USFunds.com • August 03, 2018

Table of ContentsIndex Summary • Domestic Equity Market • Economy and Bond Market • Gold Market • Blockchain & Digital Currencies

Energy and Natural Resources Market • Emerging Europe • China Region • Leaders and Laggards

Wait Until You See the Price of Gold in Venezuela Right NowBy Frank HolmesCEO and Chief Investment OfficerU.S. Global Investors

Last month in Venezuela’s capital city of Caracas, a cup of coffee would have set you back 2 million bolivars.That’s up from only 2,300 bolivars 12 months ago, meaning the price of a cup of joe has jumped nearly 87,000percent, according to Bloomberg’s Café Con Leche Index. And you thought Starbucks was expensive.

But that was July. Prices in Venezuela are doubling roughly every 18 days. The International Monetary Fund(IMF) now projects inflation to hit an astronomical 1 million percent by the end of this year. This puts thebeleaguered Latin American country on the same slippery path as Zimbabwe a decade ago and Germany in the1920s, when a wheelbarrow full of marks was barely enough to get you a loaf of bread.

Venezuela’s socialist president Nicolas Maduro announced last week that the country plans to rein inhyperinflation by lopping off five zeroes from its currency. If you recall, Zimbabwe similarly tried to combat soaringprices of its own by issuing a cartoonish $100 trillion banknote—which in 2009 was still not enough to buy a busticket in the capital of Harare.

Without structural governmental reforms, a new bolivar is just as unlikely to steady Venezuela’s skyrocketing

inflation or remedy its crumbling economy.

Gold Could Save Your LifeSo where does this put gold? At some point, hyperinflation gets so ludicrously out of control that discussingexchange rates becomes pointless. But as of July 30, an ounce of the yellow metal would have gone for 211million bolivars—an increase of more than 3.1 million percent from just the beginning of the year.

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My point in bringing this up is to reinforce the importance of gold’s Fear Trade, which says that demand for theyellow metal rises when inflation threatens to destroy a nation’s currency—as it’s doing right now in Venezuela. AVenezuelan family that had the prudence to store some of its wealth in gold would be in a much better positiontoday to survive or escape President Maduro’s corrupt, far-left regime.

In extreme cases like this, gold could literally help save lives.

Such was the case following the fall of Saigon in 1975. If not for gold, many South Vietnamese families might nothave managed to escape the country. A seat on one of the thousands of fleeing boats reportedly went for eight or10 taels of gold per adult, four or five taels per child. (A tael is slightly more than an ounce.) Gold was theirpassport. Thanks to the precious metal, tens of thousands of Vietnamese “boat people,” as they’re now known,were able to start new lives in the U.S., Canada, Australia and other developed countries.

Venezuela’s Once Prosperous Economy Destroyed by Corruption andMismanagementBut back to Venezuela. Amid the corruption and mismanagement, the only thing helping the country pay its billsright now is gold. Two years ago, it had the world’s 16th largest gold reserves. Today it stands at number 26 asit’s sold off more than half its holdings since 2010. While countries such as China and Russia continue to add totheir holdings, Venezuela has been the world’s largest seller of gold for the past two years.

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It’s hard to remember now, but as recently as 2001, Venezuela was the most prosperous country in all of SouthAmerica. Like Zimbabwe, the OPEC nation is rich in natural resources, home to the world’s largest oil reservesand what’s believed to be the fourth largest gold mine. Oil exports account for virtually all of its export revenue.

In 2016, Venezuela was the third largest exporter of crude to the U.S. following Canada and Saudi Arabia, butwith output in freefall, this is changing rapidly. For the first time ever in February, Colombia sold more crude oil tothe U.S. than its eastern neighbor did. And in June, Venezuela’s state-owned oil and gas company, Petróleos deVenezuela (PDVSA), informed at least eight foreign clients that it would be unable to meet supply commitments.According to GlobalData, production is on track to fall to only 1 million barrels per day by 2019, down from 3million a day in 2011, meaning the petrostate might soon have nothing left to deliver.

President Maduro now has the ignoble distinction of reigning over an economic recession that rivals the very worstin modern history. Last month, the IMF forecast that the country’s real gross domestic product (GDP) would fall 18percent this year—the third straight year of double-digit declines.

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A mass exodus of young, working-age Venezuelans, many of them college-educated, is unlikely to help.Estimates of the number of people who have fled the country in the past two years alone range from 1.7 million toas high as 4 million.

Their escape is no easy task, as numerous international airlines, citing rampant crime and a lack of electricity,

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have canceled all flights in and out of Caracas. The only U.S. carrier still operating in the country is AmericanAirlines, which offers a single daily flight from the nation’s capital to Miami. Just two years ago, there were asmany as 40 nonstop American flights, not to mention those of rival carriers, between the two cities—a sign of justhow dramatic and swift Maduro’s mismanagement has been in crippling Venezuela’s once-robust economy.

The Diversification Benefits of GoldThe gold bears were on top this week, with the metal trading as low as $1,205 yesterday. That’s the closest it’scome to dipping below $1,200 since February 2017. Today’s lower-than-expected jobs report gave gold a modestboost, but it wasn’t enough to prevent a fourth straight week of price declines.

In times like this, it’s important to remember that,according to gold’s DNA of volatility, it’s a non-event forthe metal to close up or down 1 percent at the end ofeach session, 2 percent for the 10-day trading period.And guess what? The S&P 500 Index has the samelevel of volatility.

Ten days ago, gold was trading just under $1,230 anounce, or 0.6 percent more than today. The math issound.

It’s also worth remembering that gold has traditionallyhad a low to negative correlation with other assets suchas equities. This is why many investors over the yearshave used it as a portfolio diversifier.

Case in point: Last Thursday, Facebook suffered itsworst single-day decline since the company went publicin 2012. Its stock plunged 19 percent, erasing some$120 billion in market capitalization—the most ever inhistory for a single trading session.

Gold, meanwhile, held relatively steady, slipping only 0.62 percent.

Curious about learning more? Explore the two main drivers of gold, the Fear Trade and Love Trade, byclicking here!

Index SummaryThe major market indices finished up this week. The Dow Jones Industrial Average gained 0.05 percent.The S&P 500 Stock Index rose 0.76 percent, while the Nasdaq Composite climbed 0.96 percent. TheRussell 2000 small capitalization index gained 0.60 percent this week.

The Hang Seng Composite fell 4.51 percent this week; while Taiwan was down 0.57 percent and theKOSPI fell 0.32 percent.

The 10-year Treasury bond yield remained essentially flat at 2.95 percent.

Domestic Equity Market

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StrengthsReal Estate was the best performing sector of the week, increasing by 3.30 percent versus an overallincrease of 0.72 percent for the S&P 500.

Dish Network Corp was the best performing stock for the week, increasing by 12.74 percent.

Apple became the first U.S. company worth $1 trillion after shares climbed 2.92 percent on Thursday,crossing the magic number of $207.05.

WeaknessesEnergy was the worst performing sector for the week, decreasing by 1.80 percent versus an overallincrease of 0.72 percent for the S&P 500.

IPG Photonics Corp was the worst performing stock for the week, falling 27.54 percent.

The conditions that triggered the most recent stock meltdown are still in place. A new study from GoldmanSachs says that the constrained liquidity the stock market experienced in February helped cause andworsen the sell-off. These conditions remain present and could cause further problems.

OpportunitiesSmart-speaker producer Sonos soared in its public trading debut with shares rocketing 33 percent to$19.91 during their first day of trading on the Nasdaq.

Tesla reported a wider loss than expected for its second quarter, but expects to be profitable in the secondhalf of the year as it ramps up Model 3 production. The electric car maker beat forecasts for revenue andits cash burn decreased compared with the first quarter.

Google reportedly wants to launch a censored search engine in China after Sundar Pichai held secretgovernment meetings. The project is codenamed "Dragonfly" and the new service may take the form of anAndroid app.

ThreatsAmazon reportedly plans to end its reliance on Oracle. Amazon, a longtime customer and competitor,plans to stop using Oracle's technology entirely by 2020, according to CNBC.

Nintendo is just shy of reaching 20 million Switch consoles sold, but momentum is slowing. Second-yearsales are down for the gaming console and Nintendo’s stock is taking a hit.

The stock market is seeing abnormally large moves this earnings season. Goldman Sachs says single-stock moves have been more extreme this earnings season than at any other point in the past eightquarters.

The Economy and Bond Market

StrengthsThe unemployment rate fell one-tenth of a percentage point to 3.9 percent, as expected, and is around itslowest level in nearly 50 years.

In the key wages category, average hourly earnings met expectations, increasing 2.7 percent over thesame period a year ago.

The Federal Reserve upgraded its assessment of the U.S. economy on Wednesday while keeping interestrates unchanged. In a widely expected move, the central bank's policymaking Federal Open MarketCommittee (FOMC) voted unanimously to keep the target range for its benchmark rate at 1.75 percent to 2percent.

WeaknessesPayroll growth turned sluggish in July after two robust months, with total nonfarm payrolls increasing by157,000. This was below the 190,000 expected by economists and the lowest gain since March.

American manufacturers grew somewhat less rapidly in July, held back by shortages of skilled laborersand higher costs of raw materials due to tariffs. The Institute for Supply Management said itsmanufacturing index dipped to 58.1 percent in July from 60.2 percent in June. That is the lowest readingsince April, though it is still a strong level. Economists had forecast the index to print at 59.5 percent.

The highest interest rates in about a month and high home prices took their toll on the mortgage industrylast week. The total mortgage application volume slipped 2.5 percent from the previous week and 12percent from a year ago, according to the Mortgage Bankers Association's seasonally adjusted report.While homebuyers are less sensitive to weekly rate moves, mortgage applications to buy a home fell forthe third straight week to the lowest level in a month.

OpportunitiesNext Friday, investors will be on the lookout for July’s U.S. inflation report. The current market consensusis forecasting an acceleration of July’s consumer price index (CPI) to 0.2 percent month-over-month, upfrom the 0.1 percent reading in June.

U.S. producer prices will be released on Thursday, where the annual rate of producer price index (PPI) isforecast to remain at 3.4 percent in July.

Given all the attention it has received in recent months, most everyone seems aware that the bondmarket’s yield curve has been flattening and is close to inverting, an event that has predicted U.S.recessions in the past. The recent firming of economic growth, however, is a reminder that the shrinkingdifference between short- and long-term Treasury yields by itself does not indicate economicweakness ahead. One the contrary, the economy tends to grow and stocks advance even as the curvespread retreats toward zero. In fact, a yield curve holding at the current levels would suggest a brightoutlook for the economy and equities in the short-term.

ThreatsRising federal budget deficits are boosting the U.S. Treasury’s borrowing and could restrain a fast-growingeconomy as the cost of credit rises. The yield of 10-year Treasury notes climbed above 3 percent for thefirst time since June, as the Treasury Department announced it would increase auctions of U.S. debt by anadditional $30 billion over the next three months. That included higher sales of two-year, three-year andfive-year notes and the introduction of a new short-term security with a two-month maturity. In all, theTreasury plans to borrow $329 billion from July through September—up $56 billion from the agency’s Aprilestimate—in addition to $440 billion in October through December. The figures are 63 percent higher thanwhat the Treasury borrowed during the same six-month period last year.

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Given the rise in yields in response to the Treasury’s debt increase announcement this week, nextWednesday’s 10-year Treasury bond auction will be closely watched for an indication of bond yieldpressures.

Next Tuesday’s release of German industrial production is forecast to show a month-over-monthcontraction of -0.5 percent versus the prior reading of 2.6 percent growth.

Gold MarketThis week spot gold closed at $1,213.30, down $9.90 per ounce or 0.81 percent. Gold stocks, as measured by theNYSE Arca Gold Miners Index, ended the week lower by 0.91 percent. Junior-tiered stocks outperformed seniorsfor the week, as the S&P/TSX Venture Index was lower by 0.75 percent. The U.S. Trade-Weighted Dollar Indexrose 0.58 percent.

Date Event Survey Actual Prior

Jul-30 Germany CPI YoY 2.1% 2.0% 2.1%

Jul-31 Eurozone CPI Core YoY 1.0% 1.1% 0.9%

Jul-31 Conf. Board Consumer Confidence 126.0 127.4 127.1

Jul-31 Caixin China PMI Mfg 50.9 50.8 51.0

Aug-1 ADP Employment Change 186k 219k 181k

Aug-1 ISM Manufacturing 59.4 58.1 60.2

Aug-1 FOMC Rate Decision (Upper Bound) 2.00% 2.00% 2.00%

Aug-2 Initial Jobless Claims 220k 218k 217k

Aug-2 Durable Goods Orders -- 0.8% 1.0%

Aug-3 Change in Nonfarm Payrolls 193k 157k 248k

Aug-2 Initial Jobless Claims 220k -- 218k

Aug-2 PPI Final Demand YoY 3.4% -- 3.4%

Aug-3 CPI YoY 3.0% -- 2.9%

StrengthsThe best performing metal this week was platinum, down just 0.04 percent as Impala Platinum announcedit would need to slash 13,000 jobs in a restructuring move aimed at boosting income. Although gold isheaded for a fourth weekly loss, the gold price rose on Friday after hitting its lowest in over a year whenthe U.S. Labor Department reported that total nonfarm payroll growth missed expectations. Nonfarmpayrolls advanced 157,000, which was below estimates of 193,000. Gold rallied as much as $10 intradayon the news.

Bloomberg reports that manufacturers are slowing production due to ongoing global trade spats. Reportsthis week showed that factory activity in the U.S, Europe and the Asia Pacific region slowed in July.Additionally, the fewest number of companies said that new orders are getting better since November2016.

The Perth Mint released figures for the month of July showing sales of 29,921 ounces of gold coins andbars, up from 16,847 in June. Silver sales also rose last month to 486,821 ounces, which is close todouble the 229,280 ounces sold in June. The World Gold Council’s (WGC) chief market strategist, JohnReade, said this week that “we may be underestimating how quickly gold mine production will decline overthe next five years.” The WGC says that discoveries have been few and far between, overall operatingcosts are rising and political risks have grown in prospective regions. Slowing gold production couldtighten supply and increase demand for the yellow metal.

WeaknessesThe worst performing metal this week was palladium, down 1.45 percent as Norilsk Nickel reportedpalladium output jumped 40 percent quarter-over-quarter. Bloomberg’s weekly survey shows that goldtraders and analysts were overall neutral on the yellow metal this week, which was the largest proportionof neutral positions in data going back to April 2015. Gold is heading for its fourth monthly drop and thelongest streak since 2013, as investors favor the dollar, reports Bloomberg. The yellow metal’s volatility isnear the lowest since January and has been trading in a narrow range for several months now. OleHansen, head of commodity strategy at Saxo Bank, said that “gold remains stuck in a relative tight range.”

This week Vanguard announced that it is restructuring and changing the name of its $2.3 billion VanguardPrecious Metals and Mining Fund, reports Kitco News. The fund will be renamed the Vanguard GlobalCapital Cycles Fund and will reduce its exposure to mining stocks to just 25 percent from 80 percent. Thismove shows that negative sentiment and bearishness on gold and precious metals has hit a bottom, asVanguard is one of the largest fund companies. Its rotation out of gold mining stocks could lead to somenear-term weakness in share prices but could certainly be a buying opportunity as well. In terms of timing,Avi Gilbert, creator of Elliotwavetrader.net, noted “You don’t see these types of moves at market tops.”

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Remember that popular idiom often espoused that “there is no inflation”? Cheesecake Factory shares fell14 percent one day this week due to second-quarter earnings results missing estimates and lowering full-year profit forecasts, reports Bloomberg. The company said that increases in minimum wage pushed laborcosts up to almost 36 percent of revenue.

OpportunitiesUBS writes that gold shorts reached an all-time high this week of 20.80moz, while gold net longs declined.BMO Global Commodities Research emphasizes that investors should be wary of trend complacencywhen it comes to the gold market. BMO notes that the warning signs are in place for a correction, as thelast time consumer confidence was this high was in 2000, just before the dotcom bubble burst. Withconfidence at multi-year highs and gold price volatility trading below the VIX Index, BMO adds thatinvestors are reluctant to appreciate that China is now gearing up for a prolonged period of trade friction,and dismissing optionality around potential macroeconomic shocks.

PIMCO writes that the outlook for gold is brightening. “Falling gold prices in the absence of rising realyields indicate that gold has cheapened relative to other U.S.-dominates flight-to-quality assets, like TIPSand Treasuries.” Too much emphasis is being placed on the dollar and many are saying that thegreenback might have peaked. Bloomberg reports that Morgan Stanley, State Street Corp., and WellsFargo are just a few of the big companies saying that the dollar is near its peak after gaining around 5percent since mid-April. Michael Arone, chief investment strategist at State Street Global Advisors said inan interview with Bloomberg that “all of a sudden the popular trade is to be long the dollar.”

Northern Empire Resources will be bought out by its largest holder Coeur Mining in a deal valued ataround $90 million for its land package in Nevada, an 18-percent premium to the stock’s closing price onWednesday. It’s refreshing to see some companies “get it right” now, and that all the cheap assets aregoing to be bought up by private equity, which was active again this week. Golden Star Resources Ltd.announced that it has entered a partnership with La Mancha Holdings, a private gold investment company.The deal could help push Golden Star to be a leading African gold producer with La Mancha investingaround $125 million in cash through a private placement. La Mancha paid a 14 percent premium to theshare price of Golden Star and also agreed to a two-year equity lockup.

ThreatsSouth African gold producers face continuing troubles and setbacks. The South African National Union ofMineworkers said this week that they are making no progress with employers regarding wage increases.

Gold Fields’ South Deep Mine, which is over 3,000 meters below the ground, is not making the companyany money. Although the mine could produce for 70 years and is built to target the world’s second largestknown body of gold-bearing ore, the cost and technical challenges of working so far underground havehindered production. Bloomberg writes that Gold Fields has consistently missed production targets and thecompany has already spent around $2.3 billion on the mine. This week the African National Congress inSouth Africa decided to amend the constitution to allow land expropriation without compensation, whichhas increased concern for investors over the political implications of growing land redistribution.

The yield of 10-year Treasury notes climbed above 3 percent for the first time since June, as the TreasuryDepartment announced it would boost the amount of long-term debt it sells to $78 billion this quarter, upfrom $73 billion the previous quarter, according to Bloomberg. Some analysts say the fiscal outlook isdeteriorating and political risk is looming over the dollar. Liz Capo McCormick of Bloomberg says that “U.S.Treasury Secretary Steven Mnuchin appears to be pulling off a bit of a magic trick – revving up debtissuance and not having to really pay up to do it.”

On Friday, China announced plans to impose tariffs on an additional $60 billion worth of U.S. goods. Partof that includes a 25-percent tariff on imports of American liquefied natural gas (LNG). This is the first timefuel has been included in the growing U.S.-China trade war and could have serious implications for U.S.producers of LNG. As Russia is set to launch a new pipeline of gas into China in 2019, long-term contactsfor imports of LNG from the U.S. could be less attractive to Chinese companies.

Blockchain and Digital Currencies

StrengthsOf the cryptocurrencies tracked by CoinMarketCap, the best performing for the week ended August 3 wasSpeed Mining Service, which gained 172.74 percent. Square Inc. made $37 million in revenue from bitcoinsales in the first quarter of 2018. According to the company’s earnings, net quarterly revenue was $814million, 6 percent of which came from the service adding to its Cash App late last year.

Bitcoin mining company Bitmain Technologies reportedly brought in $1.1 billion in net profit for the firstquarter of 2018, reports Fortune. The co-CEO of the world’s largest cryptocurrency mining company,recently revealed plans to conduct an initial public offering (IPO) in Hong Kong, the article continues, or “inan overseas market with U.S. dollar-denominated shares.”

Initial coin offering (ICO) growth is on a tear despite the selloff in virtual currencies, reports Bloomberg.ICOs attracted a record $12 billion in the first half of 2018, up from $7 billion for the whole of 2017. That ismore than a 50-fold jump from 2016, according to Autonomous Research LLP.

WeaknessesOf the cryptocurrencies tracked by CoinMarketCap, the worst performing for the week ended August 3 wasWeToken, which lost 27.01 percent.

Goldman Sachs released a note early this week predicting that the recent turnaround in bitcoin and otherdigital currencies will be short-lived, reports MarketWatch. “We expect further declines in the future givenour view that these cryptocurrencies do not fulfill any of the three traditional roles of currency: they areneither a medium of exchange, nor a unit of measurement, nor a store of value,” wrote Sharmin Mossavar-

Rahmani, CIO of Goldman’s Investment Strategy Group.

A lot fewer people than you think are using bitcoin to buy and sell goods and services, writes BloombergNews. After peaking at $411 million in September 2017, the amount of money that the largest 17 cryptomerchant-processing services received in the best-known cryptocurrency has been on a steady decline,according to research startup Chainanalysis Inc. In fact, in May it hit a low of $60 million.

OpportunitiesOn August 1, Mike Novogratz’ cryptocurrency-focused merchant bank, Galaxy Digital LP, began tradingon Toronto’s TSX Venture Exchange, reports Bloomberg. Novogratz expressed his frustration withCanadian regulators that dragged out Galaxy’s listing for months, trapping his investors as bitcoincollapsed and crypto fever cooled, the article continues. However, this should be a triumphant move for theGoldman Sachs Group partner, as well as a milestone for the industry.

According to a survey done by Capgemini, a French business consulting corporation, nearly 60 percent ofhigh net worth individuals showed interest in investing in cryptocurrency in the first quarter of 2018.“Almost 80 percent of the respondents are worth $1 million to $5 million, roughly 2 percent are worth morethan $20 million and the rest are worth somewhere between $5 million and $20 million,” the surveyreported.

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Blockchain technology can help fight digital ad fraud, reports Campaignsandelections.com. Up to 75 centsof each marketing dollar spent on programmatic ad buying does not reach the publisher, according toadvertising software provider MediaOcean. With a secure digital ledger to track inventory from thepublisher as it makes its way through the “labyrinth of middlemen” however, a marketer has moretransparency into how much they really get for their budget. Blockchain can do just that.

Threats“Corporate America’s love affair with all things blockchain may be cooling,” writes Bloomberg. According toForrester Research Inc., a number of software projects based on blockchain technology will be wounddown this year, while some companies pushing ahead with pilot tests are scaling back their ambitions andtimelines. One analyst points out that such a pullback could hurt companies like IBM and Microsoft.

Following the SEC’s decision to deny the Winklevoss twins their application for a digital asset-related ETF,bitcoin pundits are wondering what is holding things back. According to a MarketWatch article this week,some of the main issues that have recently given regulators pause include 1) security, 2) lack of liquidity,vulnerability to manipulation, and 3) valuation.

Cryptocurrencies saw a second day of losses mid-week, with bitcoin now well below the psychologicalprice point and a majority of other crypto assets in red, reports Coin360.com. Bitcoin fell below $7,500Wednesday, having lost almost 3 percent on the day. Just last week the popular coin reached $8,431 onJuly 25.

Energy and Natural Resources Market

StrengthsIron ore was the best performing major commodity this week rising 6.49 percent. The commodity ralliedafter China port inventories declined.

The best performing sector this week was the S&P 1500 Fertilizers and Agricultural Chemicals Index. Theindex rose 3.28 percent after a number of its constituents reported greater than expected demand forfertilizers, as well as higher realized prices.

The best performing stock for the week was Resolute Forest Products Inc. The Canadian pulp and paperproducer rose 19.51 percent. Resolute, which is North America's largest newsprint producer, hopes rarebipartisan political support in the United States will convince the U.S. International Trade Commission tooverturn final import duties announced Thursday.

WeaknessesLumber was the worst performing commodity this week. The commodity dropped 7.94 percent to a seven-month low as the trade spat between Canada and the U.S. drags on. Sentiment was further dampened asBloomberg reported property prices are starting to head lower globally, citing an International MonetaryFund report.

The worst performing sector this week was the S&P 1500 Steel Index. The index dropped 5.37 percentafter market specialists suggested cheap foreign steel may become too tempting for American buyers. TheU.S. steel price benchmark is up about 40 percent this year as producers raise prices to meet increaseddemand, increasing the likelihood that U.S. producers may face foreign competition even after takingimport tariffs into account.

The worst performing stock for the week was Ferrexpo PLC. The iron ore producer dropped 17.41 percentdespite reporting record price premiums and strong revenue generation, after bad news prevailed withrising commodity prices driving up input costs.

OpportunitiesClear skies may lie ahead for copper as short positions have reached new all-time highs, as estimated byanalysts at Katusa Research. Copper author and expert speaker Gianni Kovacevic chimed in to remindinvestors that last time such extreme short positioning occurred in copper, this resulted in a sharp 20-percent rally in the metal.

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Renewable energy is getting a strong push from global corporations. Businesses and public agencies arebuying more clean energy than ever before, reports Bloomberg. Companies and agencies, excludingutilities, agreed to buy 7.2 gigawatts of clean energy worldwide so far this year, already shattering therecord of 5.4 gigawatts for all of 2017.

Steel futures climbed to the strongest in more than five years as China plans harsher capacity cuts thiswinter to reduce air pollution, adding momentum to a raft of recent measures to ensure cleaner skies,Bloomberg reports. Prices have soared more than 25 percent since March as the country toughenedrestrictions on industrial plants to protect the environment and continued to cut idle and excess capacity

ThreatsU.S. sanctions on Iran may not reduce the Asian nation’s supply to the global market. China’s largestrefiner, Sinopec, will hold off on buying U.S. crude as an escalating trade war between Beijing andWashington threatens to make American imports more expensive. The U.S. has been unable to persuadeChina to cut Iranian oil imports – China is the world’s top crude buyer and Iran’s number one customer –having said previously that it opposed unilateral sanctions and increased monthly oil imports from thecountry by 26 percent in July.

Senior U.S. administration officials announced that the president asked U.S. trade representative RobertLighthizer to consider increasing the proposed tariffs on imports to 25 percent from the 10 percentannounced last month.

The bullion market has suffered its worst start to a year in almost a decade as U.S. investors pulled moneyout of gold-backed exchange traded funds. Gold demand totaled 1,959 tons in the first half, the lowestlevel since 2009, according to a report published by the World Gold Council on Thursday. Gold has beenout of favor in the U.S. as the Federal Reserve lifted interest rates twice this year and signaled furtherhikes are on the way, FT notes.

China Region

StrengthsThe Philippines was the best performing country in the region this week, gaining 1.53 percent. Moody’s

Investors Service reports that robust economic growth in the region is expected to sustain over the nextfew years, as the government focuses on infrastructure development (reinforcing the decade-long trend ofincreasing potential growth). Strong domestic demand and the economy’s limited reliance on foreignsources of financing shield the Philippines from the direct impact of abrupt global changes.

The Thai baht was the best performing currency in the region this week, up 42 basis points.

All sectors in the Hang Seng Composite were down this week as investors become risk averse with theescalation of trade tensions. Telecommunications was the best relative performing sector this week, downonly 79 basis points.

WeaknessesChina was the worst performing country in the region this week, losing 4.63 percent. Chinese equitieshave been battered by concerns about the U.S. trade rift, a slowing Chinese economy, weaker yuan andBeijing’s deleveraging efforts.

The South Korean won was the worst performing currency in the region this week, down 71 basis points.

Consumer services was the worst performing sector this week, down 7.54 percent.

OpportunitiesChinese investors flocked into money-market products at a rate outpacing equities and bonds last quarter,adding to what is already the biggest segment of the nation’s mutual fund industry. After a shadowbanking crackdown shrank the pool of investment products in China, money market funds are seen as asafer investment as trade war uncertainties weigh on stocks, while offering returns close to those ofbonds. While Chinese equities have rebounded from their lows and corporate notes jumped last monthamid a government shift toward easing, analysts say money-market funds will continue to be attractive toretail investors.

Beijing is easing, with the Shanghai Interbank Offered Rate (SHIBOR) down 179 basis points over the pastseven months. According to Corner Stone Macro research, Chinese government spending growth hasalready reaccelerated from 0 percent to 8 percent, and statements over the past few weeks suggest moreis in the pipeline. It is clear that tariff concerns are moving Beijing to put in place polices to support/boostgrowth, already clearly on the monetary side, but these will also now take place on the fiscal front. China'sPolitburo said the deleveraging campaign will continue at a measured pace and will improve economicpolicies to be more forward-looking, flexible and effective in the second half of 2018. These commentsfollowed a meeting led by Xi Jinping stressing infrastructure construction to repair weak links in theeconomy.

In a research note, the Fitch Group unit said the Philippines remain one of the strongest consumer growthmarkets in Asia supported by strong economic growth trajectory, high levels of remittance inflows andfalling unemployment. Moody’s also supports this positive view of the region.

ThreatsChina’s Caixin manufacturing PMI fell to 50.8 from 51.0 in July, an eight-month low, with new exportorders in contraction for a fourth-straight month. Manufacturing PMI data was weak across the board inAsia (Taiwan 53.1 versus 54.5, India 52.3 versus 51.1, ASEAN 50.4 versus 51) with a weak exportcomponent indicating a relationship to loss in confidence due to increased trade uncertainties. Both theCaixin service and composite PMIs softened in July, mirroring the official data. Early indicators for theregion suggest trade tensions are starting to bite. A weighted average of PMI export orders data for China,Japan, South Korea, Taiwan and Singapore has been trending down since the start of the year. In July, itedged into contractionary territory.

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According to EvercoreISI, uncertainty is a real negative in this trade war, while unpredictability is anegative in the global economy. Companies which are constantly trying to optimize their global supplychains have no idea what to do on – producing, hiring, investing, sourcing, pricing and planning.Restrictions on investment flows are serious and longer lasting than tariffs, since they eliminate near-permanent jobs and incomes. Tariffs come and go; they get implemented, do their damage, this isrecognized, and then they get wiped away when the parties involved are ready to retreat.

Thailand’s tourism authority expects second half tourist arrivals from China to fall after a deadly boataccident. Chinese travelers are expected to provide close to a third of estimated 2.09 trillion baht ($62.7billion) of revenue from foreign holidaymakers this year. Tourism is a key economic engine for Thailand,accounting for around one-fifth of gross domestic product.

Emerging Europe

StrengthsHungary was the best performing country this week, gaining 2.27 percent. MOL Hungarian Oil and Gascontributed the most after the stock was upgraded to buy at Renaissance Capital.

The Hungarian forint was the best performing currency this week, gaining 5 basis points against the U.S.dollar.

Health care was the best performing sector among eastern European markets this week.

WeaknessesThe Czech Republic was the worst performing country this week, losing 8 basis points. The central bankcut the economic growth estimate for this year to 3.2 percent from 3.9 percent, while also raising theaverage inflation projection to 2.1 percent, above the 2 percent target. Officials raised the benchmark rateby 25 basis points to 1.25 percent, as economists forecast, after increasing borrowing costs at theirprevious meeting in June.

The Turkish lira was the worst performing currency this week, losing 4.41 percent against the U.S. dollar.Turkey’s currency, bonds and stocks extended their slide after the U.S. imposed sanctions on twogovernment ministers over the detention of an evangelical pastor.

Information technology was the worst performing sector among eastern European markets this week.

OpportunitiesJPMorgan recommended an overweight of emerging markets in 2016 and 2017, and downgraded theregion in the fourth quarter of last year. After weak year-to-date performance, this week JPMorgan

upgraded emerging markets. It views now as a good entry point relative to developed markets for a fewreasons. First, the Federal Reserve rate hikes are largely priced in. Second, the dollar will most likelyweaken, and emerging market equites tend to have a very strong inverse correlation to the dollar. Finally,the relative emerging markets earning-per-share has corrected year-to-date, presenting a much betterstarting point for emerging market earnings to deliver versus developed markets.

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Deutsche Bank data this week noted that with about 40 percent of Europe’s market value having reportedsecond quarter figures, the region’s profit growth has accelerated to 6 percent for the latest quarter fromno growth at all in the prior three-month period. As reported by Bloomberg, the bank added that it’snothing like the double-digit growth seen in early 2017 or in the U.S., but the dip in economic data earlierthis year hasn’t translated into a huge hit to profits, which are now expected to pick up pace in the secondhalf of the year.

BMW is planning to build a factory in Hungary investing 1 billion euros ($1.17 billion) in a new productionfacility that will produce 150,000 vehicles annually. This will be BMW’s first new car-making plant in theregion since 2000, when it built a site in Germany.

ThreatsIn Poland, loans taken by companies for investment purposes saw a decline, on an annual basis, for thefirst time since 2013. Poland has mostly surprised investors on the upside, but with a worsening shortageof workers, surging wages and an uncertain regulatory environment for businesses, this consumer-ledboom could be disrupted, according to Dorata Bartyzel and Adrian Krajweski on Bloomberg.

Norway’s $1 trillion top wealth fund pulled most of its equity investments run by external managers inRussia under in-house management, aiming to cut exposure to oil and gas prices. The move is part of aplan announced in November 2017 to protect the value of its fund against a drop in oil prices. It is unclearwhether Russian holdings were cut since bringing investments in-house.

Euro-area inflation accelerated to 2.1 percent year-over-year in July, from 2 percent in June, and slightlyabove the forecast of 2 percent. However, economic growth in the region slowed to 2.1 percent year-over-year in the second quarter from 2.5 percent.

Leaders and LaggardsWeekly Performance

Index CloseWeekly

Change($)Weekly

Change(%)

Nasdaq 7,812.02 +74.60 +0.96%

Natural Gas Futures 2.85 +0.02 +0.85%

S&P 500 2,840.35 +21.53 +0.76%

Russell 2000 1,673.37 +10.03 +0.60%

DJIA 25,462.58 +11.52 +0.05%

Oil Futures 68.58 -0.11 -0.16%

10-Yr Treasury Bond 2.95 -0.00 -0.17%

S&P Basic Materials 371.26 -0.63 -0.17%

Korean KOSPI Index 2,287.68 -7.31 -0.32%

S&P/TSX VENTURE COMP IDX 702.05 -5.32 -0.75%

Gold Futures 1,222.00 -10.70 -0.87%

XAU 76.09 -0.70 -0.91%

S&P/TSX Global Gold Index 179.80 -2.28 -1.25%

S&P Energy 556.06 -10.16 -1.79%

Hang Seng Composite Index 3,780.26 -178.51 -4.51%

Monthly Performance

Index CloseMonthly

Change($)Monthly

Change(%)

DJIA 25,462.58 +1,287.76 +5.33%

S&P 500 2,840.35 +127.13 +4.69%

10-Yr Treasury Bond 2.95 +0.12 +4.17%

Nasdaq 7,812.02 +309.34 +4.12%

S&P Basic Materials 371.26 +10.46 +2.90%

Korean KOSPI Index 2,287.68 +22.22 +0.98%

Russell 2000 1,673.37 +12.95 +0.78%

S&P Energy 556.06 -0.78 -0.14%

Natural Gas Futures 2.85 -0.02 -0.84%

Hang Seng Composite Index 3,780.26 -77.56 -2.01%

Gold Futures 1,222.00 -42.80 -3.38%

S&P/TSX VENTURE COMP IDX 702.05 -36.70 -4.97%

Oil Futures 68.58 -5.56 -7.50%

S&P/TSX Global Gold Index 179.80 -15.62 -7.99%

XAU 76.09 -6.78 -8.18%

Quarterly Performance

Index CloseQuarterly

Change($)Quarterly

Change(%)

Nasdaq 7,812.02 +723.86 +10.21%

Russell 2000 1,673.37 +126.81 +8.20%

S&P 500 2,840.35 +210.62 +8.01%

DJIA 25,462.58 +1,532.43 +6.40%

Natural Gas Futures 2.85 +0.12 +4.40%

S&P Basic Materials 371.26 +14.22 +3.98%

S&P Energy 556.06 +13.65 +2.52%

Oil Futures 68.58 +0.15 +0.22%

10-Yr Treasury Bond 2.95 +0.00 +0.10%

S&P/TSX Global Gold Index 179.80 -11.70 -6.11%

XAU 76.09 -6.29 -7.64%

Korean KOSPI Index 2,287.68 -199.57 -8.02%

Gold Futures 1,222.00 -109.60 -8.23%

S&P/TSX VENTURE COMP IDX 702.05 -69.20 -8.97%

Hang Seng Composite Index 3,780.26 -397.18 -9.51%

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Holdings may change daily. Holdings are reported as of the most recent quarter-end. The following securities mentioned inthe article were held by one or more accounts managed by U.S. Global Investors as of (06/30/2018):

Oracle Corp.Sinopec Corp.Northern Empire Resources Corp.Coeur Mining Inc.Golden Star Resources Ltd.Gold Fields Ltd.MOL Hungarian Oil and Gas PLCAmerican Airlines Group Inc.

*The above-mentioned indices are not total returns. These returns reflect simple appreciation only and do not reflectdividend reinvestment.

The Dow Jones Industrial Average is a price-weighted average of 30 blue chip stocks that are generally leaders in theirindustry.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 Russell3000, 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 TaiwanStock Exchange.The Korea Stock Price Index is a capitalization-weighted index of all common shares and preferred shares on the KoreanStock Exchanges. The Philadelphia Stock Exchange Gold and Silver Index (XAU) is a capitalization-weighted index that includes the leadingcompanies 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 arecapped 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 ofthe S&P 500.The S&P 500 Materials Index is a capitalization-weighted index that tracks the companies in the material sector as a subsetof 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 the1941-43 base period.The S&P 500 Industrials Index is a Materials Index is a capitalization-weighted index that tracks the companies in theindustrial 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 consumerdiscretionary 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 informationtechnology 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 inthe 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 ofthe S&P 500.The S&P 500 Healthcare Index is a capitalization-weighted index that tracks the companies in the healthcare sector as asubset 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 thetelecom 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 tradedcompanies 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 marketbasket of goods and services purchased by individuals. The weights of components are based on consumer spendingpatterns.The Purchasing Manager’s Index is an indicator of the economic health of the manufacturing sector. The PMI index isbased on five major indicators: new orders, inventory levels, production, supplier deliveries and the employmentenvironment.The S&P/TSX Venture Composite Index is a broad market indicator for the Canadian venture capital market. The index ismarket capitalization weighted and, at its inception, included 531 companies. A quarterly revision process is used to removecompanies that comprise less than 0.05% of the weight of the index, and add companies whose weight, when included, willbe greater than 0.05% of the index.

Diversification does not protect an investor from market risks and does not assure a profit.The producer price index (PPI) is a family of indexes that measures the average change in selling prices received bydomestic producers of goods and services over time. The PPI measures price changes from the perspective of the seller.The S&P Supercomposite Fertilizers & Agricultural Chemicals is a capitalization-weighted index. The S&P 1500 Steel Index is an unmanaged market capitalization weighted index of companies whose primary businessinvolves the manufacture and processing of steel.The Bloomberg Café Con Leche Index tracks the price of a cup of coffee in the eastern portion of Venezuela’s capital city ofCaracas.

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