Commodities Update: Crude Oil
Last Thursday, the Organization of the Petroleum Exporting Countries (OPEC) unveiled its decision to keep oil production levels where they’ve been for the last three years, “in the interest of restoring market equilibrium.” Soon after this announcement, Brent and West Texas Intermediate (WTI) crude prices dropped to $72 and $68 per barrel, their lowest levels since May 2010. WTI plunged to a five-year intraday low of $63.
Another significant consequence of OPEC’s inaction is that the Russian ruble immediately fell to an all-time low of 49.90 versus the dollar. Since half of Russia’s budget revenue comes from oil and gas exports, OPEC’s decision to maintain current production levels is likely to hobble the country’s already fragile economy even further. We’ve been out of Russia since August, and this economic activity justifies our decision.
Precious Metals
As expected, Switzerland voted against having its central bank hold more bullion, resulting in a 2-percent decline. Leading support to falling prices is the Reserve Bank of India’s announcement last Thursday that it was lifting gold import curbs ahead of the country’s wedding season.
At the same time that spot prices are falling, more money is being pulled out of gold exchange-traded products (ETPs), suggesting that the market believes this decline to be long-term. 
We’re seeing the opposite behavior when it comes to platinum, palladium and silver. Even as prices dip, more money is being placed into ETPs. 
Although gold has many industrial applications, it’s seen more as currency. With the dollar still very strong, investors might be choosing to keep their wealth in cash instead. The other metals, on the other hand, have well-known industrial uses—platinum and palladium in automobile production and silver in film, surgical instruments and solar panels. Some investors might be willing to risk short-term losses for long-term gain.
I wish to conclude by giving thanks to our loyal Investor Alert readers as well as investors.
Disclaimer: Visit us on Facebook or Twitter and let us know what you’re thankful for this season! 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. Past performance does not guarantee future results.
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.
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.
Gold, precious metals, and precious minerals funds may be susceptible to adverse economic, political or regulatory developments due to concentrating in a single theme. The prices of gold, precious metals, and precious minerals are subject to substantial price fluctuations over short periods of time and may be affected by unpredicted international monetary and political policies. We suggest investing no more than 5% to 10% of your portfolio in these sectors.
Because the Global Resources Fund concentrates its investments in specific industries, the fund may be subject to greater risks and fluctuations than a portfolio representing a broader range of industries.
Fund portfolios are actively managed, and holdings may change daily. Holdings are reported as of the most recent quarter-end. Holdings in the funds mentioned as a percentage of net assets as of 9/30/2014: Baker Hughes, Inc. 0.00%; Calpian 0.00%; Facebook 0.00%; Google 0.00%; Klondex Mines 7.76% in Gold and Precious Metals Fund, 7.51% in World Precious Minerals Fund, 1.22% in Global Resources Fund; Newmont Mining Corp 1.11% in Gold and Precious Metals Fund, 0.26% in World Precious Minerals Fund; Twitter 0.00%.
Morningstar Ratings are based on risk-adjusted return. The Morningstar Rating for a fund is derived from a weighted-average of the performance figures associated with its three-, five- and ten-year (if applicable) Morningstar Rating metrics. Past performance does not guarantee future results. For each fund with at least a three-year history, Morningstar calculates a Morningstar Ratingä based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a fund’s monthly performance (including the effects of sales charges, loads, and redemption fees), placing more emphasis on downward variations and rewarding consistent performance. The top 10% of funds in each category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars and the bottom 10% receive 1 star. (Each share class is counted as a fraction of one fund within this scale and rated separately, which may cause slight variations in the distribution percentages.)
All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. By clicking the link(s) above, you will be directed to a third-party website(s). U.S. Global Investors does not endorse all information supplied by this/these website(s) and is not responsible for its/their content.