U.S. Markets closed

4 Precious Metal Funds to Buy on Easier Monetary Policy

Zacks Equity Research

Gold and other precious metals could strengthen further, given the anticipation of a cut in interest rates by the Federal Reserve this week. This brings into picture precious metal mutual funds, which could gain from a rise in prices of gold and other precious metals and make ideal investments.

A Fed Rate Cut is Imminent

The central bank was rather upfront in hinting at a rate cut in its testimonial to the Congress earlier this month. In fact, Fed Chair Jerome Powell cited factors such as weak global growth and trade uncertainties to back the recent dovish stance.

Therefore investors are no longer debating whether there will be a rate cut in the FOMC’s meeting scheduled Jul 30-31. Instead they are discussing the extent of the cut.

According to the CME Group’s FedWatch tool, a majority of investors are anticipating a quarter-point cut in interest rates (currently in a range of 2.25-2.5%) this week.

Why Invest in Precious Metals Now?

Since a rate cut is fairly expected, investors could expect gold and other precious metal prices to move further up. In fact, gold already crossed the $1,400 level in June. On Jul 29, spot gold edged up 0.31% to reach $1,422.65 per ounce.

A low-rate environment would dampen the greenback. Other currencies would become stronger as dollar weakens, thus making it easier to purchase gold. This would raise demand for the yellow metal.

Our Choices

We have selected four precious metal mutual funds for you. 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.

Now we come to the 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).

Wells Fargo Precious Metals A EKWAX fund invests the majority of its assets precious metal investments. The non-diversified fund aims for capital growth and may invest any amount of its assets in equity securities of non-U.S. companies, comprising of American Depositary Receipts and other like investments. EKWAX invests up to 40% of its assets in equity securities of emerging markets and up to 25%, at the time of purchase, in debt securities related to precious metals.

This Zacks sector – Precious Metal 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 Rank #1. The fund has an annual expense ratio of 1.09%, which is below the category average of 1.39%. It has year-to-date returns of 23.5%.The fund has a minimum initial investment of $1000.

American Century Global Gold A ACGGX fund aims for total return, which comprises capital appreciation and dividends. ACGGX invests most of its assets in companies that are engaged in activities such as mining, processing or distributing gold or other precious metals. The fund is non-diversified.

This Zacks sector – Precious Metal 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.

ACGGX carries a Zacks Rank #1. The fund has an annual expense ratio of 0.92%, which is below the category average of 1.39%. It has year-to-date returns of 20.5%.The fund has a minimum initial investment of $2500.

Oppenheimer Gold & Special Minerals A OPGSX fund aims for capital appreciation. The fund invests the majority of its assets in common stocks of companies that are engaged in mining and processing gold and other precious metals, gold bullion and precious-metal ETFs etc. The fund may also invest in instruments whose economic characteristics are similar to the mentioned securities.

This Zacks sector – Precious Metal 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.

OPGSX carries a Zacks Rank #1. The fund has an annual expense ratio of 1.17%, which is below the category average of 1.39%. It has year-to-date returns of 24.7%.The fund has a minimum initial investment of $1000.

Franklin Gold and Precious Metals A FKRCX fund seeks capital growth. The non-diversified fund invests the lion’s share of its assets in securities of companies that pursue gold and precious metals operations. The fund may invest in companies of any market capitalization and the companies may be located anywhere in the world. FKRCX primarily invests in non-U.S. companies and may also invest in American, Global and European Depositary Receipts.

This Zacks sector – Precious Metal 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.

FKRCX carries a Zacks Rank #2. The fund has an annual expense ratio of 0.98%, which is below the category average of 1.39%. It has year-to-date returns of 21.8%.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 (FKRCX): Fund Analysis Report
 
Get Your Free (ACGGX): Fund Analysis Report
 
Get Your Free (OPGSX): Fund Analysis Report
 
Get Your Free (EKWAX): Fund Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research