EagleWing Research Newsletter on Gold Funds
August 1, 2000
GLOBAL FACTORS
Comparing Funds | Comments
The U.S. economy continued to move ahead as both personal spending and personal income for June increased over .4%, a substantial increase and indicative of a growing GDP, which advanced at a strong annual rate of 5.3% in April-June. The value of the dollar remained strong against other currencies and further sliding of the price of gold was the financial result. The real victim is turning out to be the mining companies who find themselves digging for something that has a decreasing demand.
The fact that more and more countries are considering a dollarization of their currency or switching to a currency board to stabilize their failing currency values has given the dollar a historical strength apparently making up for the ballooning U.S. national trade deficits. These trade deficits alone would have caused a devaluing of the dollar unless there was another historical factor involved. That can only be that there are many countries who consider the dollar to be of consistent and solid value in which they can safely place their foreign reserves. Precious metals are not being considered because the dollar maintains its position of financial respect. The euro closed down for the month near .93 and the yen reached a two month low against the dollar.
The long bond interest rate slipped from 5.88% to 5.77%, not much of a factor except that it represents a continuing demand for U.S. long term debt. One possible reason for the dollar strength is the U.S treasury's activity in buying back long term debt as the nation experiences budget surpluses. This reduces the amount of debt available to other central banks and the increased demand keeps the interest rate low. This government policy created low interest rate is another factor which indicates that debt is not a problem and the dollar deserves respect.
For the month, the price of gold slid from a high of 290.1 on June 30 to 276.8 on July 31, a fall of 4.4%. Although gold is still above its May values, when it closed at 271.7, the trend has been down since it peaked at 292.5 in late June. The slide this month has been enough to convince many equity investors that gold stocks are not the place to be. Funds obviously reflect this.
The XAU index fell in July from 57.8 to 50.8 but has been trying to stay above its all-time low set two years ago at 48.8. It moved under 50 three days but managed to close over it as if the market decided that it had gone down enough.
Silver fell slightly from 5.03 to 5.00, only a token, but enough to send the Lexington Silver fund to new lows along with the gold funds. Over the past two year span only one fund, Vanguard Gold, has posted a positive result.
COMPARING FUNDS
Global Factors | Comments
Funds ranked by percentage change in net asset value for July.
fn Fund 1 mo 3 mo 12 mo 2 yr 3 yr
15 PRPFX Permanent Portfolio . -0.4 1.3 -0.8 -2.2 2.5
25 VGPMX Vanguard Gold/Pr Mtls. -1.6 7.7 -7.8 3.2 -28.7
10 STSLX Lexington Strat Silver -3.7 -6.7 -16.0 -27.3 -38.8
1 ASA ASA Ltd . -5.0 0.9 0.1 -11.7 -41.4
6 FKRCX Franklin Gold A . -6.0 1.8 -4.8 -0.8 -30.1
5 FSAGX Fidelity Sel Gold . -6.2 2.6 -3.5 -7.6 -40.6
14 OPGSX Oppenheimer Gold A . -6.3 -1.1 -11.7 -6.3 -34.0
23 GRFRX Van Eck Gold / Res A . -6.4 -3.9 -13.8 -32.0 -52.1
19 TGLDX Tocqueville Gold . -6.8 2.6 0.6
8 FGLDX INVESCO Strat Gold . -7.2 -1.9 -8.3 -21.3 -58.9
22 USAGX USAA Gold . -7.3 1.0 -6.0 -9.0 -32.4
17 SCGDX Scudder Gold . -7.4 -0.2 -7.8 -17.0 -43.1
3 INPMX Amer Exp IDS Prc Mtl A -7.7 -1.5 -11.7 -21.2 -46.8
7 GOLDX Gabelli Gold . -7.8 3.2 -3.2 -14.4 -44.9
4 EKWBX Evergreen Prec Mtls B. -7.9 -1.1 -6.8 -19.9 -45.4
2 BGEIX Amer Cent Global Gold. -8.3 -1.4 -14.1 -28.8 -51.2
11 MIDSX Midas Fund . -8.3 -5.4 -29.6 -49.1 -74.0
9 LEXMX Lexington Goldfund . -8.4 0.0 -11.6 -18.2 -45.3
24 INIVX Van Eck Intl Inv GoldA -8.8 -1.9 -20.7 -32.1 -52.1
12 MIDIX Midas Investors . -9.4 -4.5 -29.2 -47.7 -68.6
20 USERX US Global Gold Shrs . -9.6 -5.7 -17.5 -30.5 -72.0
18 SGGDX SoGen Gold . -9.7 -5.5 -10.9 -25.4 -43.9
16 RYPMX Rydex Prec Metals . -10.3 -5.5
21 UNWPX US Global World Gold . -10.6 -11.4 -21.8 -41.7 -61.7
13 MNTGX Monterey OCM Gold . -10.8 -6.6 -9.1 -23.2 -44.2
The month of July was terrible for most funds as three were down over 10% in one month. This is following the month of June which was the last sign of a noticeable rally in the last week of the month. Since then, it has been essentially downhill.
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(7-31)
15 Permanent Portfolio . -2.8 18.18
25 Vanguard Gold/Pr Mtls. -66.7 6.70
6 Franklin Gold A . -81.0 7.90
19 Tocqueville Gold . -81.8 10.78
7 Gabelli Gold . -89.0 4.86
5 Fidelity Sel Gold . -90.9 11.92
1 ASA Ltd . -91.8 15.31
22 USAA Gold . -95.9 4.86
11 Midas Fund . -100.0 0.88
21 US Global World Gold . -100.0 5.75
20 US Global Gold Shrs . -100.0 2.64
23 Van Eck Gold / Res A . -100.0 2.19
2 Amer Cent Global Gold. -100.0 4.09
24 Van Eck Intl Inv GoldA -100.0 4.56
16 Rydex Prec Metals . -100.0 17.44
13 Monterey OCM Gold . -100.0 3.81
12 Midas Investors . -100.0 1.92
3 Amer Exp IDS Prc Mtl A -100.0 4.45
18 SoGen Gold . -100.0 4.68
14 Oppenheimer Gold A . -100.0 8.25
9 Lexington Goldfund . -100.0 2.51
4 Evergreen Prec Mtls B. -100.0 9.28
8 INVESCO Strat Gold . -100.0 1.55
17 Scudder Gold . -100.0 5.52
10 Lexington Strat Silver -100.0 2.37
On monday, the last day of the month, several funds dropped to a new 52 week low, and for some, an all-time low net asset value. This is an obvious reflection on the entire industry of gold equities as gold refuses to sustain any attempt at a rally.
The following chart shows the approximate size of funds as measured in total assets under management in $millions. (As of July 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. 278
6 Franklin Gold A . 195
1 ASA Ltd . 159
5 Fidelity Sel Gold . 129
2 Amer Cent Global Gold. 127
24 Van Eck Intl Inv GoldA 120
17 Scudder Gold . 81
22 USAA Gold . 75
8 INVESCO Strat Gold . 68
14 Oppenheimer Gold A . 64
15 Permanent Portfolio . 58
9 Lexington Goldfund . 46
21 US Global World Gold . 45
11 Midas Fund . 42
3 Amer Exp IDS Prc Mtl A 31
23 Van Eck Gold / Res A . 26
16 Rydex Prec Metals . 25
10 Lexington Strat Silver 18
20 US Global Gold Shrs . 17
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
After many false attempts to get up, the price of gold and gold funds kept on sliding. This downward trend directly affects the total amount under investment management by mutual funds. As the trend continues, more investors cash out.
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 . 1.59
21 US Global World Gold . 1.46
20 US Global Gold Shrs . 1.38
23 Van Eck Gold / Res A . 1.33
2 Amer Cent Global Gold. 1.30
24 Van Eck Intl Inv GoldA 1.25
16 Rydex Prec Metals . 1.24
13 Monterey OCM Gold . 1.15
12 Midas Investors . 1.11
3 Amer Exp IDS Prc Mtl A 1.11
18 SoGen Gold . 1.07
1 ASA Ltd . 1.06
14 Oppenheimer Gold A . 1.02
7 Gabelli Gold . 1.01
5 Fidelity Sel Gold . 1.00
32 Lexington Strat Invest 0.99
28 Fidelity Sel Prec Mtls 0.96
9 Lexington Goldfund . 0.96
31 Pioneer Gold A . 0.93
19 Tocqueville Gold . 0.92
4 Evergreen Prec Mtls B. 0.91
6 Franklin Gold A . 0.91
22 USAA Gold . 0.89
8 INVESCO Strat Gold . 0.86
25 Vanguard Gold/Pr Mtls. 0.78
17 Scudder Gold . 0.75
29 PIMCO Adv Prc Mtls C . 0.72
30 Morgan St DW Prc Mtls. 0.65
10 Lexington Strat Silver 0.64
33 United Gold / Govt . 0.42
15 Permanent Portfolio . 0.18
*** 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. For comparison, some of the recently expired funds are left on this list.
INVESTING COMMENTS
Global Factors | Comparing Funds
The trend for July was down, down, down. The dollar kept up its strength, and the price of gold suffered. Not too complicated unless you want to know when it will end.
An interesting fact is that the price of gold has not suffered much in terms of other currencies, and in many has held level or advanced. The financial reason is almost totally the result of a strong dollar around the world with a lack of conviction that the dollar will weaken in the near future. The balance of payments deficits don't have much effect upon the reasoning of foreign central banks and governments.
Certain international events such as the drought in India, wars in Chechnya, Kosovo, and Africa have had little if no effect on precious metals. Even the fact that Japan is still in severe economic trouble has had no obvious effect.
On the other hand, we are due for a cycle reversal and a gold rally if the euro begins to strengthen. Any currency board or dollarization would certainly include foreign currencies other than the dollar, and as they strengthen, gold would increase worldwide in terms of dollars. It's turning out to be a numbers game.
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