EagleWing Research Newsletter on Gold Funds
June 1, 2003
GLOBAL WATCH
Comparing Funds | Comments
Gold funds advanced for most of May, following a gold price which looked like it was trying to break out to the upside. However, with further examination, the price of gold was driven almost entirely by the weak and falling dollar, with the dollar index closing the month all the way down to 93.27. There were other major changes for the month as the euro climbed from 1.117 to 1.178. The long bond yield fell from 4.77% to 4.37% as bonds rallied. Gold advanced from 339.1 to 364.5. Silver jumped from 4.63 to 4.86 before falling back to 4.52. The XAU index climbed from 65.3 to 73.4. The price of oil advanced from 26.50 to almost $30.
Scattered news reports from Iraq were only a series of minor inconveniences as if it was all behind us, disregarding the future costs. Attempts to find a lasting peace in Palestine seemed to be getting the parties together, whether or not they will agree on anything.
The dollar fell from support when Treasury Secretary John Snow stated that the Bush Administration was not pushing the strong dollar policy. The dollar slipped through previous support levels as the euro gained, reaching new four year highs against the dollar every week. Almost all other currencies gained against the dollar, also. Pravda even stated that they will increase their reserves by holding euros and gold instead of dollars.
The lastest U.S. trade deficit came in at over $42 billion, indicating that a major problem is still with us, and getting worse. Europe began to make more serious comments about the weak dollar affecting trading relationships and causing more fears of deflation in Europe.
The U.S. economy reported some positive earning reports, but unemployment conditions remained poor and there was no increase in hiring. New housing construction decreased as the housing market appears to be slowing down even as mortgage rates reached new lows, again. As a result the economy is expected to stay in the doldrums, even if Wall Street is bullishly optimistic.
President Bush signed the tax cut package, but the market discounted it. He also left to attend the G8 meeting in Europe with hopes of working out our disagreements with our past allies, in particular Russia. As a result of all this apparent good news, the Dow advanced to 8850, approaching 9000 as if the bull was back. By the end of the month, President Bush was trying to convince Europe that we still wanted a strong dollar. He was unconvincing.
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 & PrM A. 14.8 6.1 -9.2 25.9 59.3
11 MIDSX Midas Fund . 14.2 3.6 -9.9 57.6 52.6
2 BGEIX Amer Cent Global Gold. 12.5 3.7 -8.3 88.8 110.6
19 USAGX USAA Gold . 12.2 6.4 -8.6 83.2 119.7
9 LEXMX ING Pilgrim Pr Mtls A. 12.1 5.4 -6.5 79.9 105.0
21 VGPMX Vanguard Prec Metals . 12.1 4.5 -12.9 32.8 81.5
4 EKWBX Evergreen Prec Mtls B. 12.0 4.4 -4.9 76.6 117.4
14 RYPMX Rydex Prec Metals . 11.9 1.5 -12.9 40.5 55.3
10 FGLDX INVESCO Gold & Pr Mtl. 11.8 2.3 -8.3 62.2 68.4
13 OPGSX Oppenheimer Gold A . 11.7 2.1 -12.8 31.5 57.7
17 USERX US Global Gold Shrs . 11.3 -0.4 -21.9 77.1 79.6
5 FSAGX Fidelity Select Gold . 11.2 -2.8 -8.9 62.9 86.7
16 TGLDX Tocqueville Gold . 11.2 1.8 -1.3 99.3 132.5
3 INPMX AXP Precious Metals A. 11.1 1.4 -17.7 45.5 76.5
8 GOLDX Gabelli Gold . 10.9 1.3 -2.6 96.4 143.2
15 SCGDX Scudder Gold & Pr Mt S 9.7 2.9 0.3 66.4 101.4
20 INIVX Van Eck Intl Inv GoldA 9.7 -1.2 -7.9 105.3 99.7
6 SGGDX First Eagle SGen Gold. 9.5 2.1 2.5 131.9 156.6
18 UNWPX US Global World PrecM. 7.3 -1.5 -24.4 80.2 52.4
12 MNTGX Monterey OCM Gold . 5.1 -3.1 0.9 98.0 114.3
1 ASA ASA Ltd . 1.8 -0.9 -2.7 91.9 155.8
ASA Limited (ASA) gave up the top spot as U.S. equities boosted gold funds to great gains for the month. Franklin Gold (FKRCX) and the Midas Fund(MIDSX) took the lead with good monthly gains. However, even with these gains, most gold funds are still negative for the past year. That compares with most mutual funds up 5-15%.
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. As of May 30, 2003.
fn Fund pos nav
16 TGLDX Tocqueville Gold . 91.0 23.86
15 SCGDX Scudder Gold & Pr Mt S 82.2 11.50
6 SGGDX First Eagle SGen Gold. 74.5 12.78
8 GOLDX Gabelli Gold . 69.7 11.94
4 EKWBX Evergreen Prec Mtls B. 65.1 20.70
20 INIVX Van Eck Intl Inv GoldA 64.1 7.71
9 LEXMX ING Pilgrim Pr Mtls A. 62.2 5.29
19 USAGX USAA Gold . 57.6 10.70
12 MNTGX Monterey OCM Gold . 57.4 8.83
1 ASA ASA Ltd . 55.3 35.90
2 BGEIX Amer Cent Global Gold. 53.4 8.80
10 FGLDX INVESCO Gold & Pr Mtl. 50.7 2.66
5 FSAGX Fidelity Select Gold . 50.4 22.10
11 MIDSX Midas Fund . 47.0 1.45
7 FKRCX Franklin Gold & PrM A. 37.7 12.79
21 VGPMX Vanguard Prec Metals . 29.2 11.14
14 RYPMX Rydex Prec Metals . 26.2 29.29
13 OPGSX Oppenheimer Gold A . 23.3 13.29
17 USERX US Global Gold Shrs . 23.2 5.03
3 INPMX AXP Precious Metals A. 23.0 8.03
18 UNWPX US Global World PrecM. 16.6 9.55
Tocqueville Gold (TGLDX) shared the top with Scudder Gold (SCGDX) as they were not far from their yearly highs. All are above their yearly average navs.
These numbers demonstrate a fund's ability to retain previous advances without falling out of bed when gold has a bad month or two. It's obvious which funds couldn't hold onto their gains and which have.
The following chart shows the approximate size of funds as measured in total assets under management in $millions. (As of May 30) This is only an approximation as the size changes daily with new purchases, redemptions, and nav changes. Relative positions of the funds usually don't change much. The largest remain the largest.
fn fund assets
21 VGPMX Vanguard Prec Metals . 668
5 FSAGX Fidelity Select Gold . 567
2 BGEIX Amer Cent Global Gold. 393
1 ASA ASA Ltd . 344
7 FKRCX Franklin Gold & PrM A. 297
13 OPGSX Oppenheimer Gold A . 163
20 INIVX Van Eck Intl Inv GoldA 159
18 UNWPX US Global World PrecM. 140
19 USAGX USAA Gold . 137
15 SCGDX Scudder Gold & Pr Mt S 136
10 FGLDX INVESCO Gold & Pr Mtl. 118
8 GOLDX Gabelli Gold . 116
9 LEXMX ING Pilgrim Pr Mtls A. 112
16 TGLDX Tocqueville Gold . 95
6 SGGDX First Eagle SGen Gold. 90
17 USERX US Global Gold Shrs . 84
14 RYPMX Rydex Prec Metals . 71
3 INPMX AXP Precious Metals A. 49
11 MIDSX Midas Fund . 44
12 MNTGX Monterey OCM Gold . 40
4 EKWBX Evergreen Prec Mtls B. 27
During the past two years the total amount of assets under management by these funds has shown significant increases as would be expected for one of the best sectors of the market.
There are only so many valid gold equities worldwide and portfolio managers must allocate investments carefully.
The beta indicator measures the relative volatility of a fund's net asset value (nav) movement over the last 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 price of the fund. Naturally, if the market is going up, you would want one at the top of this list. However, during a correction, the funds at the bottom would probably do better.
fn fund beta
18 UNWPX US Global World PrecM. 1.55
17 USERX US Global Gold Shrs . 1.51
1 ASA ASA Ltd . 1.40
6 SGGDX First Eagle SGen Gold. 1.38
20 INIVX Van Eck Intl Inv GoldA 1.21
8 GOLDX Gabelli Gold . 1.21
12 MNTGX Monterey OCM Gold . 1.20
16 TGLDX Tocqueville Gold . 1.07
3 INPMX AXP Precious Metals A. 1.07
2 BGEIX Amer Cent Global Gold. 1.06
9 LEXMX ING Pilgrim Pr Mtls A. 1.02
19 USAGX USAA Gold . 1.02
11 MIDSX Midas Fund . 0.99
4 EKWBX Evergreen Prec Mtls B. 0.97
10 FGLDX INVESCO Gold & Pr Mtl. 0.89
15 SCGDX Scudder Gold & Pr Mt S 0.85
5 FSAGX Fidelity Select Gold . 0.85
14 RYPMX Rydex Prec Metals . 0.82
13 OPGSX Oppenheimer Gold A . 0.68
21 VGPMX Vanguard Prec Metals . 0.66
7 FKRCX Franklin Gold & PrM A. 0.65
The beta for each fund may change as the fund advances and declines, but the general position on the ladder doesn't change much, except as a reference to other funds. As you can see, there is a big difference between management policies of different funds. The nav movement is a direct reflection of the types of equities selected by the fund manager.
INVESTING COMMENTS
Global Watch | Comparing Funds
What appears to be a bond rally is in my opinion only a sucker play for those thinking they are investing in a secure investment. When rates go back up after the Federal Researve finishes playing its interest rate games, bond holders will be left holding the bag of falling bond values. The inevitability of higher rates is obvious to many, but not to everyone. That will cause bond prices to fall, catching many investors by surprise.
The monthly advance of gold equities and funds following the move by gold is into an overbought condition and warrants caution for gold funds. With silver giving up most of its gains this month, it will be hard for gold to continue by itself. In addition, gold on the worldwide market has made only limited advances in other currencies. Once the dollar gets support, and it will, gold will stop climbing for now. In the long run, it will still be higher and gold funds will still be up.
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