EagleWing Research Newsletter on Gold Funds
May 1, 2000
GLOBAL WATCH
Comparing Funds | Comments
The U.S. economy continued to move ahead as first quarter growth in GDP was over 5.4% and consumer spending exceeded a growth of 8.3% from last year. There were signs of overheating, but, although the stock market flinched slightly with the possibility of inflation, it was short lived. Stock market dips were quickly reversed and money continued to come into the markets. There was but one sign of interest rates increasing as the 2 year U.S. bond reached a relatively high 6.70%. The 30 year bond closed at 5.96%, much lower. The spread is worrying many analysts because of its indication of a confused and unreliable debt market.
As reported by the Prudent Bear Fund (www.prudentbear.com), U.S. investment margin debt has doubled within the past two years, and mortgage debt has increased over three times the margin debt. If you remember 1929, a primary problem for the stock market crash was the large amount of margin debt at 10% margin. Although today's margin limit is at 50%, mortgage debt, like 70 years ago, is also ballooning to record levels, well out of the control of the Fed. Needless to say, these trends cannot continue.
With the latest stock market dips ending quickly, the U.S. stock market seems to be the most valued in the world and is still attracting billions of dollars of foreign money. Of course, some of this is just our trade deficit returning in someone else's investment account. This return of cash to U.S. shores has pushed the dollar to new highs against almost every other currency, including an eleven year high against the Swiss Franc, once the world's most valued investment currency. Meanwhile, the much heralded euro has fallen about 9% since January 1, and closed the month at 91 cents, US.
For the month, gold moved from 278.4 to a high of 284.0 before returning back down to 273.1. This slide in the price of gold is limited primarily to the dollar. In other currencies, the price of gold has gone up as the dollar appreciates in relative value. Silver ended down slightly from 5.02 to 4.96. The XAU index slipped from 56.5 to 54.7, but most gold equities fell out of bed one more time. Most gold funds took another major hit.
Although the mainland Chinese government made more threats against Taiwan about claiming any form of independence, other hotspots around the world have all cooled down significantly. The conflict in Chechnya is still active, and European governments are pressuring Russia, but Putin has little reason to pull out, and no one really expects him to.
COMPARING FUNDS
Global Watch | Comments
Funds ranked by percentage change in net asset value for April.
fn Fund 1 mo 3 mo 12 mo 2 yr 3 yr
8 FGLDX INVESCO Strat Gold . -1.2 -1.9 -23.7 -40.6 -65.2
15 PRPFX Permanent Portfolio . -2.3 2.9 -5.7 -4.8 8.4
17 SCGDX Scudder Gold . -3.5 -8.9 -21.0 -34.4 -48.5
13 MNTGX Monterey OCM Gold . -3.5 -3.1 -21.7 -33.8 -41.5
18 SGGDX SoGen Gold . -4.3 -8.2 -17.8 -35.7 -45.3
12 MIDIX Midas Investors . -4.3 -9.0 -33.2 -55.5 -73.5
24 INIVX Van Eck Intl Inv GoldA -4.3 -9.0 -31.8 -46.8 -54.4
23 GRFRX Van Eck Gold / Res A . -4.6 -2.6 -26.5 -43.6 -52.9
21 UNWPX US Global World Gold . -5.0 -10.7 -32.7 -49.1 -60.6
2 BGEIX Amer Cent Global Gold. -5.5 -10.2 -30.3 -45.0 -53.0
4 EKWBX Evergreen Prec Mtls B. -6.0 -10.6 -22.2 -39.9 -49.0
22 USAGX USAA Gold . -6.1 -10.6 -21.8 -29.2 -37.2
14 OPGSX Oppenheimer Gold A . -6.7 -14.1 -22.2 -25.3 -33.7
5 FSAGX Fidelity Sel Gold . -6.9 -10.8 -21.5 -32.0 -44.9
6 FKRCX Franklin Gold A . -7.0 -13.6 -14.7 -22.9 -33.8
19 TGLDX Tocqueville Gold . -7.2 -10.6 -15.6
10 STSLX Lexington Strat Silver -7.3 -11.5 -16.7 -33.9 -36.3
20 USERX US Global Gold Shrs . -7.9 -14.4 -29.1 -50.0 -74.5
9 LEXMX Lexington Goldfund . -8.1 -14.3 -23.5 -35.0 -48.4
25 VGPMX Vanguard Gold/Pr Mtls. -8.3 -18.9 -19.1 -25.2 -37.5
3 INPMX Amer Exp IDS Prc Mtl A -8.7 -11.0 -24.5 -37.0 -52.6
7 GOLDX Gabelli Gold . -9.2 -14.8 -24.4 -36.2 -56.1
11 MIDSX Midas Fund . -10.6 -14.7 -40.8 -60.4 -77.8
1 ASA ASA Ltd . -11.2 -11.2 -15.4 -34.5 -44.4
The slide in gold equities and funds continued throughout April. Seventeen of the twenty-five funds reached a new annual low on the last day of the month. It was not a good 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(4-30)
15 Permanent Portfolio . -28.2 17.95
13 Monterey OCM Gold . -86.6 4.08
6 Franklin Gold A . -88.2 7.76
1 ASA Ltd . -90.5 15.37
18 SoGen Gold . -91.8 4.95
19 Tocqueville Gold . -91.8 10.51
8 INVESCO Strat Gold . -97.3 1.58
11 Midas Fund . -100.0 0.93
2 Amer Cent Global Gold. -100.0 4.15
23 Van Eck Gold / Res A . -100.0 2.28
20 US Global Gold Shrs . -100.0 2.80
24 Van Eck Intl Inv GoldA -100.0 4.65
21 US Global World Gold . -100.0 6.49
3 Amer Exp IDS Prc Mtl A -100.0 4.52
7 Gabelli Gold . -100.0 4.71
5 Fidelity Sel Gold . -100.0 11.62
14 Oppenheimer Gold A . -100.0 8.34
12 Midas Investors . -100.0 2.01
9 Lexington Goldfund . -100.0 2.51
22 USAA Gold . -100.0 4.81
4 Evergreen Prec Mtls B. -100.0 9.38
25 Vanguard Gold/Pr Mtls. -100.0 6.22
17 Scudder Gold . -100.0 5.53
10 Lexington Strat Silver -100.0 2.54
The short rally in early April quickly turned negative and most funds closed the month with little sign of positive action.
The following chart shows the approximate size of funds as measured in total assets under management in $millions. (As of April 28) 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
6 Franklin Gold A . 192
1 ASA Ltd . 160
16 Rydex Prec Metals . 134
2 Amer Cent Global Gold. 129
5 Fidelity Sel Gold . 126
24 Van Eck Intl Inv GoldA 122
17 Scudder Gold . 82
22 USAA Gold . 74
8 INVESCO Strat Gold . 69
14 Oppenheimer Gold A . 64
15 Permanent Portfolio . 57
21 US Global World Gold . 51
9 Lexington Goldfund . 46
11 Midas Fund . 45
3 Amer Exp IDS Prc Mtl A 32
23 Van Eck Gold / Res A . 27
10 Lexington Strat Silver 20
20 US Global Gold Shrs . 18
7 Gabelli Gold . 13
4 Evergreen Prec Mtls B. 12
18 SoGen Gold . 11
19 Tocqueville Gold . 10
12 Midas Investors . 4
13 Monterey OCM Gold . 1
As the price of gold and gold equities continue to head south, funds are losing assets under management. Relative to the stock market, the entire list of gold equities could be bought for less than many single internet companies.
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
11 Midas Fund . 1.58
2 Amer Cent Global Gold. 1.40
23 Van Eck Gold / Res A . 1.35
20 US Global Gold Shrs . 1.34
24 Van Eck Intl Inv GoldA 1.34
21 US Global World Gold . 1.22
16 Rydex Prec Metals . 1.22
13 Monterey OCM Gold . 1.19
1 ASA Ltd . 1.19
3 Amer Exp IDS Prc Mtl A 1.19
7 Gabelli Gold . 1.13
5 Fidelity Sel Gold . 1.11
14 Oppenheimer Gold A . 1.11
12 Midas Investors . 1.10
18 SoGen Gold . 1.09
9 Lexington Goldfund . 1.07
19 Tocqueville Gold . 1.03
6 Franklin Gold A . 1.01
22 USAA Gold . 1.00
4 Evergreen Prec Mtls B. 0.99
8 INVESCO Strat Gold . 0.92
25 Vanguard Gold/Pr Mtls. 0.88
17 Scudder Gold . 0.83
10 Lexington Strat Silver 0.54
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 six months. When the market turns, I would expect the funds at the top to make the biggest moves.
INVESTING COMMENTS
Global Watch | Comparing Funds
The fall in navs for gold funds has driven most under five dollars, and Rydex Precious Metals (RYPMX) conducted a reverse split of 1 for 5. Its price was readjusted to over $18 on April 17. This has no effect upon fund values held by investors, and is only a bookkeeping manuever.
Although gold was down only 5.30 (2%) and XAU was down 1.8 (3%), most funds and equities were down much more for the second month in a row. Investment money is being squeezed out of the gold equity market much more than a proportional amount.
An interesting relationship has surfaced between the price of gold and the value of the euro. Both have been falling in tandem against the dollar demonstrating a relatively close association. It might mean that gold will continue to slide as long as the dollar climbs against the euro. Therefore, a rally in the euro might be the first indication of gold bottoming, whenever that is. For the month, the euro fell from 97 to 91 cents.
The interest rate increases during the last week of the month may be an indication of market worries, but it was hard to tell that gold was listening. The long bond tested 6%, but quickly fell back to close at 5.96%.
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