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Buy 4 Precious Metal Funds as Gold Shines at 5-Week High

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Gold prices touched their highest settlement in more than five weeks on Mar 26. This upsurge was prompted by the U.S. dollar falling to a five-week low. A weaker greenback also had a positive impact on silver prices. Rising gold and silver prices bode well for the overall precious metals market.

Gold lost some of its luster in 2016 after a tumultuous 2015, but has managed to maintain its Bull Run in 2017. Moreover, the yellow metal has managed to register a strong increase so far this year. With gold prices shining, investors could eye mutual funds that have significant exposure to the precious metals sector.

Gold Best In More Than 5 Weeks

Gold prices increased 0.1% to settle at $1,354.51 per ounce on Mar 27 morning after hitting an intraday high of $1,355.97 an ounce on Mar 26, its best since Feb 16. Prices of the yellow metal registered three straight days of gains.

Additionally, silver prices advanced by 0.6% to $16.75 per ounce early on Mar 27 and hit an intraday high of $16.79 on Mar 26, the metal’s highest since Mar 7. Moreover, other key precious metals like platinum advanced 0.5% at $957 per ounce and palladium increased 0.3% to $976.47 per ounce during the day. 

The decline in U.S. dollar was the primary trigger for the rise in prices of precious metals, including gold. The U.S. dollar index declined from 89.03 to 89.05 on Mar 26, reaching a five-week low level of 88.979 on the day. The U.S. dollar fell recently after trade war fears and rising rate hike concerns.

Moreover, dollar fell on Feb 26 as investors focused on President Trump’s order to expel 60 Russian diplomats following the Skripal spy poisoning case. Russia’s Foreign Ministry termed this move from the United States as a “provocative gesture.”

Valuation Concerns a Boon for Gold

The U.S. Dollar Index increased 34% to touch 103 in 2016. During the same period, gold prices fell 34% to $1,250 an ounce. In contrast, the U.S. Dollar Index has fallen less than 90 this year, helping gold prices surpass the $1,350 an ounce mark.

The extent of gold’s gains this year can be gauged from its best-ever level. Gold prices touched the all-time high of $1,900 an ounce in 2011, when the Dollar Index had hit a low of $75. With gold prices moving near the key level of more than $1,300 an ounce, the precious metals sector has made a killing this year. Additionally, according to Morningstar, the precious metal mutual fund category has posted three-year returns of 7.6%.

4 Precious Metals Mutual Funds to Buy

A weak dollar led the gold prices upward, which makes precious metals funds strong investment choices. Here, we have selected four precious metal mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). Moreover, these funds have encouraging three-year annualized returns. These also have minimum initial investment within $5000 and low expense ratios.

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.

Vanguard Precious Metals and Mining VGPMX invests heavily in stocks of both domestic and foreign companies whose primary operations concern precious metals including gold. The fund seeks growth of capital over the long term. This non-diversified fund may also invest around one-fifth of its assets in gold, silver and other precious metals coins and bullion.

VGPMX has three-year annualized returnsof 1%. The fund has an expense ratio of 0.43% compared with the category average of 1.38%.

American Century Global Gold Investor BGEIX invests in securities other than stocks, like debentures, bonds, gold, gold futures, etc. The fund focuses on those precious metals companies that are involved in mining, fabricating, exploring, processing and distribution of gold. BGEIX seeks returns through capital growth and high dividends.

BGEIX has three-year annualized returnsof 2.5%. The fund has an expense ratio of 0.67% compared with the category average of 1.38%.

Oppenheimer Gold & Special Minerals A OPGSX invests primarily in common stocks of companies engaged in processing, mining and dealing in gold, gold bullion and precious metals-based ETFs. OPGSX invests not more than one-fourth of its assets in the Oppenheimer Gold & Special Minerals Fund (Cayman) Ltd. The fund seeks growth of capital.

OPGSX has three-year annualizedreturns of 4.3%. The fund has an expense ratio of 1.17% compared with the category average of 1.38%.

VanEck International Investors Gold YINIYX seeks growth of capital and income for the long run. INIYX invests a large chunk of its assets in companies involved in gold-based activities. This non-diversified fund may also invest at least one-fourth of its assets in the gold-mining industry.

INIYX has three-year annualizedreturns of 3.6%. The fund has an expense ratio of 1.10% compared with the category average of 1.38%.

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