EagleWing Research Newsletter on Gold Funds
June 1, 2001
GLOBAL WATCH
Comparing Funds | Comments
May started by trying to keep a rally from April going, and, after an interest rate drop and an ineffective gold auction, pushed many gold funds to new twelve month highs. However, some gains dissipated during the final week as the price of gold fell back.
One reason for the fallback was a report from Russia that they might sell some bullion to finance aid to flood victims in Siberia. However, an IMF agreement with Russia restricts the sale of bullion as a means of raising revenue, so the suggestion of selling some to pay for humanitarian needs in Siberia was quickly squashed.
In Europe, the weak euro gave no reason for gold to move up, and probably put the brakes to the gold advance as the euro reached a seven month low at .845, nearing its alltime low of .823 set last October, just prior to the low in gold stocks. Almost all economic news from Europe was negative as projected growth rates are all down. The auction of gold by the Bank of England went by with little notice as the market absorbed it quickly and quietly.
In the U.S. first quarter, manufacturing orders were down while consumer confidence was still high. This coincides with another large monthly trade deficit over $30 billion. While jobless claims increased slightly in April, new homes sales remained high.
Korea, Taiwan, and Japan were experiencing slowdowns which are indicative of coming deflationary recessions, not inflationary. This is even with current large trade surpluses with the U.S.
A relevant news item from Asia which wasn't mentioned anywhere except on the internet was a report that China has decided to allow its citizens to own and trade gold, and that a major gold exchange will be opened with state support.
In South America, Argentina claims to have escaped a financial mess by refinancing much of its large debt, but time will tell. Brazil, like California, is suffering economic woes brought about by high energy prices.
The lowering of U.S. federal funds to 4.0% gave all markets a boost, but long term rates actually went up. Oil remained in a small trading range near $28-29 with little effect on metals. The dollar index reached a new high, over 119.
During the month, gold moved from 264.0 to a closing high of 287.4 before sliding back to 265.3. Silver climbed up from its low at 4.32 to reach 4.60 before falling back to 4.39. The XAU did likewise, advancing from 55.1 to 65.7 before slipping back to 57.1. It was a familiar pattern as they all returned to previous plateaus.
COMPARING FUNDS
Global Watch | Comments
Funds ranked by percentage change in net asset value for May.
fn Fund 1 mo 3 mo 12 mo 2 yr 3 yr
7 FKRCX Franklin Gold A . 7.7 8.3 26.5 28.0 17.2
24 VGPMX Vanguard Gold/Pr Mtls. 7.0 7.3 33.2 24.7 18.4
4 EKWBX Evergreen Prec Mtls B. 7.9 11.0 23.1 13.0 -10.5
8 GOLDX Gabelli Gold . 5.7 10.5 23.8 14.7 -3.6
13 OPGSX Oppenheimer Gold A . 5.4 10.3 19.9 8.2 5.6
21 USAGX USAA Gold . 5.0 12.1 19.9 9.6 -0.5
5 FSAGX Fidelity Select Gold . 4.9 9.6 14.6 8.3 -7.6
2 BGEIX Amer Cent Global Gold. 4.7 10.7 10.7 -5.7 -26.9
17 SCGDX Scudder Gold . 4.7 7.1 21.0 14.8 -4.4
19 USERX US Global Gold Shrs . 4.4 7.6 1.4 -14.7 -36.9
15 LEXMX Pilgrim Goldfund . 4.3 8.9 14.0 2.4 -12.0
20 UNWPX US Global World Gold . 3.9 6.2 -15.7 -32.7 -51.6
18 TGLDX Tocqueville Gold . 3.8 4.7 16.6 16.0 24.9
12 MNTGX Monterey OCM Gold . 3.7 12.3 8.3 1.4 -16.9
6 SGGDX First Eagle SGen Gold. 3.6 9.3 10.6 5.4 -18.6
11 MIDIX Midas Investors . 3.5 0.5 -2.4 -25.1 -48.1
16 RYPMX Rydex Prec Metals . 2.9 6.6 10.5
1 ASA ASA Ltd . 2.6 3.5 32.3 27.5 -0.3
9 FGLDX INVESCO Strat Gold . 2.5 10.1 3.8 -9.9 -27.1
3 INPMX AXP Precious Metals A. 2.0 7.4 21.3 2.8 -10.8
14 PRPFX Permanent Portfolio . 1.2 0.9 2.3 0.8 0.6
22 GRFRX Van Eck Gold / Res A . 0.8 7.0 10.6 -1.5 -24.3
10 MIDSX Midas Fund . 0.0 4.5 -3.2 -32.4 -52.3
23 INIVX Van Eck Intl Inv GoldA -1.9 0.0 -2.9 -22.1 -38.2
I made a few comments last month about the big boys getting ready to goose the market and it looks like they did just that. However, it was the bullion market which jumped up. Gold equities have already moved into a bull market area, showing substantial gains this year already (+15% gains compared to a 2% loss for bullion).
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(5-31)
7 Franklin Gold A . 80.7 10.16
24 Vanguard Gold/Pr Mtls. 78.0 8.39
22 Van Eck Gold / Res A . 75.8 2.61
5 Fidelity Select Gold . 68.2 13.57
13 Oppenheimer Gold A . 67.2 10.11
4 Evergreen Prec Mtls B. 67.2 11.72
17 Scudder Gold . 63.9 6.91
21 USAA Gold . 63.5 5.84
15 Pilgrim Prec Metals . 61.8 2.94
12 Monterey OCM Gold . 61.2 4.46
8 Gabelli Gold . 59.8 6.08
9 INVESCO Strat Gold . 59.1 1.64
14 Permanent Portfolio . 58.0 18.45
2 Amer Cent Global Gold. 56.8 4.66
3 AXP Precious Metals A. 55.7 5.52
16 Rydex Prec Metals . 55.0 20.84
18 Tocqueville Gold . 51.8 12.49
6 First Eagle SGen Gold. 50.0 5.51
11 Midas Investors . 38.2 2.06
19 US Global Gold Shrs . 29.3 2.84
1 ASA Ltd . 27.8 19.71
23 Van Eck Intl Inv GoldA 19.7 4.62
20 US Global World Gold . -39.7 5.30
10 Midas Fund . -44.3 0.92
Several funds reached new highs in May after climbing in April, definitely a good sign. All but two are above their 12 month average.
The following chart shows the approximate size of funds as measured in total assets under management in $millions. (As of May 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
24 Vanguard Gold/Pr Mtls. 326
5 Fidelity Select Gold . 208
1 ASA Ltd . 190
7 Franklin Gold A . 176
2 Amer Cent Global Gold. 160
17 Scudder Gold . 99
23 Van Eck Intl Inv GoldA 93
21 USAA Gold . 72
9 INVESCO Strat Gold . 61
13 Oppenheimer Gold A . 59
14 Permanent Portfolio . 54
15 Pilgrim Prec Metals . 47
16 Rydex Prec Metals . 44
20 US Global World Gold . 42
10 Midas Fund . 34
3 AXP Precious Metals A. 31
22 Van Eck Gold / Res A . 26
19 US Global Gold Shrs . 23
8 Gabelli Gold . 12
18 Tocqueville Gold . 12
12 Monterey OCM Gold . 11
6 First Eagle SGen Gold. 9
4 Evergreen Prec Mtls B. 6
11 Midas Investors . 3
If gold funds begin to catch some publicity (top fund group for 2001 so far), more cash will begin to flow into this chart, and these funds will continue to climb.
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 . 1.81
1 ASA Ltd . 1.40
20 US Global World Gold . 1.18
12 Monterey OCM Gold . 1.17
16 Rydex Prec Metals . 1.17
2 Amer Cent Global Gold. 1.06
21 USAA Gold . 1.03
4 Evergreen Prec Mtls B. 1.02
8 Gabelli Gold . 0.98
3 AXP Precious Metals A. 0.94
17 Scudder Gold . 0.93
5 Fidelity Select Gold . 0.91
6 First Eagle SGen Gold. 0.91
7 Franklin Gold A . 0.90
13 Oppenheimer Gold A . 0.90
15 Pilgrim Prec Metals . 0.89
24 Vanguard Gold/Pr Mtls 0.88
19 US Global Gold Shrs . 0.79
23 Van Eck Intl Inv GoldA 0.77
9 INVESCO Strat Gold . 0.76
18 Tocqueville Gold . 0.74
11 Midas Investors . 0.73
22 Van Eck Gold / Res A . 0.72
14 Permanent Portfolio . 0.15
Since we recently experienced many new fund highs, these numbers have changed even more from April. Again, this number is only an indication of activity, meaning price changes compared to other funds. As you can see, there is a big difference between some of these 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.
INVESTING COMMENTS
Global Watch | Comparing Funds
With a falling euro and a dollar index reaching a new high, its amazing gold hasn't fallen out of bed already. The good news is that gold equities are getting a life of their own, showing much more strength than a gold market that can't hold a rally.
The dollar index has moved from 114 to 119 in two months and gold has gone up. This is very contradictory in theory, so there must be something behind the scenes which will come out soon. Once the index peaks, expect gold to once again make a move. This would also probably coincide with a bottom for the euro.
Gold in Australian dollars reached a seven year high, due primarily to a weak $A, but it indicates strong recent changes in worldwide markets independent of the U.S. dollar.
I can see a large new demand from China if the economy weakens and a way for China to slowly rid itself of U.S. dollars by buying bullion for foreign reserves without going through other exchanges affected by U.S. influence.
When the idea of a sale of bullion by Russia surfaced, the gold price fell off its peak, but leveled off when it was denied by the IMF and Russian authorities. However, I wonder which side the IMF is on if it won't let Russia pay off debts or help its citizens in need by selling gold? Is there another agenda here to stop the sale of gold? That would be a change.
If Asian countries are having problems with growth now, what will happen when their trade surplus with us is reduced by a slowing U.S. economy?
High energy prices, as in California and Brazil, and I'm sure in other countries, suck the energy (no pun intended) out of economies and bring on recessions until more energy is produced or provided. We are beginning to see the results of this, which started last year. Gold goes up in recessions only if the currency is debased by government actions, like flooding the market with money to prevent a recession. Does this sound familiar?
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