EagleWing Research Newsletter on Gold Funds
December 1, 2002
GLOBAL WATCH
Comparing Funds | Comments
On the home front, President Bush had a good month. Not only did he manage to get more Republicans elected but was also able to get some of his programs either passed or ready for an agreeable Congress. However, one factor about the passed Homeland Security bill was an increasing budget deficit, which doesn't seem to worry anyone, including this administration. President Bush was also able to convince the United Nations to demand that Iraq allow arms inspectors into the country. Tensions were eased some after Iraq agreed to the demands, which added a little value to the dollar.
The European Union is looking to add more countries next year, which will probably affect the euro which closed below parity at .997 as the dollar strengthened. Once again, it looked like the dollar was stronger as other currencies weakened.
Although Argentina defaulted on a loan payment to the IMF, Brazil offered some assurance that they were going to make adjustments to meet economic expectations. Brazil's new administration seems to be getting along with IMF rules for the ongoing thirty billion dollar loan, which should help to stabilize the currency and South America in general. However, currency problems getting worse in Brazil would certainly act as a stake in the heart of many other smaller South American economies, creating a short term move into dollars and slapping gold down again.
For the month, gold climbed over 324, but closed down slightly at 316.8, spending most of the month acting like a yoyo. There is a battle going on between buyers and sellers, not just a market. Silver lost a few cents at 4.41, and XAU finished at 63.3. Bonds slipped as the long bond yield climbed to 5.04% from 5.00%. In addition, the real return on ten year bonds is about to slip below the inflation trend, as measured by the Producer Price Index (1.1%), which is historically bullish for gold prices.
The October trade deficit was once again over $35 billion, holding at over 4.7% of GDP for the year. The Dow continued its bullish trend, ignoring most of the latest economic indicators.
COMPARING FUNDS
Global Watch | Comments
Funds ranked by percent change in net asset value for November.
fn Fund 1 mo 3 mo 12 mo 2 yr 3 yr
3 INPMX AXP Precious Metals A. 3.8 -6.9 39.2 50.5 26.9
8 GOLDX Gabelli Gold . 2.7 -6.1 55.8 102.1 61.3
21 VGPMX Vanguard Prec Metals . 1.4 -2.7 18.5 46.4 30.9
18 UNWPX US Global World PrecM. 1.1 -11.7 43.9 59.4 -8.6
13 OPGSX Oppenheimer Gold A . 1.0 -7.5 19.8 45.7 15.2
17 USERX US Global Gold Shrs . 1.0 -10.4 47.4 68.3 9.8
9 LEXMX ING Pilgrim Pr Mtls A. 0.7 -7.7 46.7 86.7 37.6
14 RYPMX Rydex Prec Metals . 0.7 -8.6 26.7 55.8
4 EKWBX Evergreen Prec Mtls B. 0.5 -7.9 41.5 84.2 47.8
6 SGGDX First Eagle SGen Gold. 0.5 -6.1 75.8 132.4 68.7
19 USAGX USAA Gold . 0.5 -7.6 45.6 97.2 56.6
1 ASA ASA Ltd . 0.4 0.9 53.9 118.4 73.0
7 FKRCX Franklin Gold & PrM A. 0.4 -4.8 21.3 35.6 17.8
15 SCGDX Scudder Gold & Pr Mt S 0.3 -6.0 39.2 68.2 41.5
12 MNTGX Monterey OCM Gold . 0.1 -7.8 59.9 113.9 58.5
10 FGLDX INVESCO Gold & Pr Mtl. 0.0 -8.9 37.0 71.2 29.9
11 MIDSX Midas Fund . 0.0 -6.6 43.8 66.2 -0.8
20 INIVX Van Eck Intl Inv GoldA -0.3 -10.5 55.0 88.2 36.0
16 TGLDX Tocqueville Gold . -0.3 -7.0 56.6 92.6 63.9
2 BGEIX Amer Cent Global Gold. -1.0 -9.0 43.6 99.0 37.1
5 FSAGX Fidelity Select Gold . -1.3 -9.6 35.3 76.1 35.1
Most of the news for November was centered on the Republican victory and Bush's pressure on the UN to make demands upon Iraq. When Iraq agreed, gold lost slightly, but most gold funds held up.
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(11-29)
6 SGGDX First Eagle SGen Gold. 34.4 10.46
12 MNTGX Monterey OCM Gold . 31.9 7.53
16 TGLDX Tocqueville Gold . 22.5 20.40
8 GOLDX Gabelli Gold . 12.1 9.74
1 ASA ASA Ltd . 9.1 30.06
11 MIDSX Midas Fund . 6.0 1.28
19 USAGX USAA Gold . 5.6 9.13
15 SCGDX Scudder Gold & Pr Mt S 4.7 9.37
9 LEXMX ING Pilgrim Pr Mtls A. 4.1 4.43
20 INIVX Van Eck Intl Inv GoldA 2.9 7.83
5 FSAGX Fidelity Select Gold . -1.1 19.16
4 EKWBX Evergreen Prec Mtls B. -4.0 16.85
10 FGLDX INVESCO Gold & Pr Mtl. -5.6 2.26
2 BGEIX Amer Cent Global Gold. -6.8 7.25
21 VGPMX Vanguard Prec Metals . -11.3 10.10
3 INPMX AXP Precious Metals A. -15.7 7.03
14 RYPMX Rydex Prec Metals . -17.4 25.83
7 FKRCX Franklin Gold & PrM A. -23.1 11.04
13 OPGSX Oppenheimer Gold A . -23.7 11.80
17 USERX US Global Gold Shrs . -27.2 4.04
18 UNWPX US Global World PrecM. -35.0 7.54
First Eagle SoGen Gold (SGGDX) and Monterey OCM Gold (MNTGX) continue to lead the group with 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 or two. It's obvious which funds can't hold onto their gains and which can.
The following chart shows the approximate size of funds as measured in total assets under management in $millions. (As of November 29) This is only an approximation as the size changes daily wth 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 . 606
5 FSAGX Fidelity Select Gold . 491
2 BGEIX Amer Cent Global Gold. 311
1 ASA ASA Ltd . 288
7 FKRCX Franklin Gold & PrM A. 225
20 INIVX Van Eck Intl Inv GoldA 162
19 USAGX USAA Gold . 116
15 SCGDX Scudder Gold & Pr Mt S 111
13 OPGSX Oppenheimer Gold A . 111
18 UNWPX US Global World PrecM. 111
10 FGLDX INVESCO Gold & Pr Mtl. 100
8 GOLDX Gabelli Gold . 95
9 LEXMX ING Pilgrim Pr Mtls A. 94
16 TGLDX Tocqueville Gold . 81
6 SGGDX First Eagle SGen Gold. 73
17 USERX US Global Gold Shrs . 67
14 RYPMX Rydex Prec Metals . 63
3 INPMX AXP Precious Metals A. 42
11 MIDSX Midas Fund . 39
12 MNTGX Monterey OCM Gold . 34
4 EKWBX Evergreen Prec Mtls B. 22
Except for the last month, these numbers have been increasing across the board as fresh investment capital has been coming back into the gold sector. Since neither Vanguard (VGPMX) nor Fidelity (FSAGX) is leading the pack in performance, it looks like fund marketing with name recognition is still important in increasing funds under management. While not the most famous gold funds, they are certainly well know in the mutual fund business and therefore benefit from their reputations.
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 . 1.30
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 & 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 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.
INVESTING COMMENTS
Global Watch | Comparing Funds
American Express Precious Metals (INPMX) jumped to the front all by itself this month, with Gabelli Gold (GOLDX) in hot pursuit. Only four funds posted a negative for the month, and the trend seems to be reversing back up after a three week sag in gold equities.
With the election over, the Republicans looked to consolidate their position to introduce more of their programs to Congress to see if they will pass. However, with the continued emphasis on spending, spending, spending, with pork, pork, pork, a sizeable budget deficit will be in the future for this fiscal year and probably next year too. That will eventually weaken the dollar and add more fuel to the coming gold bull market.
The Dow looked like it was starting a new bull leg, having accomplished a nice advance since early October lows, but there is little in the news which indicates that the economy is improving. Only the last interest rate lowering provides a positive factor. Of course, the housing refinancing boom continues, but that is not what I would call good news for the long haul. The increasing number of late payments and bankruptcies is the dark side and could soon terminate the housing bubble.
The overall economy is important in that the dollar is now being rated by investors based a great deal on the U.S. economic engine being able to function efficiently. Another drop in the Dow would signal a weaker economy and a weaker dollar. The Fed has very little it can help by lowering interest rates again. The market knows this because the long bond rate is once again over 5%.
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