Global economic slowdown and weakness in U.S. dollar propelled gold to a 10-month high on Feb 19. However, gold prices have wobbled since then, as has the U.S. dollar. As it stands, gold is currently priced at $1,285.23 an ounce.

Though volatile, investors speculate that the yellow metal will witness a decrease in value in the near term. However, such weakness, if any, is only momentary as global economic fluctuations and inflated equity valuations are likely to boost gains for gold in the long run. Therefore, investing in gold mutual funds at this point seems prudent.

Gold Will Remain Solid This Year

The impact of global economic and political dynamics over the past two years is largely expected to be felt in 2019. There has been an increase in adoption of protectionist trade and economic policies by major economies across the globe. Needless to say, such practices contribute to an increase in volatility in the markets.

On Jan 21, the International Monetary Fund (IMF) reduced its global economic growth forecast for 2019 to 3.5% from 3.7% last October. Likewise, global growth projection for 2020 was reduced to 3.6% from 3.7%, marking the second reduction in the last three months.

Further, equity valuations remain stretched across the world. Such factors point toward a global recession this year. Therefore, there will be a surge in demand for gold in 2019 as a hedge against global financial risks.

Fed to Take a Slow Rate Hike Approach in 2019

Experts are of the view that the yellow metal faces severe headwinds from higher interest rates and strength in the greenback. However, the Fed has indicated a more controlled approach toward hiking interest rates this year, which means that gold will surge in the near term. 

Minutes from the Federal Open Market Committee’s meeting held in January were released on Wednesday. Minutes showed that officials from the Fed remained divided on their view of hiking interest rates. A group of officials argued that a hike in interest rates would only be necessary if inflation levels turned out to be higher than the initial baseline forecast.

Market watchers widely expect the Fed to hold interest steady in its next meeting in March. Per the CME FedWatch Tool, the probability that the Fed will keep its rates unchanged in the range of 2.25-2.5% at its upcoming meeting stands at 98.7%.

3 Best Choices

We have, thus, selected three passive mutual funds with a Zacks Mutual Fund Rank #1 (Strong Buy) and 2 (Buy) that are poised to gain from such factors. Moreover, these funds have encouraging three and five-year returns. Additionally, the minimum initial investment is within $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.

The question here is: 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.

Oppenheimer Gold & Special Minerals Y (OGMYX - Free Report) seeks capital growth by investing 80% of its net assets in common stocks of companies that are engaged in mining and processing gold, precious metals and related ETFs. This is a non-diversified fund.

This Zacks sector – Precious Metal product has a history of positive total returns for more than 10 years.

OGMYX has a Zacks Mutual Fund Rank of #1 and an annual expense ratio of 0.92%, which is below the category average of 1.38%. The fund has three and five-year returns of 18.8% and 0.6%, respectively.

USAA Precious Metals and Minerals Adviser (UPMMX - Free Report) targets capital appreciation and protects the purchasing power of capital against inflation. The fund does so by investing 80% of its assets in equity securities of U.S. and non-U.S. companies that are involved in mining and processing gold, precious metals and minerals etc.

This Zacks sector – Precious Metal product has a history of positive total returns for more than 10 years.

UPMMX has a Zacks Mutual Fund Rank of #2 and an annual expense ratio of 1.30%, which is below the category average of 1.38%. The fund has three-year returns of 15.4%.

Oppenheimer Gold & Special Minerals A (OPGSX - Free Report) is a non-diversified fund that seeks capital appreciation by investing 80% of its assets in common stocks of companies that are involved in mining and processing gold, precious metals and related ETFs and therefore may invest in all of its assets in these securities.

This Zacks sector – Precious Metal product has a history of positive total returns for more than 10 years.

OPGSX has a Zacks Mutual Fund Rank of #1 and an annual expense ratio of 1.16%, which is below the category average of 1.38%. The fund has three and five-year returns of 18.5% and 0.4%, respectively.