U.S. Markets close in 5 hrs 31 mins

4 Gold Funds to Counter Weak Economic Data and Global Risks

Zacks Equity Research
Top Analyst Reports: Mastercard, Coca-Cola, Amgen & More

Gold prices recently took a leap, benefiting from a decline in the dollar, rising tensions in the Middle-East, uncertainties around a potential U.S.-China trade truce, the possibilities of a Fed rate cut and United States’ weak economic data.

As investors flock to buy gold-related assets in this time of economic uncertainty, one could consider investing in gold mutual funds to hedge against rising global and financial risks.

US-Iran Conflict Turns Worse

Jun 25, Trump warned Iran of "obliteration," saying that an attack on "anything American will be met with great and overwhelming force." The already-tense air between Washington and Tehran has only become tenser with the tweet.

Earlier this week, President Donald Trump imposed “hard-hitting” sanctions on Iran, whichprevent Iran’s supreme leader Ayatollah Ali Khamenei and top officials from accessing crucial financial resources. The action came on the heels of the shooting of an unmanned American drone by Iran last week.

United States and Iran’s deteriorating relations are only pushing gold prices higher.

US-China G20 Meet Might Not Yield Desired Result

The must-awaited meeting between Trump and his Chinese counterpart on Jun 29 may not satisfy investor expectations after all.

Although equity markets might rally temporarily if there is a truce to the ongoing trade war, but the damaging effect of the tariffs on global economy could continue till the levies have been discarded.

However, should the trade war escalate with new tariffs, there could be a recession-like slowdown in global growth, according to UBS economists.

Weak US Economic Data Might Trigger a Fed Rate Cut

Although comments from Federal Reserve Chairman Jerome Powell and St. Louis Fed President James Bullard on Jun 25 lowered investor hopes of a near-term rate cut, recent economic data points toward a possible rate cut.

To add to May’s disappointing 75,000 new job additions, new single-family home sales unexpectedly declined for the second month in May, indicating that lower mortgage rates are yet to boost the housing market. New home sales shed 7.8% to a seasonally adjusted annual rate of 626,000 units in May, the lowest since December.

In addition, consumer confidence tumbled to a 21-month low in June as escalations in trade tensions impacted household optimism. In fact, the 10-year Treasury note stooped to its lowest level in more than two and a half years at 1.994% on Jun 25 following weak U.S. economic data.

The aforementioned economic data can therefore potentially make way for Fed to cut rates in the near future.  

Weaker Greenback Pushes Gold Higher

Finally, dollar’s decline has certainly boosted gold prices, with the precious metal reaching six-year highs earlier this week. Dollar has been declining over Fed’s neutral to now dovish stance, which has changed sentiment on the greenback.

Gold’s demand has increased amid rising geopolitical and trade tensions already, and the weaker dollar is bound to push it further.

Our Choices

Considering the aforementioned factors, we have selected four gold mutual funds that you could add to your portfolio. All these funds carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). Moreover, these funds have encouraging year-to-date returns. Additionally, the minimum initial investment is less than $5000.

We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but also on the likely future success of the fund.

Now we come to the second-most vital question: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).

Vanguard Global Capital Cycles Fund Investor Shares VGPMX aims for long-term capital growth. The fund particularly invests in a wide range of sectors, and a mix of developed and emerging markets stocks. It typically holds companies across all market capitalizations. The non-diversified fund invests in U.S. and non-U.S. securities alike. Agnico Eagle Mines Ltd and Barrick Gold Corp are among the fund’s top holdings.

This Zacks sector – Precious product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.

VGPMX carries a Zacks Mutual Fund Rank #1. The fundhas an annual expense ratio of 0.33%, which is below the category average of 1.37%. It has year-to-date returns of 3.8%.The fund has a minimum initial investment of $3000.

Franklin Gold and Precious Metals Fund Advisor Class FGADX aims for capital growth. The fund invests the majority of its assets in securities of gold and precious metals operation companies. The non-diversified fund also invests in American, Global and European Depositary Receipts. The fund may purchase securities of gold and precious metals operation companies located globally. Anglogold Ashanti Ltd and B2Gold Corp are among the fund’s top holdings.

This Zacks sector – Precious product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FGADX carries a Zacks Mutual Fund Rank #1. The fundhas an annual expense ratio of 0.73%, which is below the category average of 1.37%. It has year-to-date returns of 2.3%.The fund has no minimum initial investment.

Invesco Oppenheimer Gold & Special Minerals Fund Class Y OGMYX aims for capital appreciation. The fund invests most of its assets in common stocks of companies that are engaged in mining, processing or dealing in gold or other metals or minerals and gold bullion etc. The non-diversified fund has Kirkland Lake Gold Ltd and Barrick Gold Corp among its top holdings.

This Zacks sector – Precious product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.

OGMYX carries a Zacks Mutual Fund Rank #1. The fundhas an annual expense ratio of 0.92%, which is below the category average of 1.37%. It has year-to-date returns of 7.1%.The fund has no minimum initial investment.

Wells Fargo Precious Metals Fund - Class A EKWAX seeks long-term capital appreciation. The fund invests the majority of its assets in investments related to precious metals. The non-diversified fund has Agnico Eagle Mines Ltd, Barrick Gold Corp, Kirkland Lake Gold Ltd and Royal Gold Inc among its top 10 holdings.

This Zacks sector – Precious product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.

EKWAX carries a Zacks Mutual Fund Rank #2. The fundhas an annual expense ratio of 1.09%, which is below the category average of 1.37%. It has year-to-date returns of 5%.The fund has a minimum initial investment of $1000.

Want key mutual fund info delivered straight to your inbox?

Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week. Get it free >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Get Your Free (EKWAX): Fund Analysis Report
 
Get Your Free (OGMYX): Fund Analysis Report
 
Get Your Free (FGADX): Fund Analysis Report
 
Get Your Free (VGPMX): Fund Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research