The price of gold has plunged and spiked so dramatically in the past year that investors likely feel woozy.
Concerns about war in Europe helped push gold to just over $2,000 an ounce in March 2022. Then, rising interest rates eroded gold’s appeal, and prices fell to the low $1,600s. Now, worries about the economy have pushed gold prices to $2,000 again, close to 2020’s all-time high. The swings were even greater for gold-mining stocks, which are typically more volatile than the metal.
One mutual fund that tries to serve investors leery of gold’s volatility is First Eagle Gold (Symbol SGGDX), which manages more than $2 billion in assets. The fund’s managers balance a select list of about 20 stocks with holdings in gold and silver bullion. In 2022, the fund lost just 1.6 percent when precious-metals mutual funds lost nearly 15 percent, on average. It also edged out the 10.8 percent average gain for its category in the first quarter of 2023. As a result, First Eagle’s five-year annualized return of 10.1 percent puts it in the top 20 percent of the category.
“Gold acts as a potential safe haven” that has a low correlation with stock market movements, says co-manager Thomas Kertsos. That means gold can have a place in a well-diversified portfolio, but it’s best kept to a small portion of overall holdings. Conflicting signals from the Federal Reserve about inflation and interest rates portend more volatility for gold in 2023, Kertsos warns.
Kertsos and associate portfolio manager Max Belmont try to dampen volatility by focusing on low-cost miners and firms that can prosper in any economy. They zero in on factors such as a company’s cost of producing an ounce of gold, debt level and reserves, says Belmont.
First Eagle has stakes in miners such as Newmont and Barrick Gold, but its top holding is Wheaton Precious Metals, which funds miners in return for a share of their production, a fairly stable niche called streaming. Wheaton has plenty of cash and long-term contracts, promising royalties for the future, says Belmont.
The fund charges a load of up to 5 percent but is available without sales charges on platforms such as Schwab and E*Trade. Its expense ratio is 1.19 percent.
