Gold fund / mutual fund

Wil Ferch · 06-03-2009, 06:41 AM

Can anyone with serious knowledge on this topic post a recommended gold mutual fund that is available for use as an IRA? Please also give a quick summary why you feel *this* one is special.....

Thanks..,,

competentone · 06-03-2009, 07:46 AM

Not addressing your question specifically (as I don't like mutual funds, period):

I would stay away from "paper gold."

You can own American Eagles (real gold coins) in an IRA, though I would suggest keeping physical gold ownership "out of sight" of the government -- meaning not in an IRA account.

Go with the physical (non-IRA), or own the stock of gold mining companies (look for the ones that have not hedged their production) if you want "gold" in an IRA.

Do analysis of the mining companies as you would analyze any company and look at them from a perspective of the reserves they own to understand the "gold you hold" (in the ground) when you own their stock. (Pay attention to debt.)

I just bought another 1000 shares of GSS (Golden Star Resources) in my IRA. It would be considered a more speculative stock by most people's standards, but is the only specific recommendation I'd make right now when it comes to the gold miners (not to imply I don't think there are other good choices).

masraum · 06-03-2009, 07:55 AM

Interesting, thanks for the info. I'm always open to learning more.

Tishabet · 06-03-2009, 08:22 AM

Just to muddy the waters a bit (and because I genuinely do not know), are the value of stocks held in a mining company typically correlated to the price of the mined product? i.e. will the present stock price of a company which holds copper mines correlate strongly with the present/futures price of copper? I've never really invested in a company that produced a market valued exchangeable commodity like gold, so was just wondering.

Put me down as another one who is skeptical about the value of mutual funds.

competentone · 06-03-2009, 09:02 AM

Quote:

Originally Posted by Tishabet

are the value of stocks held in a mining company typically correlated to the price of the mined product?

Generally yes, though there can be "company specific" issues which affect the stock price of the mining company.

Additionally, owning the miner, will usually represent a more "leveraged" position in the commodity it mines than owning the commodity directly. One can see more dramatic moves in the stock price than one sees in the underlying commodity.

For example, look at this graph showing Gold Corp. charted against "GLD" (an ETF that tracks the price of gold):

http://finance.yahoo.com/q/bc?s=GG&t=2y&l=off&z=l&q=l&c=gld

You can see the more dramatic price swings in the stock price of Gold Corp (symbol "GG") than the price of gold (as reflected by "GLD").

This is the case since the miner has certain fixed costs in recovering the metal, once those fixed costs are met, any higher price in the commodity will translate into near pure profit. The reverse is true if the commodity price drops; a price for the commodity below the recovery cost will kill the profits for the miner.

Additionally, as the price of the underlying commodity rises, the recoverable reserves of the miner can actually increase since the higher commodity price justifies mining and refining ore bodies that were not profitable at previous lower prices.

So long as they are managed well, are not (too heavily) hedged on their forward production, and are priced "reasonably," I think many of the precious metals mining companies are a good way to "own" precious metals for investment purposes. (I still think one should have physical coins as a hedge against economic collapse though.)

Tishabet · 06-03-2009, 09:59 AM

Quote:

Originally Posted by competentone

Generally yes, though there can be "company specific" issues which affect the stock price of the mining company.

Additionally, owning the miner, will usually represent a more "leveraged" position in the commodity it mines than owning the commodity directly. One can see more dramatic moves in the stock price than one sees in the underlying commodity.

For example, look at this graph showing Gold Corp. charted against "GLD" (an ETF that tracks the price of gold):

http://finance.yahoo.com/q/bc?s=GG&t=2y&l=off&z=l&q=l&c=gld

You can see the more dramatic price swings in the stock price of Gold Corp (symbol "GG") than the price of gold (as reflected by "GLD").

This is the case since the miner has certain fixed costs in recovering the metal, once those fixed costs are met, any higher price in the commodity will translate into near pure profit. The reverse is true if the commodity price drops; a price for the commodity below the recovery cost will kill the profits for the miner.

Additionally, as the price of the underlying commodity rises, the recoverable reserves of the miner can actually increase since the higher commodity price justifies mining and refining ore bodies that were not profitable at previous lower prices.

So long as they are managed well, are not (too heavily) hedged on their forward production, and are priced "reasonably," I think many of the precious metals mining companies are a good way to "own" precious metals for investment purposes. (I still think one should have physical coins as a hedge against economic collapse though.)

Very interesting, thanks for the response! I've been considering trying my hand at some volatility arbitrage (straddles in particular) and this might be an interesting industry to track for the future...

the · 06-03-2009, 10:06 AM

In my experience, gold mining stocks follow the general market almost more than they follow the price of gold. So when the mkt tanks, the gold mining stocks tank, even if the price of gold goes up.

I found that to be true when I owned Newmont Mining in real life throughout the years. Never did well on it, even when gold prices rose substantially.

Also, in the PPOT stock pick contest in '08, where we picked stocks in January of 08, I knew the mkt would tank in 08, and that gold would likely rise. So I picked Yamana Gold for my stock. It was a sort of "hedge," in that I figured if it at least stayed even, I'd win the contest.

It got slaughtered. Not because of the price of gold went down, but because the stock market went down, and at the end of the day, stock in a gold company is still stock in a company.

tabs · 06-03-2009, 12:22 PM

U know what they say a gold coin in hand is worth two that are still in the ground...

tabs · 06-03-2009, 12:23 PM

The only fkin reason to own gold is as a hedge against inflation and/or a melt down of the earth. So why are we playing in this game again?

jluetjen · jluetjen's Garage

My $0.02 is that commodities like gold are good to season a portfolio as a hedge, but I wouldn't want to have more then 5% of my total portfolio in anything like that. To be honest, Gold is already trading pretty high in it's historical range. (Disclaimer, gold is used in my industry; semiconductor assembly and so I routinely see the prices since we track it for pricing purposes.) There are a lot of companies that trade in Gold and it's futures because they either buy it or sell large quantities of it as part of their business. An example are companies that make or buy the gold wire used in semiconductor assembly, or jewelry.

Unless you want to take the time to really understand the ins and outs of it I'd fear that large investments by a private party in gold are going to be speculative at best. To put it differently, it's no different then trying to get rich by playing the slots. In both cases there are some big players (aka: "The House") who are going to win more often then you do. Given that stocks are down and gold is up right now, personally I think that stocks are a better investment. Buying gold now because the price is high is reacting to old news.

That's my $0.02, but then I'm not a speculative investor.

gatotom · 06-03-2009, 04:02 PM

Best gold fund, IMHO, Tocqueville Gold Fund, has a nice balance of paper and actual gold but it is run by John Hathaway, a very savy manager. performance since 2001 to 2008 has been +22%, +83%, +54%, -6%, +30%, +39%, +12% and last yr -35%. So far this yr +20%, not bad returns.

If you got into gold and silver when it was 230.00 oz and silver 4.25 oz ride it to whenever you want to sell.

If you are just getting into the game, I would put your bet on silver, still not too much per oz but the upside is enormous.

Never put all your eggs in one basket but I am not too hot on the stocks right now, this dead cat bounce rally has got some cleaning up to do.

If you want a Co. to invest in that has not IPO yet, go to caliberdata. com and see the future of web advertising, solid bet there.

masraum · 06-03-2009, 04:31 PM

I bought some Silver ETF (SLV) the first of last Oct at about $11.70. Right now it's mid $15. Not bad considering what the rest of the market has done, I think. Still, I'm just slightly more than clueless and trying to learn about investing in general. It was mostly luck.

John_AZ · 06-03-2009, 04:44 PM

Quote:

Originally Posted by Wil Ferch

Can anyone with serious knowledge on this topic post a recommended gold mutual fund that is available for use as an IRA? Please also give a quick summary why you feel *this* one is special.....

Thanks..,,

Having no "serious knoweldge" but to answer your Q. Vanguard Precious Metals and Mining fund. YTD up 46.75%. Minimum investment for $10,000.

https://personal.vanguard.com/us/funds/snapshot?FundId=0053&FundIntExt=INT

GL
John_AZ

dan88911 · 06-03-2009, 08:40 PM

You might consider SPDR Gold Trust (GLD)

competentone · 06-04-2009, 06:20 AM

Quote:

Originally Posted by tabs

The only fkin reason to own gold is as a hedge against inflation and/or a melt down of the earth. So why are we playing in this game again?

Because price inflation is coming to our economy at levels we have never seen (in this country) before.

Think "1980's South American" style inflation right here in the U.S.

Mad Ben and his printing press are going to destroy the middle class, with hyper-inflation, to "celebrate" the Fed's 100-year anniversary (in 2013).