U.S. Global Investors' Gold Shares Fund and World Precious Minerals Fund

Portfolio Commentaries

August 24, 2005

Spot gold closed the month of July at $429.80, down $5.70 or 1.31 percent. Equity markets, as measured by the S&P 500 Index were up, gaining 3.60 percent. The U.S. trade-weighted dollar continued its rebound for the fifth consecutive month, climbing 0.29 percent.

Strengths

• A gold bullion sale by the Portuguese Central Bank didn't hurt the price of the commodity. Buyers seem more comfortable with these price levels, and the worst seems to be over.

Weaknesses

• July was a rocky month for the gold stocks in general. Earnings reports weren't positive, as higher costs hampered results.
  
• Up to this point, 2005 can be tagged as a bull market for commodities. Gold seems to be the outlier for this category, lagging all other commodities, as it has fallen 2 percent for the year.

Opportunities

• Looking forward, August is a very good month historically, as the prices for the Christmas buying season start to effect bullion prices.
  
• Revaluation of the Chinese Renminbi gives that currency more purchasing power, making gold a cheaper purchase for the Chinese consumer.

Threats

• With the likelihood of the Federal Reserve possibly reaching its interest rate equilibrium level with the next hike in rates, the Dollar will lose an important catalyst to push it higher.
  
• Rising interest rates are a significant threat to equity valuations.
  
• With the looming threat of a long strike in the Gold Mining sector in South Africa, many mining companies will see their costs significantly increased. We may see some of these companies be forced out of business, creating opportunities for the rest of the world's producers.
  
• Lack of earning growth for the gold sector despite higher prices.

For the month of July, the Philadelphia Gold & Silver Index fell 2.42 percent.

*** Returns are quotes as price return in the home currencies of each index. Ex. S&P/TSX Canadian Gold Capped Sector Index is calculated using Canadian Dollars.

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Please consider carefully the 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.

The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies.

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 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 FTSE/JSE African Gold Mining Index is a market capitalization weighted index.

Holdings in the Gold Shares and World Precious Minerals Fund as a percentage of net assets as of June 30, 2005:
Gold Fields Mineral Services: (0.00%)

Gold funds may be susceptible to adverse economic, political or regulatory developments due to concentrating in a single theme. The price of gold is 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 3% to 5% of your portfolio in gold or gold stocks.

Frank Holmes
Chairman/CEO/CIO of U.S. Global Investors Inc
August 2005

321gold Inc