EagleWing Research Newsletter on Gold Funds
April 1, 2000
GLOBAL WATCH
Comparing Funds | Comments
The U.S. economy remained in cruise mode as it grew at over 7% in the fourth quarter of 1999. The trade deficit for January exceeded $28b, a new record, causing the U.S. current account balance to exceed 4% of annual GDP, the highest percentage in recent history. The negative trade deficit and balance of payments deficit cannot continue to increase without financial repercussions, yet U.S. policies show no indication of changing the course of increasing deficits. Although the NASDAQ was down 11% from its recent high, most stock markets ignored the news. The S&P 500 index reached a new all-time high before settling back.
Gold dropped for a few days as rumors surfaced about the possibility of France selling bullion soon to raise funds to cover their pension plans. However, the Bank of France, which controls French gold, quickly stated that they had no plans to sell.
OPEC agreed to increase production, and petroleum prices fell under $25 per barrel, offering some reduction in the recent price advance. If the price stays down it will remove one potentially inflationary force.
The war in Chechnya continued, but Russian TV began to show some of the military failures kept from the Russian people. This may or may not have any effect upon a conflict which could go on forever.
Although the election of a pro-independence politician to the presidency of Taiwan stirred up Red Chinese military threats, the situation seems to have cooled down and returned to normal.
Meanwhile, President Clinton's tour of India and Pakistan, while making no apparent major political policy achievements, certainly helped to cool the rhetoric and probably will have a beneficial effect on that region. It also makes the U.S. look good, strengthening the dollar slightly.
Indonesia stabilized as the new government begins to investigate previous corruption. Over all, there was an absence of international turmoil which could have disturbed currency and precious metals markets.
For the month, the euro fell against the yen and held fairly consistent at .970 dollars.
Metals resumed their slides with gold dipping to 275 before closing at 278.4. The trading floors at 300, 290, 285, and 280 were easily penetrated as if gold traders were testing the market to see how low it would go. Silver traded between 5.13 and 4.95, closing at 5.02. The XAU index fell below 60 and touched 56.1 before closing at 56.5. Although the trend is still down, there are indications that the slide is slowing.
COMPARING FUNDS
Global Watch | Comments
Funds ranked by percentage change in net asset value for March.
fn Fund 1 mo 3 mo 12 mo 2 yr 3 yr
15 PRPFX Permanent Portfolio . 2.6 3.2 0.8 -1.5 11.0
23 GRFRX Van Eck Gold / Res A . -0.4 -12.5 -14.3 -36.4 -54.6
13 MNTGX Monterey OCM Gold . -2.5 -10.6 -8.8 -26.6 -45.3
10 STSLX Lexington Strat Silver -2.8 -7.4 -1.4 -29.6 -36.0
6 FKRCX Franklin Gold A . -2.9 -13.5 8.6 -11.4 -33.3
8 FGLDX INVESCO Strat Gold . -3.0 -7.0 -13.5 -38.0 -66.5
11 MIDSX Midas Fund . -3.7 -23.5 -25.7 -53.1 -77.4
17 SCGDX Scudder Gold . -4.0 -13.2 -7.6 -28.6 -50.1
24 INIVX Van Eck Intl Inv GoldA -4.1 -15.2 -20.8 -38.7 -55.9
25 VGPMX Vanguard Gold/Pr Mtls. -4.2 -19.4 4.0 -11.2 -37.4
16 RYPMX Rydex Prec Metals . -4.6 -17.7 -10.3 -35.4 -50.8
14 OPGSX Oppenheimer Gold A . -4.6 -14.5 -2.1 -13.9 -32.8
19 TGLDX Tocqueville Gold . -4.6 -11.4 6.1
12 MIDIX Midas Investors . -5.0 -20.8 -25.8 -52.2 -74.7
7 GOLDX Gabelli Gold . -5.1 -16.7 -4.8 -21.7 -55.7
4 EKWBX Evergreen Prec Mtls B. -5.5 -13.6 -5.6 -29.1 -49.8
22 USAGX USAA Gold . -5.5 -14.4 -4.3 -17.6 -37.3
1 ASA ASA Ltd . -5.8 -7.6 8.9 -15.7 -41.3
3 INPMX Amer Exp IDS Prc Mtl A -6.1 -13.6 -9.2 -27.5 -51.4
9 LEXMX Lexington Goldfund . -6.5 -17.0 -7.1 -23.1 -47.7
18 SGGDX SoGen Gold . -7.2 -12.1 -5.0 -27.1 -46.7
5 FSAGX Fidelity Sel Gold . -7.2 -15.6 -2.6 -22.8 -44.2
21 UNWPX US Global World Gold . -7.6 -16.6 -20.7 -44.2 -60.6
2 BGEIX Amer Cent Global Gold. -7.6 -17.0 -14.9 -36.0 -54.5
20 USERX US Global Gold Shrs . -7.6 -18.3 -14.4 -42.6 -74.5
For the month of March, gold equities continued to slide, with only a handful registering a gain for the month. Gold funds suffered as a result. Most equities were approaching annual lows.
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(3-31)
15 Permanent Portfolio . 19.3 18.38
1 ASA Ltd . -47.7 17.31
6 Franklin Gold A . -58.4 8.34
19 Tocqueville Gold . -61.8 11.32
25 Vanguard Gold/Pr Mtls. -68.2 6.78
7 Gabelli Gold . -69.7 5.19
13 Monterey OCM Gold . -73.9 4.23
5 Fidelity Sel Gold . -75.0 12.48
18 SoGen Gold . -75.5 5.17
22 USAA Gold . -85.3 5.12
4 Evergreen Prec Mtls B. -85.6 9.98
21 US Global World Gold . -90.7 6.83
3 Amer Exp IDS Prc Mtl A -91.7 4.95
8 INVESCO Strat Gold . -91.9 1.60
20 US Global Gold Shrs . -92.0 3.04
23 Van Eck Gold / Res A . -93.4 2.39
9 Lexington Goldfund . -94.9 2.73
24 Van Eck Intl Inv GoldA -96.0 4.86
10 Lexington Strat Silver -96.1 2.74
14 Oppenheimer Gold A . -96.7 8.94
11 Midas Fund . -96.9 1.04
2 Amer Cent Global Gold. -97.8 4.39
12 Midas Investors . -98.1 2.10
17 Scudder Gold . -98.1 5.73
16 Rydex Prec Metals . -100.0 3.76
High positive numbers represent a fund near its 52 week high and negative near its 52 week low. Several funds set new lows in March before moving up slightly at the end of the month.
The following chart shows the approximate size of funds as measured in total assets under management in $millions. (As of March 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. 282
6 Franklin Gold A . 206
1 ASA Ltd . 180
2 Amer Cent Global Gold. 137
5 Fidelity Sel Gold . 135
24 Van Eck Intl Inv GoldA 128
17 Scudder Gold . 85
22 USAA Gold . 79
8 INVESCO Strat Gold . 70
14 Oppenheimer Gold A . 69
15 Permanent Portfolio . 58
21 US Global World Gold . 53
9 Lexington Goldfund . 50
11 Midas Fund . 50
3 Amer Exp IDS Prc Mtl A 35
23 Van Eck Gold / Res A . 28
16 Rydex Prec Metals . 27
10 Lexington Strat Silver 21
20 US Global Gold Shrs . 20
7 Gabelli Gold . 14
18 SoGen Gold . 12
4 Evergreen Prec Mtls B. 12
19 Tocqueville Gold . 11
12 Midas Investors . 5
13 Monterey OCM Gold . 1
Most funds continue to lose assets as gold slides, and some decided to quit as assets reached an unmanageable level. Recently two more funds left our active list as Fidelity merged their Precious Metals Fund (FDPMX) into Fidelity Select Gold (FSAGX), and PIMCO Advisors merged their Precious Metals series of funds (PPMCX) into natural resource funds. Therefore, our latest list of funds decreased to only 25. Four years ago we were looking at 38.
The in-house beta 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
23 Van Eck Gold / Res A . 1.27
11 Midas Fund . 1.24
2 Amer Cent Global Gold. 1.24
24 Van Eck Intl Inv GoldA 1.23
13 Monterey OCM Gold . 1.19
1 ASA Ltd . 1.19
20 US Global Gold Shrs . 1.15
21 US Global World Gold . 1.15
16 Rydex Prec Metals . 1.14
5 Fidelity Sel Gold . 1.10
18 SoGen Gold . 1.09
7 Gabelli Gold . 1.08
19 Tocqueville Gold . 1.03
6 Franklin Gold A . 1.01
12 Midas Investors . 0.99
3 Amer Exp IDS Prc Mtl A 0.97
8 INVESCO Strat Gold . 0.92
14 Oppenheimer Gold A . 0.92
22 USAA Gold . 0.92
4 Evergreen Prec Mtls B. 0.90
9 Lexington Goldfund . 0.86
25 Vanguard Gold/Pr Mtls. 0.81
17 Scudder Gold . 0.74
10 Lexington Strat Silver 0.37
15 Permanent Portfolio . 0.21
*** 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 five months. When the market turns, I would expect the funds at the top to make the biggest moves.
INVESTING COMMENTS
Global Watch | Comparing Funds
Once again, the fall in gold cannot easily be blamed on international events, but is a partial result of the financial success of the U.S. stock markets and the high value of the dollar. Even with the increase in petroleum prices this year, inflation fears have not surfaced as thought by many, and the thirty year bond price falling under 6% indicates U.S. debt is still considered a safe haven.
Of the 29 gold equities monitored in the Eaglewing Guide to Gold Funds, only 4 advanced for the month of March. A few were down as much as 20% in one month. As a result, it's no surprise that as these equities approach their lows for the year, so do some of the gold funds.
The long bond closed at 5.84%, below the short term rate dictated by the Federal Reserve at 6%, and far below the 2 year bond rate near 6.4%. This is highly unusual and represents another twist in analyzing this market. Only 60 days ago, the long bond rate was as high as 6.70%, and the fall in the rate seems to be completely ignoring the ballooning balance of payments deficit.
The rumor of a French sale of bullion was just another load placed on the market, but has proven to be false.
For excellent pro-gold comments from another source, I refer you to John Hathaway articles at www.tocqueville.com, home of the Tocqueville Gold fund(TGLDX).
Another web site for gold fund comparisons is put out by Bloomberg at bloomberg.com, but the URL is too long to print out.
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