EagleWing Research Newsletter on Gold Funds
October 1, 2002
GLOBAL WATCH
Comparing Funds | Comments
Currency problems continued to plague several national economies, which makes a weak dollar look good. Brazil's currency kept sliding even after the IMF agreed to help with loans this year. International investors and banks were waiting for the results of the elections coming up in October before making any serious committment. Even after the election, it will be hard to determine a definite base from which to judge the new administration until they actually do something.
In Japan, a policy to support the stock market and banking system by buying bank stocks, was questioned and didn't seem to have any positive effect. The yen continued to slide against the dollar, on purpose, which gave the dollar another false sense of strength. September closed the month at 122.1 yen/dollar, down from 118.5. The euro closed at .988, slightly higher than its beginning the month at .981. The dollar index was essentially unchanged at 106.8. This didn't keep the price of gold from advancing over $10.
Part of that advance was due to the fear of a war in Iraq, plus perhaps some transfer of investments from the falling stock market, which closed September with the Dow at 7591, down from 8663. For the last three months, the stock market was down about 18%.
An item of major interest to many gold investors was the New York Institutional Gold Conference, which recently closed in New York after attracting many experts who could be classified as gold bugs. The Conference was hardly mentioned in the media but did remind us of all the many fundamental factors why gold was climbing and why it could go much higher. Factors mentioned included the large overhang of personal and national debt, a weakening dollar, an excessive increase in the money supply, an increasing budget deficit, and a trade deficit that won't go away. All of these factors could produce a dollar falling into very cheap status. One speaker suggested that South Africa represented an international situation where investments would soon be at risk and should be avoided. The idea was rebutted by many others.
From a commodity standpoint, production of gold continues to lag far behind consumption, and physical demand is being met from existing supplies, which won't last forever. There are essentially no mines publically willing to forward sell or hedge anymore.
For September, gold climbed from 312.4 to 325.9 in late month action, closing at 323.9. Silver responded, advancing from 4.43 ti 4.53. The price of oil climbed from 28.98 to 30.45, reflecting war fears, and the long bond yield fell further from 4.93% to 4.67%, reflecting a continuing strong demand for U.S. Treasuries. This demand is not due to the yield, but to belief in a safe haven. The XAU index was essentially unchanged, edging up slightly from 69.4 to 69.7.
COMPARING FUNDS
Global Watch | Comments
Funds ranked by percentage change in net asset value for September.
fn Fund 1 mo 3 mo 12 mo 2 yr 3 yr
1 ASA ASA Ltd . 8.3 5.8 79.9 105.9 72.5
11 MIDSX Midas Fund . 6.6 8.1 58.7 67.8 -5.2
17 USERX US Global Gold Shrs . 2.9 -12.1 65.7 77.1 8.2
2 BGEIX Amer Cent Global Gold. 2.6 -1.3 55.2 106.6 27.6
5 FSAGX Fidelity Select Gold . 2.4 0.4 53.7 84.8 34.4
8 GOLDX Gabelli Gold . 1.7 0.1 66.7 109.3 56.5
6 SGGDX First Eagle SGen Gold. 1.6 0.4 80.3 122.0 69.0
15 SCGDX Scudder Gold & Pr Mt S 1.4 -2.3 41.0 76.4 38.9
20 INIVX Van Eck Intl Inv GoldA 1.4 -3.5 66.4 101.1 30.4
9 LEXMX ING Pilgrim Pr Mtls A. 1.2 -0.6 57.3 90.6 35.0
12 MNTGX Monterey OCM Gold . 1.2 4.4 66.1 118.8 52.3
16 TGLDX Tocqueville Gold . 1.0 -1.5 71.6 101.5 61.0
18 UNWPX US Global World PrecM. 0.7 -17.5 61.0 60.8 -10.5
10 FGLDX INVESCO Gold . 0.4 -1.2 44.8 68.2 18.6
19 USAGX USAA Gold . 0.2 -2.2 55.9 105.0 49.1
7 FKRCX Franklin Gold & PrM A. 0.2 -5.9 25.4 44.0 13.9
13 OPGSX Oppenheimer Gold A . 0.2 -4.4 30.4 52.3 9.4
4 EKWBX Evergreen Prec Mtls B. -0.2 -4.3 49.3 90.1 39.3
3 INPMX AXP Precious Metals A. -0.4 -8.3 39.5 65.3 18.4
14 RYPMX Rydex Prec Metals . -1.7 -4.0 29.1 59.2
21 VGPMX Vanguard Prec Metals . -2.3 -9.1 21.9 49.1 21.1
While the price of gold advanced over $10 in September, equities appear to have reached a strong resistence point, unable to sustain any climb which would threaten the highs set in late May. This essentially means that investors don't think that gold equities will be able to follow gold, or that gold is over bought. On a positive note, these numbers show that over the past two years, there is no other stock market sector which can compete with gold funds.
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(9-30)
12 MNTGX Monterey OCM Gold . 64.6 8.27
6 SGGDX First Eagle SGen Gold. 59.2 11.32
11 MIDSX Midas Fund . 49.4 1.46
16 TGLDX Tocqueville Gold . 49.2 22.16
5 FSAGX Fidelity Select Gold . 43.3 21.69
20 INIVX Van Eck Intl Inv GoldA 38.5 8.87
8 GOLDX Gabelli Gold . 35.8 10.55
9 LEXMX ING Pilgrim Pr Mtls A. 33.1 4.86
15 SCGDX Scudder Gold & Pr Mt S 31.6 10.11
19 USAGX USAA Gold . 31.1 9.90
2 BGEIX Amer Cent Global Gold. 29.3 8.18
1 ASA ASA Ltd . 28.5 32.27
10 FGLDX INVESCO Gold . 26.8 2.49
4 EKWBX Evergreen Prec Mtls B. 21.5 18.27
14 RYPMX Rydex Prec Metals . 7.3 27.79
13 OPGSX Oppenheimer Gold A . 7.3 12.78
17 USERX US Global Gold Shrs . 3.3 4.64
3 INPMX AXP Precious Metals A. 3.3 7.52
7 FKRCX Franklin Gold & PrM A. -3.0 11.62
18 UNWPX US Global World PrecM. -7.8 8.60
21 VGPMX Vanguard Prec Metals . -9.7 10.14
Monterey OCM Gold (MNTGX) and First Eagle SoGen Gold (SGGDX) continue to lead the group with Midas (MIDSX) and Tocqueville (TGLDX) close behind. These numbers demonstrate a fund's ability to retain previous advances without falling out of bed when gold has a bad month.
The following chart shows the approximate size of funds as measured in total assets under management in $millions. (As of September 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 . 608
5 FSAGX Fidelity Select Gold . 556
2 BGEIX Amer Cent Global Gold. 351
1 ASA ASA Ltd . 309
7 FKRCX Franklin Gold & PrM A. 237
20 INIVX Van Eck Intl Inv GoldA 184
19 USAGX USAA Gold . 126
18 UNWPX US Global World PrecM. 126
13 OPGSX Oppenheimer Gold A . 120
15 SCGDX Scudder Gold & Pr Mt S 119
10 FGLDX INVESCO Gold . 110
9 LEXMX ING Pilgrim Pr Mtls A. 103
8 GOLDX Gabelli Gold . 102
16 TGLDX Tocqueville Gold . 88
6 SGGDX First Eagle SGen Gold. 80
17 USERX US Global Gold Shrs . 77
14 RYPMX Rydex Prec Metals . 68
3 INPMX AXP Precious Metals A. 45
11 MIDSX Midas Fund . 45
12 MNTGX Monterey OCM Gold . 37
4 EKWBX Evergreen Prec Mtls B. 24
These numbers have been increasing across the board as fresh investment capital comes back into the gold sector. However, even with a very positive two years for every fund, the total amount of new capital has been relatively small. A change in stock market investment philosophy by a small percentage of investors would give this market a tremendous boost.
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 probably 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 . 1.30
20 INIVX Van Eck Intl Inv GoldA 1.21
6 SGGDX First Eagle SGen Gold. 1.19
8 GOLDX Gabelli Gold . 1.16
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
12 MNTGX Monterey OCM Gold . 0.99
11 MIDSX Midas Fund . 0.99
4 EKWBX Evergreen Prec Mtls B. 0.97
10 FGLDX INVESCO Gold . 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 changes monthly 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 price movement is a direct reflection of the types of equities selected by the fund manager.
If you can't stand the thought of big ups and downs, don't buy a fund with a high beta.
INVESTING COMMENTS
Global Watch | Comparing Funds
With all of the action on the international stage, the ultimate bottom line for the month is that gold went up and equities hardly moved. That is not a good sign for the near future, and resembles many other times when equity movements, or lack of movement, eventually determined the movement of bullion prices.
The Gold Conference in New York brought up many of the fundamental factors which every gold fund investor should know about, whether you believe them or not. The idea that South African gold mines should be avoided was rebutted by many other fund managers. ASA, 83% invested in South Africa is currently among the leaders of all funds over the past 3 months and 12 months periods. Like all other indicators, things could drastically change with the political winds.
Other factors brought up, including excessive money creation, rampant credit promotion, and large scale spending, not just in private, but public government policy, represent a mindset which produces excessive and unmanageable debt in an attempt to get something for nothing. Recent corporate bankruptcies weren't just because they lost money. They couldn't service their debts, which were humongous. Management bet their investors' assets and lost. The same could be said for Argentina and Brazil. In this country, some think the same experience will eventually hit the dollar.
Relative to the current price of oil, a historical relationship of one ounce of gold per 15 barrels of oil would equate to a gold price of over $450 for gold.
|