EagleWing Research Newsletter on Gold Funds
January 1, 2001
GLOBAL WATCH
Comparing Funds | Comments
With most of the presidential election controversy behind us, the U.S. stock market began to show signs of serious decay, the most obvious indication being the 39% decline in the NASDAQ for the year. What would be considered a depression in most markets is only the venting of hot air from an overexpanded balloon in NASDAQ values. The Dow Industrials was down for the first time since 1991 but only 6%. Meanwhile, the Dow Utilities were up 45% to new all-time highs. This market is apparently not considering the power companies in California threatening bankruptcy.
Overseas, the Japanese yen has been weakening substantially, even against the dollar as their economy remained in a recession with no real improvement in sight. In Europe, the euro continued its climb from a recent low, closing the year at $.942. This trend seems well established and bodes well for the price of gold in dollars. The dollar index was down for the month, closing just above 109. Last month it was over 118. That's a noticable decline of over 7% in only six weeks time. U.S. consumer confidence fell as more companies gave into the downturn by laying off employees. In November, there was a large decrease in the amount of new money moving into mutual funds, although the total was still a positive input. Fourth quarter profits were down. The U.S. trade deficit, while not setting a new record, was still over $34 billion, and added to the pile of U.S. dollar cash overseas.
The international political scene didn't change much as Israel and the Palestinians continue to shoot at each other, and each new effort to discuss peace was aborted with new violence. Potential problems in other locations have cooled off, including Russia, Indonesia, China and North Korea, which is a good sign for the future. OPEC producers met to try to keep the price of crude oil high as it fell below $27. If the market holds oil under $30, inflationary forces will be easier controlled.
For the month, gold edged up slightly form 270.1 to 272.0 but silver fell from 4.67 to 4.58, setting a new three year low at 4.56. The XAU index climbed from 47.0 to 51.4 and all gold funds gained, some substantially. The leading fund(Van Eck Gold & Resources, GRFRX) was up over 13%. The long bond gained as interest rates came down slightly, with the long bond yield falling from 5.64% to 5.45%.
For the year, gold prices fell from $288.50 to $272.00, (-$16.50, -5.7%), and silver from $5.41 to $4.58(-$.83, -15%). In several other currencies, gold actually gained in price. The XAU index dropped from 67.9 to 51.4(-16.5, -24%) as only one gold fund gained, and the average fund was down -28%. The long bond interest rate, which opened the year at 6.6%, closed at 5.45%, a significant decline.
COMPARING FUNDS
Global Watch | Comments
Funds ranked by percentage change in net asset value for December.
fn Fund 1 mo 3 mo 12 mo 2 yr 3 yr
23 GRFRX Van Eck Gold / Res A . 13.3 7.7 -12.8 -21.7 -31.4
5 FSAGX Fidelity Sel Gold . 10.7 2.6 -18.5 -11.7 -19.4
8 FGLDX INVESCO Strat Gold . 10.6 -1.4 -15.1 -22.8 -40.2
22 USAGX USAA Gold . 9.3 4.8 -15.4 -9.3 -8.3
7 GOLDX Gabelli Gold . 9.1 4.4 -15.6 -7.1 -10.4
11 MIDSX Midas Fund . 9.1 -3.4 -38.2 -45.6 -61.0
2 BGEIX Amer Cent Global Gold. 9.0 0.3 -24.4 -27.5 -36.3
3 INPMX Amer Exp IDS Prc Mtl A 8.8 11.6 -11.3 -12.2 -18.6
20 USERX US Global Gold Shrs . 8.8 -0.4 -29.8 -31.7 -54.2
4 EKWBX Evergreen Prec Mtls B. 8.3 3.1 -14.2 -11.7 -21.9
6 FKRCX Franklin Gold A . 8.2 9.2 -8.6 14.1 4.3
16 RYPMX Rydex Prec Metals . 7.8 2.3
12 MIDIX Midas Investors . 7.7 2.1 -26.4 -30.9 -53.1
19 TGLDX Tocqueville Gold . 7.6 3.6 -10.8 8.6
9 LEXMX Lexington Goldfund . 7.6 0.4 -22.2 -15.5 -21.0
17 SCGDX Scudder Gold . 7.5 4.5 -9.2 -2.3 -18.6
25 VGPMX Vanguard Gold/Pr Mtls. 7.1 8.6 -9.9 14.7 10.2
14 OPGSX Oppenheimer Gold A . 6.8 3.1 -17.3 -6.5 -7.8
24 INIVX Van Eck Intl Inv GoldA 6.7 0.7 -22.3 -32.5 -40.5
21 UNWPX US Global World Gold . 6.3 -6.0 -38.3 -46.2 -54.7
13 MNTGX Monterey OCM Gold . 6.0 -1.3 -21.1 -23.1 -28.3
1 ASA ASA Ltd . 5.2 -7.7 -15.9 7.2 -14.9
18 SGGDX SoGen Gold . 2.7 -9.4 -21.4 -17.2 -32.6
10 STSLX Lexington Strat Silver 1.9 -9.8 -28.4 -22.3 -45.4
15 PRPFX Permanent Portfolio . 0.9 -0.9 2.0 -2.8 0.6
The month of December gave us a glimpse of what could be if gold made a sustained advance. However, in constrast to the above net asset value changes, many gold equities did not advance. Most gains were made in large capitalization mines which are favored by institutional investors, and indicates the fragility of this rally. Many smaller equities actually lost for the month.
The Position indicator gives the relative position of a fund between its 52 week high and low. Its high is represented by +100 and its low by -100.
fn Fund pos nav(12-31)
25 Vanguard Gold/Pr Mtls. 24.5 7.58
15 Permanent Portfolio . 22.3 18.16
17 Scudder Gold . 3.0 5.99
6 Franklin Gold A . -7.7 8.81
22 USAA Gold . -8.8 5.06
3 Amer Exp IDS Prc Mtl A -11.4 5.08
4 Evergreen Prec Mtls B. -13.4 9.91
7 Gabelli Gold . -17.2 5.26
19 Tocqueville Gold . -17.6 11.40
23 Van Eck Gold / Res A . -19.5 2.38
16 Rydex Prec Metals . -23.9 17.87
5 Fidelity Sel Gold . -26.6 12.04
8 INVESCO Strat Gold . -34.6 1.46
2 Amer Cent Global Gold. -36.1 4.00
9 Lexington Goldfund . -38.2 2.56
13 Monterey OCM Gold . -40.0 3.73
14 Oppenheimer Gold A . -41.1 8.65
12 Midas Investors . -44.3 1.95
24 Van Eck Intl Inv GoldA -44.9 4.45
20 US Global Gold Shrs . -58.3 2.61
1 ASA Ltd . -63.3 15.31
18 SoGen Gold . -63.8 4.62
11 Midas Fund . -70.5 0.84
21 US Global World Gold . -73.8 5.05
10 Lexington Strat Silver -82.7 2.12
All funds rallied, some from all time lows, and trends were definitely positive. Again, many smaller equities did not gain in December, and represent a weakness still apparent in the overall gold equity market. With gold now just above 270, this market needs a surge to 280 or more. That might wake everyone up.
The following chart shows the approximate size of funds as measured in total assets under management in $millions. (As of December 31) This is only an approximation as the size changes daily with new purchases, redemptions, and nav changes. Relative positions of the funds don't change much. The largest remain the largest.
fn fund assets
25 Vanguard Gold/Pr Mtls. 315
6 Franklin Gold A . 218
1 ASA Ltd . 159
5 Fidelity Sel Gold . 130
2 Amer Cent Global Gold. 125
24 Van Eck Intl Inv GoldA 117
17 Scudder Gold . 88
22 USAA Gold . 78
14 Oppenheimer Gold A . 67
8 INVESCO Strat Gold . 64
15 Permanent Portfolio . 57
9 Lexington Goldfund . 47
11 Midas Fund . 40
21 US Global World Gold . 39
3 Amer Exp IDS Prc Mtl A 36
23 Van Eck Gold / Res A . 28
16 Rydex Prec Metals . 26
20 US Global Gold Shrs . 17
10 Lexington Strat Silver 16
7 Gabelli Gold . 14
4 Evergreen Prec Mtls B. 12
18 SoGen Gold . 11
19 Tocqueville Gold . 11
12 Midas Investors . 4
13 Monterey OCM Gold . 1
If you totaled all of these funds, you would have only $1.7 billion. this capitalization is almost nothing compared to many other individual stocks and will change quickly if more investment managers recognize the potential.
Our beta indicator measures the relative volatility of a fund's net asset value(nav) movement over 52 weeks as compared to the gold fund group average, 1.0. This number indicates volatility but does not specify the direction of movement, so it is only a measurement of relative activity of the fund.
fn fund beta
11 Midas Fund . 1.59
21 US Global World Gold . 1.57
13 Monterey OCM Gold . 1.25
20 US Global Gold Shrs . 1.22
24 Van Eck Intl Inv GoldA 1.15
12 Midas Investors . 1.13
32 Lexington Strat Invest 1.11
2 Amer Cent Global Gold. 1.10
28 Fidelity Sel Prec Mtls 1.07
16 Rydex Prec Metals . 1.06
5 Fidelity Sel Gold . 1.04
31 Pioneer Gold A . 1.04
18 SoGen Gold . 1.03
10 Lexington Strat Silver 1.00
3 Amer Exp IDS Prc Mtl A 0.99
9 Lexington Goldfund . 0.97
14 Oppenheimer Gold A . 0.96
1 ASA Ltd . 0.95
22 USAA Gold . 0.84
23 Van Eck Gold / Res A . 0.84
7 Gabelli Gold . 0.81
29 PIMCO Adv Prc Mtls C . 0.81
8 INVESCO Strat Gold . 0.79
6 Franklin Gold A . 0.78
4 Evergreen Prec Mtls B. 0.78
30 Morgan St DW Prc Mtls. 0.73
25 Vanguard Gold/Pr Mtls. 0.69
19 Tocqueville Gold . 0.68
17 Scudder Gold . 0.63
33 United Gold / Govt . 0.46
15 Permanent Portfolio . 0.16
You may notice that the top funds in this category are also among the largest losers for the year. This statistically represents the large losses by these funds and could reverse once the markets turn up for good.
*** Funds that diversify with government treasuries, bullion or natural resource stocks generally have a lower beta and are less volatile compared to a portfolio concentrating on small capitalization mining companies. These numbers have remained stable, changing little within the past six months. When the market turns, I would expect the funds at the top to make the biggest moves. For comparison, some of the recently expired funds are left on this list.
INVESTING COMMENTS
Global Watch | Comparing Funds
It seems that the economy is waiting only partially on President-elect Bush's appointments, and mostly recognizing that the stock market boom may be over for now. With NASDAQ down 39% last year and the Dow still weak, this may also depress gold prices like most recessions have in the past. The Dow Utilities cannot maintain its high position if the power distribution problems in California expand to other western states.
The price of gold has advanced only $8 from its low in early November, and cannot be classified in a major advance yet. Some equities have optimistically advanced more than the climb in gold can justify, but may be just leading the way. If gold can push above 275-280, we may see some serious money come into the market, and a serious rally may result. So far, this advance is only preliminary, waiting on something else to give it a push. The continuing trade deficit, over 34 billion dollars, threw some more fuel on the fire, but is not the subject that will lead the charge.
Continued weakness in the dollar coinciding with an increasing euro and a strengthening European market will be a good indication that precious metals will keep climbing. However, the weak price of silver demonstrates that we are certainly not in a precious metals bull market, so don't bet on one yet.
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