Gold hasn’t been getting much love from investors lately due to rising bond yields, and bullion-backed gold mutual funds and ETFs have seen significant outflows so far this year through the end of February.
Before pulling your money out, though, I would advise investors to double-check what’s in the fund. During this period, we’ve managed to outperform many of our peers thanks to a substantial rotation into metals and minerals that will increasingly be needed in advanced technology, including lithium-ion batteries. Besides lithium, we like copper, nickel, cobalt, and graphite, and we see great upside potential in companies that not only produce these minerals but also develop the technology behind the batteries.
Further down, I’ll be sharing one of these companies with you and how it’s helped us outperform during the gold correction.
Record-Setting Money Printing Increases the Attractiveness of Hard Assets
First, I think it’s important for me to say upfront that we still have strong conviction in gold and believe one of its most convincing long-term investment cases is the alarming growth in money supply in the U.S. There are different ways to define “money,” but let’s look at highly liquid M1, which includes cash outside the U.S. Treasury, money market deposit accounts and other forms of so-called “near money.”
As you can see, the amount of cash floating around the economy is up a head-spinning 355% compared to last year. This is a record rate, and it’s not even close. To combat the economic impact of the pandemic, policymakers flipped on the printing machines and never bothered to shut them off, flooding the U.S. with easy money.
The law of supply and demand may apply to currencies just as it does to any other asset. This extra liquidity has helped prop up the economy and lift stock prices, but an unintended consequence could very well be dollar depreciation—suggesting inflation may not be too far behind.
When and if that happens, I think investors with exposure to gold and gold mining would be in a much better position than those without. Historically in times of accelerating inflation, the yellow metal has improved portfolios’ risk-adjusted returns and delivered positive returns, according to the World Gold Council (WGC).
Disclosure:
Past performance does not guarantee future results.
Please consider carefully a fund’s investment objectives, risks, charges, and expenses. For this and other ...
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Disclosure:
Past performance does not guarantee future results.
Please consider carefully a fund’s investment objectives, risks, charges, and expenses. For this and other important information, obtain a fund prospectus by clicking here or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Foreside Fund Services, LLC, Distributor. U.S. Global Investors is the investment adviser.
Total Annualized Returns as of 12/31/2020:
| Funds |
One-Year |
Five-Year |
Ten-Year |
Gross Expense Ratio |
| World Precious Minerals Fund |
70.60% |
19.11% |
-6.86% |
1.56% |
| NYSE Arca Gold Miners Index |
24.09% |
22.76% |
-3.99% |
n/a |
Performance data quoted above is historical. Past performance is no guarantee of future results. Results reflect the reinvestment of dividends and other earnings. For a portion of periods, the fund had expense limitations, without which returns would have been lower. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Performance does not include the effect of any direct fees described in the fund’s prospectus which, if applicable, would lower your total returns. Performance quoted for periods of one year or less is cumulative and not annualized. Obtain performance data current to the most recent month-end at www.usfunds.com or 1-800-US-FUNDS.
Foreside Fund Services, LLC, Distributor. U.S. Global Investors is the investment adviser. Mutual fund investing involves risk. Principal loss is possible. Gold, precious metals, and precious minerals funds may be susceptible to adverse economic, political or regulatory developments due to concentrating in a single theme. The prices of gold, precious metals, and precious minerals are subject to substantial price fluctuations over short periods of time and may be affected by unpredicted international monetary and political policies. We suggest investing no more than 5% to 10% of your portfolio in these sectors. The breakeven inflation rate represents a measure of expected inflation derived from 5-Year Treasury Constant Maturity Securities and 5-Year Treasury Inflation-Indexed Constant Maturity Securities. The latest value implies what market participants expect inflation to be in the next 5 years, on average. Beginning May 2020, M1 consists of (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) demand deposits at commercial banks (excluding those amounts held by depository institutions, the U.S. government, and foreign banks and official institutions) less cash items in the process of collection and Federal Reserve float; and (3) other liquid deposits, consisting of OCDs and savings deposits (including money market deposit accounts). The Venture 50 is an annual ranking of the top-performing companies from five industry sectors: Clean Technology and Life Sciences, Diversified Industries, Mining, Energy, and Technology. Nano One was recognized in the Clean Technology and Life Sciences category. The Venture 50 ranking is comprised of the strongest companies on the TSX Venture Exchange in 2020, selected based on the equally weighted criteria of share price appreciation, trading volume amount and market capitalization growth. The ISM Manufacturing Prices Index is one of the diffuse indicators, based on which the Supply Management Institute calculates the Manufacturing PMI. It reflects a change in prices paid by industry representatives for the products or services they receive. The NYSE Arca Gold Miners Index (GDM) is a rules-based index designed to measure the performance of highly capitalized companies in the Gold Mining industry. The S&P 500 Index is a market-capitalization-weighted index of the 500 largest U.S. publicly traded companies. The S&P is a float-weighted index, meaning company market capitalizations are adjusted by the number of shares available for public trading. TSX Venture Exchange is a stock exchange in Calgary, Alberta, Canada that was originally called the Canadian Venture Exchange (CDNX). It resulted from a merger between the Vancouver and Alberta stock exchanges. TSX Venture Exchange also has offices in Toronto, Vancouver, and Montreal. Fund portfolios are actively managed, and holdings may change daily. Holdings are reported as of the most recent quarter-end. Holdings are not a recommendation to buy or sell a security. Holdings are reported as of the most recent quarter-end. Holdings in the World Precious Minerals Fund as a percentage of net assets as of 12/31/2021: Compagnie Générale des Établissements Michelin 0.00%, General Mills Inc. 0.00%, La-Z-Boy Inc. 0.00%, Nano One Materials Corp. 12.73%, Volkswagen Group 0.00%, Compagnie de Saint-Gobain S.A. 0.00%. Morningstar Rankings represent a fund’s total-return rank relative to all funds that have the same Morningstar Category. The highest rank is 1 and the lowest is based on the total number of funds ranked in the category. It is based on Morningstar total return, which includes both income and capital gains or losses, and is not adjusted for sales charges or redemption fees. Morningstar ranked UNWPX in the top 1%, 80%, and 80% out of 68, 59, and 50 Equity Precious Metals funds for the one-, five- and ten-year periods ending 12/31/2020, respectively. All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.
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