EagleWing Research Newsletter on Gold Funds
April 1, 2001
GLOBAL WATCH
Comparing Funds | Comments
For the month it seemed like everything was headed downhill. Both the Dow Industrials and the NASDAQ plunged, as the Dow settled below 10,000 at 9878, and the NASDAQ under 2000, at 1840. Meanwhile the price of gold slowly made its way toward its 22 year low at 253, closing the month at 257.9. That's within one bad day's striking distance, so be ready. (There's not much you can do about it anyway, unless you're a lot richer than I can imagine.)
Around the world, there were increasing signs of financial instability, including a potential default of debts by Argentina or Brazil. The hoof and mouth disease in Britain and Europe has slowed agricultural traffic to a standstill and may turn out to be a financial disaster for them. Interest in Japan's problems increased, but the Nikkei index rallied enough to make it look like the problem was finding a natural solution. The same could be said about Turkey's bank problem mentioned last month. The normal financial mechanisms in Europe appear to be working to the good. This is all fine and dandy for now, but the world economy is slowing, and the U.S. won't be carrying as much of a load as it has in the past three years, buying enough from others to keep their economies afloat. That method has been reflected in the recurring trade deficits as Americans bought massively from abroad. This can't continue without some other negative financial result.
In the U.S., another rate decrease may have supported the overall economy some, but the markets didn't give it much credit. The U.S. confidence level stopped falling and actually climbed slightly in the latest measurement. On the other hand, the latest trade deficit came in near $33 billion again, near the record set a few months ago. The overall economy, while slowing, is still fairly robust, so far absorbing the layoffs as they come. The energy problem in California seems to be mostly hot air, depending upon your point of reference or field of view. Normal economics would demand a rate hike, but that is not an easy solution, as politicians know. Therefore, expect much more discussion and alarm sounding before it is through.
For the month, the price of gold slipped slowly from 266.8 to below 260 before rallying back to 270, only to quickly fall back to close at 257.9. Silver acted like it was on its deathbed, continuing February's plunge all the way down to close at 4.27. The dollar index closed up over 6% for the month, at 117+. That helped to push the euro below 90, closing worth only 87.8 cents. That's from a value of 92.3 on March 1. Oil also showed no signs of inflation, closing at $26.33, well below its alarm high last fall of over $35. The U.S. long bonds, both 10 year and 30 year, climbed for awhile, but closed down slightly. The interest rate return on the 30 year bonds climbed from 5.34% to 5.44%. If this holds, there probably won't be another rate cut from the Fed, and the stock markets will slide some more.
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
14 PRPFX Permanent Portfolio . -3.6 -8.7 -9.8 -11.4 -11.1
6 SGGDX First Eagle SGen Gold. -4.0 3.3 -7.7 -15.7 -32.7
9 FGLDX INVESCO Strat Gold . -4.0 -29.4 -35.5 -44.0 -60.0
23 GRFRX Van Eck Gold / Res A . -4.9 -2.5 -2.9 -20.5 -38.3
12 MNTGX Monterey OCM Gold . -5.3 0.8 -11.1 -21.0 -34.7
16 STSLX Pilgrim Silver . -5.4 -1.2 -23.5 -24.9 -46.1
15 LEXMX Pilgrim Goldfund . -5.9 -12.1 -17.6 -25.2 -36.6
21 UNWPX US Global World Gold . -6.6 -13.0 -35.6 -51.1 -64.1
22 USAGX USAA Gold . -8.3 -5.8 -6.9 -13.1 -23.2
2 BGEIX Amer Cent Global Gold. -8.3 -9.6 -17.6 -33.4 -47.3
13 OPGSX Oppenheimer Gold A . -8.5 -4.1 -7.3 -9.7 -20.2
5 FSAGX Fidelity Select Gold . -9.0 -8.2 -11.4 -16.6 -31.6
20 USERX US Global Gold Shrs . -9.1 -15.6 -27.5 -39.7 -58.4
10 MIDSX Midas Fund . -9.1 -12.1 -29.0 -49.1 -66.7
17 RYPMX Rydex Prec Metals . -9.3 -1.8
4 EKWBX Evergreen Prec Mtls B. -9.5 -8.1 -8.8 -17.4 -35.3
18 SCGDX Scudder Gold . -9.9 -35.1 -32.1 -35.5 -51.6
24 INIVX Van Eck Intl Inv GoldA -10.0 -15.3 -22.5 -41.0 -52.5
3 INPMX AXP Precious Metals A. -10.7 -13.8 -11.5 -21.8 -35.9
8 GOLDX Gabelli Gold . -11.3 -7.2 -6.0 -12.1 -26.4
19 TGLDX Tocqueville Gold . -11.8 -7.7 -7.1 1.7 5.2
7 FKRCX Franklin Gold A . -12.2 -19.2 -14.7 -7.6 -24.4
1 ASA ASA Ltd . -13.4 -4.0 -12.7 -5.1 -26.4
11 MIDIX Midas Investors . -14.6 -41.0 -45.2 -59.2 -73.8
25 VGPMX Vanguard Gold/Pr Mtls. -15.1 -17.7 -7.9 -5.6 -18.3
No fund was safe this month as ASA finally gave up some of its quarterly gains, at least partially due to the dollar regaining strength against the euro. The strong action of ASA lately was thought to be an indication of a strengthening gold market, but turned out to just be another false alarm. As anyone can tell, it was a very lousy month for precious metals, particularly gold funds. If the dollar continues to go up, this will continue.
Pilgrim Silver Fund (STSLX) has not traded for several days and therefore looks better than it probably would have. This is usually a sign of a fund about to close. With silver plunging, who wants to manage a losing fund. That would explain the over dozen gold fund managements which have said 'adios' over the past four years. Only relatively new fund Tocqueville Gold (TGLDX) has decided to swim against the current, and I think will be rewarded.
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(3-30)
18 Scudder Gold . -18.8 5.81
17 Rydex Prec Metals . -27.4 17.73
1 ASA Ltd . -28.6 16.49
23 Van Eck Gold / Res A . -33.3 2.32
4 Evergreen Prec Mtls B. -34.3 9.56
12 Monterey OCM Gold . -37.0 3.76
22 USAA Gold . -39.6 4.78
15 Pilgrim Goldfund . -41.8 2.54
6 First Eagle SGen Gold. -43.9 4.84
7 Franklin Gold A . -46.1 8.24
9 INVESCO Strat Gold . -46.2 1.43
2 Amer Cent Global Gold. -50.8 3.86
13 Oppenheimer Gold A . -55.1 8.39
14 Permanent Portfolio . -55.4 17.62
5 Fidelity Select Gold . -55.4 11.27
8 Gabelli Gold . -58.1 4.88
3 AXP Precious Metals A. -58.1 4.59
25 Vanguard Gold/Pr Mtls. -60.9 6.64
19 Tocqueville Gold . -68.3 10.52
24 Van Eck Intl Inv GoldA -70.7 4.16
16 Pilgrim Silver . -82.7 2.12
10 Midas Fund . -83.6 0.80
11 Midas Investors . -85.6 1.75
20 US Global Gold Shrs . -87.5 2.40
21 US Global World Gold . -95.1 4.66
Some funds are approaching their 12 month lows, in some cases set last November, as gold itself approached its 22 year low at $253. For gold to penetrate this level would be bearish, to say the least.
The following chart shows the approximate size of funds as measured in total assets under management in $millions. (As of March 30) 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. 258
5 Fidelity Select Gold . 198
1 ASA Ltd . 172
7 Franklin Gold A . 160
2 Amer Cent Global Gold. 128
24 Van Eck Intl Inv GoldA 84
18 Scudder Gold . 83
9 INVESCO Strat Gold . 63
22 USAA Gold . 59
14 Permanent Portfolio . 51
13 Oppenheimer Gold A . 49
15 Pilgrim Goldfund . 41
10 Midas Fund . 38
17 Rydex Prec Metals . 37
21 US Global World Gold . 37
3 AXP Precious Metals A. 27
23 Van Eck Gold / Res A . 23
20 US Global Gold Shrs . 19
16 Pilgrim Silver . 13
6 First Eagle SGen Gold. 10
8 Gabelli Gold . 10
19 Tocqueville Gold . 10
4 Evergreen Prec Mtls B. 7
11 Midas Investors . 4
12 Monterey OCM Gold . 1
It wasn't too long ago that there were several funds with over $300 million each under management, but this long term gold bear has taken its toll.
The 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
Since we haven't had any recent changes in 52 highs and lows, this number hasn't changed in three months. However, since we are rapidly approaching possible new lows, this number will be changing soon. Again, this number is only an indication of activity, meaning price changes compared to other funds.
*** 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
February's short rally was enough to get gold traders excited, but it ran out of steam and folded up like a cheap tent. At the current price under 260, we could test the low set in February of 255.1 or we could go all the way to the 22 year low at 253. Having bounced off the 255-257 level several times, previous rallies were short lived and only acted to get people excited before the fall.
During this recent slide in gold prices, several things have happened. First, the most important, is that although the U.S. stock market has been falling, the dollar has remained as a safe refuge for investors. Our long bonds act as a safe storage for assets worldwide and the demand pushes bond prices up and interest rates down. The dollar index, a relatively accurate measurement of the value of the dollar against other currencies, has rallied once again above 117. Last month it was under 110 for a short time and the resulting relative strength in the euro caused the gold markets to demonstrate some enthusiasm. Since then, the euro has cratered and all other currencies have taken a back seat to the dollar.
The weakness of other economies is one factor in the dollar rising, and there is no sign of anyone else taking the lead from the U.S. Europe's problem with hoof and mouth disease has really placed a burden on their economic alliances and will certainly be reflected in the near future. The euro will suffer and it is not a good sign for gold prices. Japan's solution has been to lower interest rates to zero and devalue the yen even more, providing for increased exports to the U.S., which results in a stronger dollar again. So far all trends point the same way.
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