time that the Federal Reserve was lifting rates. The bond market pain was heavily front-loaded. The 10-year yield traded sideways following its initial shift up, while the 2-year yield grinded its way higher as the Fed tightened.

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The yield curve flattened massively. The coming 12 months could play out in a very similar fashion, broken out into two distinct phases. The first phase would see a sharp upward adjustment in rate hike expectations in the U.S. and could last about two months. This would likely be followed by a phase in which the Fed are raising rates, but at a gradual pace that is roughly in line with market expectations. In that scenario long-term yields will trade sideways at worst, and may even trend lower again if there is any softening in U.S. growth.

• Housing data has been unstable, yet the belief is that a continual uptrend for the market can be expected. This uptrend will be a modest boost for the economy through this year and next.
• The U.S. payroll report comes out Monday, August 3. If this report is strong, it will add to the weight of economic data supporting an initial rate hike this year.

Threats

• Overall fixed investment was dragged down by a 4.1 percent decline in equipment investment and a 1.6 percent drop in structures. These two categories have been sensitive to the stronger dollar as well as recession in the oil sector. These factors will remain nuisances heading into the second half of the year.
• Puerto Rico is likely to miss a $58 million principal payment on Public Finance Corp. bonds, due August 1, because the legislature failed to allocate the funds. The amount is among $635 million owed in August and would mark Puerto Rico’s first official debt default.
• The combination of weaker real growth and higher inflation over the last few years suggests lower potential growth. However, while the revisions show weaker historical growth, the recent trajectory is stronger. All in all, this leaves the Fed on a path to hike rates by September. If potential growth is indeed lower, then the cycle may end up looking shallower.

Gold Market

For the week, spot gold closed at $1,095.82, down $3.23 per ounce, or 0.29 percent. Gold stocks, as measured by the NYSE Arca Gold Miners Index, lost 1.61 percent. The U.S. Trade-Weighted Dollar Index fell 0.04 percent for the week.

Strengths

• In July, the U.S. Mint sold the most physical gold in two years even as the price of the precious metal briefly slid to its lowest level in five years.
• Goldcorp cut its dividend as part of a strategy to cope with slumping prices. The decision was made even after the company said it became cash-flow positive in the second quarter, after years of capital expenditures to build two new mines in Argentina and Canada. The company hasn’t been cash-flow positive since the third quarter of 2012. Sibanye Gold’s CEO announced he is willing to work on a compromise with the unions in order to find a solution without a strike. In a lucky move, Barrick Gold was able to leverage a lofty price for its copper mine in Chile. The company is selling a 50-percent stake in its Zaldivar mine to Antofagasta for $1 billion.
• Comstock Mining announced it reached a definitive agreement with John Winfield to amend the terms of the operating agreement for its Northern Comstock LLC joint venture. The agreement will reduce the company’s remaining capital contributions from $31.05 million down to $9.75 million. In addition, any prior or future royalty commitments for the Northern Comstock properties and Mr. Winfield will be eliminated. This strengthens the balance sheet by significantly reducing liabilities while improving liquidity and lowering future capital costs. The company has consolidated an unprecedented land position in the world-class Comstock silver and gold district. Mr. Winfield also announced that he intends to donate all of his resulting personal dividends to the Comstock Foundation, an established 501(c)3 organization dedicated to the protection, preservation and restoration of Comstock. He also informed the company of his intention to step down from his duties on its board to focus more on the community-enhancing work of the foundation. Comstock’s share price rose 58 percent for the week on the good news as the change in capital structure will allow a new group of inventors to start purchasing the stock. 

Weaknesses

• Gold traders are the most bearish since April as U.S. policymakers move closer to raising interest rates this year. According to the Perth Mint Treasurer, the market expects bullion to decline to $1,000 per ounce before prices begin to recover.
• Gold slipped to five-and-a-half year lows on Friday and had its sixth straight weekly fall, its longest retreat since 1999, after upbeat U.S. economic data strengthened expectations for a near-term interest rate hike. The S&P Goldman Sachs Commodity Index has lost more than 12 percent month-to-date, bringing its level to the lowest since February 25, 2002. It has now exceeded the bottom of the 2008 global financial crisis.
• According to Capital Economics, China’s imports of gold are yet to respond to low prices. The company also believes investors are becoming increasingly worried about a more pronounced correction in China’s stock market and will return to gold to diversify their portfolios.

Opportunities

• First Majestic agreed to purchase SilverCrest Mines for C$154 million, which represents a 37-percent premium to SilverCrest’s 30-day weighted average price. Separately, OceanaGold announced it will acquire Romarco Minerals in an all-share transaction representing a 73-percent premium based on the July 29 closing prices. The combination is expected to create the lowest cost gold producer in the market that is propelled by a long reserve life, a portfolio of high quality assets that generate significant free cash flow, and a solid pipeline of organic growth opportunities.  This represents two acquisitions announced in less than a week.  This is a good sign that parties are now more willing to get a deal done, and could bode well for more deals in the near future.
• Russia’s central bank has turned away from buying U.S. treasuries and opted for buying all its domestically-produced gold instead.

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• According to Gold Mining Union, Russia became the world’s second biggest producer of gold last year, extracting 288 tonnes. In Russia (where the ruble to the dollar has depreciated to more than 57 to $1, from 1.17 in 1993), the ruble price of gold has risen 15,030 percent during that time period. Gold holds great value to citizens of countries where the currency has shown historical bouts of severe volatility.

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• The Reserve Bank of India bought significant amounts of gold when oil prices plunged in 1986, the early 1990s and in 2009. Lower oil prices bolster India’s balance of payments, giving the central bank room to make gold purchases. With India being the world’s largest buyer of the metal, perhaps its central bank could be a big buyer now that oil prices have slumped.

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• Even as the Federal Reserve may be getting closer to raising interest rates for the first time in almost a decade, currency forecasters are ratcheting back expectations for gains in the dollar. Back in April, analysts were calling for the ICE U.S. Dollar Index to reach a 12-year high of 100.7 at year end. Now they see it finishing the year at 98.6. It seems to be an enigma why dollar bulls are losing confidence given the likelihood of rate hikes.

Threats

• According to the average estimate in a Bloomberg News survey, the price of gold will drop to $984 per ounce before January. That would be the lowest since 2009 and a 10-percent retreat from Tuesday’s closing price. ANZ sees gold averaging $1,020 in December versus a previous forecast of $1,125. Citigroup cut its three-month gold target to $1,000 and has a six to 12 month target of $1,025. HSBC lowered its average gold price forecasts for 2015 and 2016 to $1,160 and $1,205, respectively. According to Morgan Stanley, gold could sink to $800 in its worst-case scenario and has the largest downside risk of all commodities.
• According to Bank of America Merrill Lynch (BofAML), hedge funds have gone net short on gold for the first time since 2006.
• While the mantra says sell in May and go away, the current three-month seasonality suggests selling in July/August, as the worst three-month period of the year is August-October.

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• The incumbent presidential cycle calls for a mid-year 2015 peak ahead of a weaker period into year-end and 2016. This weaker part of the cycle opens the window for a cyclical bear market within the larger secular bull market trend, according to BofAML. Weakness ahead may also be foreshadowed by the collapse of net free credit to a new record low. Net free credit is free credit balances in cash and margin accounts net of the debit balance in margin accounts. As of April, net free credit stood at a new record low of -$227 billion. If the market drops and triggers margin calls, investors do not have cash in their accounts and would be forced to sell stocks or get cash from other sources to meet the margin calls. This would likely exacerbate an equity market sell-off.

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Energy and Natural Resources Market

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Strengths

• Container and packaging stocks led the natural resources industry groups on the back of strong earnings reports.  The S&P 500 Containers & Packing Index gained 4.61 percent this week.  Sealed Air Corp. increased 6.47 percent over the period.
• TSX listed oil and gas producers outperformed the benchmark following a severely oversold condition last week.  The S&P/TSX Capped Energy Index gained 4.26 percent during the week.
• The S&P 500 Railroads Index posted positive returns along with the overall Transports Index as crude oil prices test prior lows.  The S&P 500 Railroads Index gained 4.03 percent in the week.

Weaknesses

• Precious metal stocks fell again this week as investors turn away from the asset class in favor of the general equity market. The NYSE Arca Gold Miners Index fell 1.61 percent.
• Iron and steel stocks continued to trend lower this week in light of structural over supply and concern over China’s economic growth.  The Bloomberg World Iron & Steel Index fell 2.73 percent this week.
• Base metals stocks pulled back as investors continue to fear a slowdown in China’s growth. The S&P/TSX Capped Diversified Metals and Mining Index fell 2.30 percent this week.

Opportunities

• China’s ambitious 18 gigawatt (GW) solar target for 2015 has seen a rapid deployment so far this year, and is expected to connect another 8.5GW through the second half of 2015.
• The relative valuation of commodities (S&P GSCI Commodities Index) to global equities (MSCI World Index) has fallen below the lows of February 1999. 
• Next week’s nonfarm payrolls data will help determine the Fed’s next move regarding interest rates, as well as the fate of the U.S. dollar.

Threats

• Concerns over China’s slowing growth rate remain elevated. Commodities and related stocks should be cautiously monitored.
• Oil seems to be testing the lows seen back in March. WTI crude could be in a flat to down trend for the near future.
• The Fed has all but said for certain that it will raise rates this year. As more investors consider this be true, precious metals stocks will continue to see pullbacks.

July 27, 2015 3 Reasons Why Gold Isn’t Behaving Like Gold Right Now	July 23, 2015 Does Your Muni Bond Fund Own Puerto Rico’s Bad Debt?	July 22, 2015 Emerging Europe Analyst: "Poland Today Reminds Me of America"

Emerging Markets

Strengths

• Russian equities outperformed this week as the beaten up stocks saw a much needed rebound. The MICEX Index rose 4.60 percent this week.
• Brazilian equities also got a bounce this week after being hit hard by the slump in commodity prices. The Ibovespa Brasil Sao Paulo Stock Exchange Index rose 2.88 percent this week.
• Turkish equities rebounded despite escalating tensions on the country’s southern border and the increasing probability of snap elections in November. The Borsa Istanbul 100 Index rose 1.52 percent this week.

Weaknesses

• China’s mainland equity market got hit hard this week after three consecutive weekly gains, implying that the wild volatility is here to stay. The Shanghai Stock Exchange Composite Index fell 10.00 percent this week.
• Indonesian equities underperformed this week as the country’s money supply growth rate fell for the fourth-straight month. The Jakarta Stock Exchange Composite Index fell 1.11 percent.
• Philippine equities fell this week primarily due to regional weakness. The Philippines Stock Exchange PSEi Index fell 1.51 percent this week.

Opportunities

• A flare-up of A-Share market volatility in China this week only strengthens the likelihood for further government policy easing, which could manifest itself in a possible reacceleration of money supply growth moving forward.  Historically, this policy backdrop bodes well for a recovery in housing sales. Quality Chinese property developers with diversified geographical exposure and lower debt should benefit the most. 

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• The European Commission’s monthly economic sentiment indicator (ESI) was released this week and showed signs of strength for the euro area as a whole. The ESI rose to 104 in July from 103.2 in June.
• The Russian central bank halted the purchase of U.S. dollars this week, signaling to markets that the government’s induced depreciation of the ruble has reached its limit. If crude oil prices recover, the ruble could head back toward levels it approached in May, when the central bank began buying dollars.

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Threats

• Macau’s hotel occupancy continued to deteriorate in June to 73.9 percent, a fresh five-year low. So far, there remains little sign of city-wide gaming revenue improvement in July. Renewed volatility in the Chinese A-Share market this week should reinforce the ongoing retrenchment of risk appetite in games of chance for the mainland middle class, while the ongoing bear market rebound in Macau casino stocks may not be sustainable.
• The uncertain outlook for the Chinese economy is still the single largest macro threat to the global recovery.
• The Federal Reserve still sees considerable strength in the labor market and is on course to begin rate hikes in September. Turkey and other emerging markets will be particularly vulnerable.

Leaders and Laggards

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.

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

Stock markets can be volatile and share prices can fluctuate in response to sector-related and other risks as described in the fund prospectus.

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. Though the Near-Term Tax Free Fund seeks minimal fluctuations in share price, it is subject to the risk that the credit quality of a portfolio holding could decline, as well as risk related to changes in the economic conditions of a state, region or issuer. These risks could cause the fund’s share price to decline. Tax-exempt income is federal income tax free. A portion of this income may be subject to state and local taxes and at times the alternative minimum tax. 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.

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 6/30/2015:

Antofagasta 0.00%
Barrick Gold (Gold and Precious Metals Fund 0.03%, World Precious Minerals Fund 0.03%)
Comstock Mining (Gold and Precious Metals Fund 1.98%, World Precious Minerals Fund 1.33%)
First Majestic 0.00%
Goldcorp 0.00%
OceanaGold (Gold and Precious Metals Fund 1.35%, World Precious Minerals Fund 0.40%)
Romarco Minerals (World Precious Minerals Fund 0.70%)
Sealed Air Corp (Global Resources Fund 2.25%)
Sibanye Gold 0.00%
SilverCrest Mines (Gold and Precious Metals Fund 1.01%)

*The above-mentioned indices are not total returns. These returns reflect simple appreciation only and do not reflect dividend reinvestment.
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The Bloomberg Commodity Index is made up of 22 exchange-traded futures on physical commodities. The index represents 20 commodities, which are weighted to account for economic significance and market liquidity.
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 Consumer Confidence Index (CCI) is an indicator which measures consumer confidence in the Economy.
The U.S. Trade Weighted Dollar Index provides a general indication of the international value of the U.S. dollar.
S&P 500 Containers & Packaging Index is a capitalization-weighted index that tracks the companies in the containers & packaging industry.
The S&P/TSX Capped Energy Index is a constrained market capitalization-weighted index that consists of Canadian energy sector companies listed on the Toronto Stock Exchange.
The S&P 500 Railroad Index is a capitalization-weighted index that tracks the companies in the railroad sub-industry as a subset of the S&P 500.
The S&P 500 Transportation Index is a capitalization-weighted index that tracks the companies in the transportation sub-industry as a subset of the S&P 500.
The Bloomberg World Iron/Steel Index is a capitalization-weighted index of the leading iron/steel stocks in the world.
S&P/TSX Capped Diversified Metals and Mining Index is an index of companies engaged in diversified production or extraction of metals and minerals.
The Goldman Sachs Commodity Index is a composite index of commodity sector returns, representing an unleveraged, long-only investment in commodity futures that is broadly diversified across the spectrum of commodities.
MSCI World Index is a capitalization weighted index that monitors the performance of stocks from around the world.
The MICEX Index is the real-time cap-weighted Russian composite index. It comprises 30 most liquid stocks of Russian largest and most developed companies from 10 main economy sectors. The MICEX Index was launched on September 22, 1997, base value 100. The MICEX Index is calculated and disseminated by the MICEX Stock Exchange, the main Russian stock exchange.
The Bovespa Index, or Ibovespa (IBOV), is a gross total return index weighted by traded volume and is comprised of the most liquid stocks traded on the Sao Paulo Stock Exchange.
The Borsa Istanbul 100 Index is a capitalization-weighted index composed of National Market companies except investment trusts.
The Shanghai Composite Index (SSE) is an index of all stocks that trade on the Shanghai Stock Exchange.
The Jakarta Stock Price Index is a modified capitalization-weighted index of all stocks listed on the regular board of the Indonesia Stock Exchange.
The Philippine Stock Exchange PSEi Index is composed of stocks representative of the industrial, properties, services, holding firms, financial and mining & oil sectors of the Philippines Stock Exchange.