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Value Line’s Precious Metals objective group consists of funds with the stated policy of investing at least 50% of their assets in gold and/or precious metals stocks or bullion. In reality, most funds in this group place well more than 50% of their assets in these investments. That said, there tend to be two types of funds here, those that invest almost exclusively in gold and those that invest more broadly in precious metals (though, in reality, even these funds will have material exposure to gold and gold stocks). There are also a small number of funds that offer “inverse” performance to the price of gold.

In general, the Precious Metals objective group is fairly small, and most of the funds have very similar goals and performance. The strategic exception, of course, is the “inverse” style of fund. The similarity in the funds and performance is driven by two factors. First, there simply aren’t all that many ways to invest in gold and precious metals—the list of stocks is about as short as the list of funds. Second, gold and precious metals are commodities, and their price swings can be extreme.  

That said, precious metals, particularly gold, are often considered a “store of value” in times of inflation and, for the more extreme times, in case society falls into chaos. Thus, some recommend a small gold component for all portfolios. Small, however, is a key word, as most asset allocation models, including Value Line’s, don’t recommend more than a few percentage points of exposure to this category. It is also important to note that gold and precious metals stocks and funds are very different from owning gold or precious metals directly in the form of bullion. Indeed, if society did happen to fall into chaos, owning shares in a gold fund isn’t going to help anyone buy a loaf of bread.

At the end of the day, gold and precious metals funds can fill an important niche. But it is a niche and a volatile one at that. Investors should be cautious about how much exposure they maintain here.

Over the long term, the Precious Metals objective group has been a very strong performer relative to the broader market, as measured by the S&P 500 Index.  For the 10-year period ended June 28, 2013, the group had an annualized gain of 7.9%, while the S&P 500 reported an annualized gain of 7.3%. For five years and three years, the group had losses of 10.5% and 17.3%, respectively, while the Index reported gains of 7.0% and 18.4%. Over the trailing 12 months ended in June, the Precious Metals objective group reported a loss of 37.1%, compared to gain of 20.6% for the S&P 500. For the year-to-date period ending June 28th, the group had a total loss of 40.9%, while the S&P reported and total return of 13.8%. The group has an average Risk Rank of 5, indicating a very high level of risk. This reflects the dramatic up-and-down moves that the group has experienced over the past 10 years. 


Fund Name:
Invesco Gold & Precious Metals Fund A
Ticker: IGDAX
Investment Advisor: Invesco Advisers, Inc.
Year-to-Date Return: -40.26%
Benchmark: Philadelphia Gold & Silver Index / S&P 500 Index
Objective: The Fund’s investment objective is long-term growth of capital.
Investment Strategy:
• Fund invests at least 80% of its net assets in securities of issuers engaged in exploring for mining, processing, or dealing and investing in gold and others precious metals such as silver, platinum and palladium, as well as diamonds.
• Fund invests predominantly in equity securities. The principal type of equity securities purchased by the fund are common stock.
• May invest up to 100% of its net assets in foreign securities of issuers doing business in the gold and precious metals sector.
• Fund invests in issuers of all market capitalizations.

Fund Name: Tocqueville Gold Fund
Ticker: TGLDX
Investment Advisor: Tocqueville Asset Management, L.P.
Year-to-Date Return: -44.76%
Benchmark: Philadelphia Stock Exchange Gold/Silver Index / S&P 500 Index
Objective: The Fund’s investment objective is long-term capital appreciation.
Investment Strategy:
• Fund invests at least 80% of its net assets plus borrowings for investment purposes in gold and securities of companies located throughout the world, in both developed and emerging markets, that are engaged in mining or processing gold.
• Also may invest in other precious metals. However no more than 20% of the fund’s total assets may be invested directly in gold bullion and other precious metals.
• Fund is non-diversified.


Fund Name: Wells Fargo Adv Precious Metals Fund A
Ticker: EKWAX
Investment Advisor: Wells Fargo Funds Management, LLC
Year-to-Date Return: -45.62%
Benchmark: S&P 500 Index / FTSE Gold Mines Index
Objective:  The Fund seeks long–term capital appreciation.
Investment Strategy:
• Fund invests at least 80% of its net assets in related to precious metals.
• Invests in any amount of the fund’s total assets in equity securities of foreign issuers, including ADRs and similar investments.
• Fund may invest up to 40% of its total assets in emerging market equity securities.
• May also invest up to 25% of the fund’s total assets, at the time of purchase, in debt securities linked to precious metals and common or preferred stocks of subsidiaries of the fund that invest directly or indirectly in precious metals and minerals.
• Fund is non-diversified.

In the table below, we have listed 10 top-performing funds through June 28, 2013 that we follow in our Fund Advisor database.

  

10 Top Precious Metals Funds Performance 

 

Fund Name 

Ticker 

% Year-to-date 

Total Return 

% 1 Month 

Total 

Return 

% 3  

Month 

Total 

Return 

% 6 Month 

Total  

Return 

% 5 Year 

Total 

Return 

Annualized 

Van Eck Global Hard Assets A 

GHAAX 

-4.79 

-4.79 

-7.21 

-4.79 

-6.45 

  

Vanguard Precious Metals & Mining 

VGPMX 

-34.88 

-13.36 

-23.00 

-34.88 

-17.38 

Invesco Gold & Precious Metals Fund A  

IGDAX 

-40.49 

-15.66 

-30.79 

-40.49 

-9.69 

  

First Eagle Gold Fund A  

SGGDX 

-42.49 

-16.10 

-32.24 

-42.49 

-6.24 

Rydex Precious Metals Fund A 

RYMNX 

-43.67 

-15.69 

-32.66 

-43.67 

-12.74 

Tocqueville Gold Fund 

TGLDX 

-44.76 

-16.06 

-33.34 

-44.76 

  

-4.73 

PIA OCM Gold Fund  

OCMGX 

-44.88 

-16.78 

-33.90 

-44.88 

-9.31 

Van Esk Intl Investors Gold Fund A 

INIVX 

-45.39 

-17.45 

-33.43 

-45.39 

-8.39 

  

Wells Fargo Adv Precious Metals Fund A 

EKWAX 

-45.62 

-18.95 

-34.65 

-45.62 

-9.73 

  

DWS Gold & Precious Metals Fund A 

SGDAX 

-46.10 

-17.50 

-35.26 

-46.10 

-14.63 

  

Precious Metals Objective Group 

  

-40.93 

-15.41 

-30.75 

-40.93 

-10.52 

  

At the time of this article's writing, the authors did not have positions in any of the companies mentioned.