||Why Gold? |
Why Gold? |
Why Funds? |
Historically, gold has been a proven method of preserving value when a national currency was losing value. If your investments are valued in a depreciating currency, allocating a portion to gold assets is similar to a financial insurance policy. In the past year, the climb in the price of gold above $1900 per ounce is due to many factors, one being that the dollar is losing value.
- Gold doesn't pay income or interest.
- Gold was in a serious bear market from 1980 to 2002.
- Central banks have tons of bullion which they occasionally threaten to sell.
- If you don't count the last ten years, gold stocks have not done well.
- Since gold funds have made big moves over seven of the last eight years, they are now not doing too well.
- Your broker probably won't recommend gold funds.
- The dollar is weak and getting weaker due to national economic policies which don't appear to have an end.
- Gold price appreciation makes up for lost interest, especially in a bull market.
- The last ten years are a major bull move similar to the 70's when gold moved from $38 to over $800.
- Central banks in several countries have been increasing their gold holdings as part of their foreign reserves, instead of selling.
- All gold funds are in a long term uptrend with bullion, sliding in 2011 as gold increased, but ready for an new gold bull market surge in 2012.
- The trend of commodity prices to increase is relative to gold price increases.
- Worldwide gold production is not matching consumption. The price will go up further with demand.
- Most gold consumption is done in India and China and their demand is increasing with their increase in national wealth.
- All gold funds reached all-time highs in 2010 and will soon resume the advance.
- The short position held by hedged gold funds has being methodically reduced.
- U.S. government economic policies over the past decade have systematically projected the U.S. economy down a road with uncontrollable federal spending and an uncontrollably increasing trade deficits. Both will cause the dollar to lose in international value and will increase the price of alternative investments, such as gold.
- With the recent devaluation of many international currencies, the U.S. dollar was the international safe haven of last resort. We are seeing signs of this ending due to many financial factors, the most important one being a falling dollar.
- There are over two Trillion dollars ($2,000,000,000,000) of U.S. debt owned by foreigners which could be repatriated under certain conditions. This could cause a major decline in the value of the dollar and a soaring gold price.
- If you believe in 'buy low, sell high', gold is still low, but climbing.
- Gold bullion. - Refiners produce gold bars from one gram to 400 ozs.
- Gold coins. - The most popular are one oz coins such as the American Eagle, Canadian Maple Leaf, the South African Krugerrand, and the Austrian Vienna Philharmonic. They are easy to keep and transport and closely match the price of gold with a small premium. More specific details.
- Numismatic coins. - Older coins which fit the description of collectibles have a premium to the value of gold included in the coin. The holder is dependent upon an accurate and fair appraisal.
- Gold certificates. - A certificate which represents ownership of gold bullion held by a financial institution for convenient and safe storage. There is a fee for storage and insurance.
- Gold futures and options. - A futures contract traded on one of the futures exchanges, such as the COMEX in New York. This method is generally leveraged and options provide price movement much more than that of gold itself. It can be used to sell short and can be used to benefit from a drop in the price of gold.
- Gold Mining stocks. - Stock ownership of a company traded on one of the exchanges. The price movement is dependent not only upon the price of gold, but also upon the future of the corporation and management. It's price movement is almost always more than the movement of gold itself. Market Vectors Gold Miners ETF (GDX) is one way to invest in stocks.
- Jewelry. - Representing the largest consumption of gold each year, jewelry is a major method of savings in developing economies.
- Exchange Traded Funds (ETF)- Perhaps the safest method of buying and owning gold by buying shares in a fund based solely on the existing market price of gold. No leverage or storage problems. GLD, GDX, and SLV.
- Gold Mutual funds. - A relatively safe method of buying and owning gold stocks allows the owner to diversify among many stocks and allows the investing decisions to be made by a professional. Investment methods vary among funds and provide many different styles of portfolio management for an investor to choose from. Prices move faster and further in both directions than the price of gold.
- The 20 funds evaluated by EagleWing Research can be bought, sold, or exchanged on any market day, do not have a storage or liquidity problem and will quickly send you a fund prospectus upon request. Each is easy to get into and to get out of.
- In general, gold funds:
a. Provide professional management and diversification within the gold sector.
b. Are more volatile than the S&P index.
c. May or may not have any correlation with the general market.
d. Move daily with the price of gold, but not always.
e. Move proportionally more than gold, up and down.
- When selecting a fund, an investor should be aware of significant differences between funds:
a. Investment style................Very conservative or daring.
b. Type of load.....................Front-end, Back-end or No-load.
c. Expense ratios..................Varies from .4% to over 2%
d. Portfolio turnover..............Varies from 2% to over 500%.
e. Fund sizes.........................Varies from $80 mil to over $5 billion.
f. Net Asset Value(NAV).....Varies from $8 to over $90.
- Some funds have special relationships with discount brokers.
- Some funds invest in South African mining stocks.
- Some funds allow hedging, shorting and option writing.
- A few funds have heavy bullion holdings.
- Since 1989 sixteen gold funds have dissolved(quit) and nine more have changed management.
- One gold fund terminated as recently as November 2001.
- One new fund started in June 2002.
- Some funds are closed to new investments.
The EagleWing Guide to Gold Funds covers unique fund characteristics, expense ratios, loads, sizes, portfolio turnovers, recent and long term NAV changes, investment objectives, brokerage connections and investment comments. For a low cost of only $15.95 the Guide can save you hours of research time, effort and expense and is updated monthly.
Before investing, call for a fund prospectus (funds page) and examine management policies and investment objectives. Check out past performance. Is it a load fund or have high expenses? Check out the latest portfolio holdings. Is it overloaded with very few companies, or well diversified? Better yet, buy the Guide and save yourself hours of time and effort.
Investigate before you invest.