EagleWing Research Newsletter on Gold Funds
February 1, 2001
GLOBAL WATCH
Comparing Funds | Comments
The month of January was uneventful except for the two interest rate reductions by the Federal Reserve and the beginning of a new presidential term and new administration. It is not clear that the Bush cabinet will change much at the U.S. Treasury as both candidates in November supported free trade and a strong dollar. Therefore, trends should continue, including large trade deficits and a slowly weakening dollar due to international reality. Of course, the dollar could stage more rallies, but the large flow of dollars overseas and the reducing return of greenbacks back to this country in investments will eventually be very evident in the currency markets. The last trade deficit was nearly $34 billion, over a billion dollars a day outbound, or about $4 per citizen daily.
International news has been relatively calm going back to November as U.S. elections stole most of the news thunder. The exception has been the apparent deterioration of profit and lost statements for many companies and the U.S. economy in general. By lowering short term rates a full percentage point and also the discount rate, the Fed is trying to prevent further erosion of the bull market, which is showing substantial signs of turning into a bear. On the other hand, the NASDAQ, after falling most of last year, gained over 12% this month to indicate that the lower rates may already be affecting investor mentality.
The precious metals market has been sliding since the November low point and subsequent rally into December. Since then, gold has been trying to stay above 262 after failing to hold at the 270 level in December. Gold funds, meanwhile, have been indicating that, although weak, they are well above the lows set in October and November. Out of the blue, silver has shown signs of strength by climbing up from its recent lows. Oil, while attempting to stay above $30, recently fell once more, closing the month below 29, and indicating that inflation is not a big worry to the markets. The U.S. dollar index closed at 110.3, well below its recent high, and showing signs of falling further as the European economy starts to gain strength. The euro closed the month at .936, well above its recent low near .83. The long term bond interest rate closed the month at 5.52%, very close to the Fed short term rate.
One factor noticed by more analysts is the large domestic debt, both corporate and personal, which has resulted from, or been the driving force of, depending upon you viewpoint, this six to eight year bull market. Overall debt has doubled since 1991, much of it mortgages supported by stock market profits, paid for by money from real estate refinancing of new homes bought with stock market profits. In fact, in December, in the face of the slowing economy, home sales were up 13%, a phenomenal number. With a negative savings rate, U.S. consumers are being force to back down from their several year long buying binge, although it's not evident yet.
COMPARING FUNDS
Global Watch | Comments
Funds ranked by percentage change in net asset value for January.
fn Fund 1 mo 3 mo 12 mo 2 yr 3 yr
1 ASA ASA Ltd . 8.0 16.8 -1.7 6.8 -20.0
16 STSLX Pilgrim Silver . 5.7 4.7 -22.0 -19.7 -39.9
6 SGGDX First Eagle SGen Gold. 2.2 6.3 -12.4 -16.6 -32.1
11 MIDIX Midas Investors . 2.1 15.7 -10.0 -29.4 -49.0
7 FKRCX Franklin Gold A . 1.9 17.5 0.0 16.6 0.7
18 SCGDX Scudder Gold . 1.7 14.7 0.3 1.0 -20.0
19 TGLDX Tocqueville Gold . 0.9 14.1 -2.1 11.2 15.0
14 PRPFX Permanent Portfolio . 0.8 2.1 4.9 -2.1 0.3
15 LEXMX Pilgrim Goldfund . 0.8 13.7 -11.9 -14.3 -26.1
17 RYPMX Rydex Prec Metals . 0.6 16.7
3 INPMX AXP Precious Metals A. 0.6 18.6 0.6 -8.7 -22.2
13 OPGSX Oppenheimer Gold A . 0.6 13.0 -10.4 -5.2 -11.3
12 MNTGX Monterey OCM Gold . 0.3 14.7 -11.2 -21.4 -31.1
24 INIVX Van Eck Intl Inv GoldA 0.2 13.5 -12.7 -30.2 -42.7
10 MIDSX Midas Fund . 0.0 3.7 -22.9 -42.1 -62.5
8 GOLDX Gabelli Gold . 0.0 15.4 -4.9 -5.2 -19.1
23 GRFRX Van Eck Gold / Res A . -0.4 12.9 1.3 -18.8 -34.7
4 EKWBX Evergreen Prec Mtls B. -0.5 15.2 -6.0 -10.5 -28.9
9 FGLDX INVESCO Strat Gold . -0.7 9.0 -9.9 -21.2 -42.5
5 FSAGX Fidelity Sel Gold . -0.9 14.2 -8.4 -10.0 -24.3
25 VGPMX Vanguard Gold/Pr Mtls. -0.9 12.4 -2.1 13.6 1.1
21 UNWPX US Global World Gold . -1.0 4.2 -31.2 -44.3 -58.7
2 BGEIX Amer Cent Global Gold. -1.0 13.5 -14.3 -27.1 -40.2
20 USERX US Global Gold Shrs . -1.1 9.3 -21.1 -29.3 -54.7
22 USAGX USAA Gold . -1.4 14.2 -7.2 -9.1 -15.0
As I stated in November, I thought that we were seeing the lowest price of gold for the next decade, probably forever. Gold equities had been hammered and now have held up for the last two months as if they have seen their lows. In the above table, the three month gains are evident, and the once large losses for the previous twelve months have been decreasing. The failure of this rally to regroup and relaunch is not a good sign for metals.
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(11-30)
14 Permanent Portfolio . 43.9 18.31
25 Vanguard Gold/Pr Mtls. 18.2 7.51
18 Scudder Gold . 15.2 6.09
7 Franklin Gold A . 3.7 8.98
3 AXP Precious Metals A. -8.6 5.11
19 Tocqueville Gold . -11.8 11.50
4 Evergreen Prec Mtls B. -16.4 9.86
22 USAA Gold . -16.5 4.99
8 Gabelli Gold . -17.2 5.26
17 Rydex Prec Metals . -21.1 17.98
23 Van Eck Gold / Res A . -21.8 2.37
1 ASA Ltd . -27.2 16.54
5 Fidelity Sel Gold . -30.7 11.93
15 Pilgrim Goldfund . -34.5 2.58
11 Midas Investors . -36.1 1.99
13 Oppenheimer Gold A . -38.4 8.70
9 INVESCO Strat Gold . -38.5 1.45
12 Monterey OCM Gold . -39.0 3.74
2 Amer Cent Global Gold. -40.3 3.96
24 Van Eck Intl Inv GoldA -44.0 4.46
6 First Eagle SGen Gold. -54.8 4.72
16 Pilgrim Lxtn Silver . -59.6 2.24
20 US Global Gold Shrs . -62.5 2.58
10 Midas Fund . -70.5 0.84
21 US Global World Gold . -76.6 5.00
No fund has set a new low since November and this chart demonstrates that all are up substantially from their lows. A few are even in positive territory.
The following chart shows the approximate size of funds as measured in total assets under management in $millions. (As of January 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. 292
5 Fidelity Sel Gold . 210
7 Franklin Gold A . 174
1 ASA Ltd . 172
2 Amer Cent Global Gold. 131
24 Van Eck Intl Inv GoldA 90
18 Scudder Gold . 87
9 INVESCO Strat Gold . 64
22 USAA Gold . 62
14 Permanent Portfolio . 53
13 Oppenheimer Gold A . 51
15 Pilgrim Goldfund . 41
10 Midas Fund . 40
21 US Global World Gold . 40
17 Rydex Prec Metals . 38
3 AXP Precious Metals A. 30
23 Van Eck Gold / Res A . 23
20 US Global Gold Shrs . 19
16 Pilgrim Lxtn Silver . 14
8 Gabelli Gold . 11
19 Tocqueville Gold . 11
6 First Eagle SGen Gold. 10
4 Evergreen Prec Mtls B. 7
11 Midas Investors . 4
12 Monterey OCM Gold . 1
As I mentioned last month, if you totaled all of these funds, you would have just over 1.7 billion dollars. Compared to many dotcom stocks, the total capitalization for gold equities is almost nothing. Any positive change in demand would drive these equities and funds into a strong bull trend.
My 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
10 Midas Fund . 1.59
21 US Global World Gold . 1.57
12 Monterey OCM Gold . 1.25
20 US Global Gold Shrs . 1.22
24 Van Eck Intl Inv GoldA 1.15
11 Midas Investors . 1.13
32 Lexington Strat Invest 1.11
2 Amer Cent Global Gold. 1.10
28 Fidelity Sel Prec Mtls 1.07
17 Rydex Prec Metals . 1.06
5 Fidelity Sel Gold . 1.04
31 Pioneer Gold A . 1.04
6 First Eagle SGen Gold. 1.03
16 Pilgrim Lxtn Silver . 1.00
3 AXP Precious Metals A. 0.99
15 Pilgrim Goldfund . 0.97
13 Oppenheimer Gold A . 0.96
1 ASA Ltd . 0.95
22 USAA Gold . 0.84
23 Van Eck Gold / Res A . 0.84
8 Gabelli Gold . 0.81
29 PIMCO Adv Prc Mtls C . 0.81
9 INVESCO Strat Gold . 0.79
7 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
18 Scudder Gold . 0.63
33 United Gold / Govt . 0.46
14 Permanent Portfolio . 0.16
If you compare this list with the nav changes, you will find that volatility does not always match success. In fact, Vanguard, Tocqueville, and Scudder, all leaders on the latest monthly chart, are low in beta, while high beta funds are often losers. This is an indication that the high beta funds are sticking with the smaller equities which haven't had much action lately. That could change, however.
*** 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 seven months. When the market turns, I would expect the funds at the top to make the biggest moves. For comparison only, some of the recently expired funds are left on this list.
INVESTING COMMENTS
Global Watch | Comparing Funds
After the rally in November, there were many precious metals analysts who thought that this was it, the time had come, gold was on its way, finally, and I was leaning in that direction. However, unless there is some support for gold soon, we will shortly have give up all gains since the rally began.
The signs of a weakening dollar remain. They are not going away and the existence of another large monthly trade deficit is just around the corner. The euro is in an uptrend, and the increasing number of layoffs from major corporations indicates that the economy is truly slowing. This by itself is not good for gold, but the weakening dollar as a result of lower rates and worsening investment conditions is definitely bullish for gold prices.
Historically, gold has always had a difficult time rallying in dollars if there was no support in South African equities. The relatively strong movement by ASA indicates that South African stocks, supported by international, mostly European investors, perhaps have seen their lows and are trying to lead the way. In the U.S., gold has been a terrible investment and carries a terrible reputation. However, as noticed above, some funds have done much better than the NASDAQ over the past year, and represent a market segment still asleep. I do not expect this to last much longer.
|