With all of this talk about the potential for gold and silver, does anyone know of a good mutual fund (or two) that would be able to take advantage of a large price movement in these two metals?

Thanks.

Brett,

Hopefully someone will come along who has invested in precious metal mutual funds. I have not.

But here is a good article on the subject.

Larry

I have not invested in this fund, but I have heard that Central Fund of Canada (CEF) invests half of their assets in gold and the other half in silver, and store it in their own vaults. I heard about it on one of the weekly radio broadcasts that Larry posted from the financial sense site. I'd be interested to know what premium the fund has over just holding the metal. If anyone knows how to make this calculation, please post it. I haven't taken the time to figure it out yet.

Here is their web site:

http://www.centralfund.com/

Marc,

It appears to me that they have a chart that compares the funds performance with the price of gold and silver. Is that what you're looking for?

Larry

The chart seems to show the price performance comparison, but what I was wondering is how much gold I can own with $1 worth of CEF stock vs. just buying the metal outright. I guess it doesn't really matter though as long as the percentage movement in price is the same...the chart seems to indicate that nd of correlation.

Oh, I see what you're asking, Marc. I'm not a gold mining company analyst, but I would think that you would have to know what the gold reserves were for each individual company in the fund. That information is available, but I'm sure you would have to examine each company's financial statements to dig it out. You may be able to get the information from the fund itself. They're looking for investors, so they may be able to help you.

Larry

Hi Larry!

I just want to say, that following you, I am up 8,4% now in one week investing in ProFund's Precious Metals Ultra Sector.

Look at the charts:
http://www.profunds.com/main/chartPerf.asp

You can make fundswitch with (virtually) no cost.
I use it from Hungary through Internet of course.

I was wondering, that really nobody else is using it?
Only a small guy from Hungary?

Csaba

Hi Csaba,

I know that others are using Profunds, or Rydex, or maybe Potomac Funds. I don’t know of anyone who has invested in the Profund’s Precious Metals Ultra Sector fund, but there very well may be some who have.

It’s great that you had a good week. I would just caution you that you are dealing with a good bit of leverage in that fund. Leverage can work for you and it can work against you. As I’ve stated many times, precious metals are tough to trade in the early stage of a bull market. Just as soon as you think that they’re ready to make a big move, they pullback sharply. It can be frustrating.

With precious metals (the funds, the stocks, or the metal), I think that you should allocate a certain percentage of your portfolio to them and forget that you own them. You shouldn’t watch it on a daily basis anymore than you watch the value of you house fluctuate on a daily basis. I’ve suggested 10% of a portfolio should be invested in precious metals. I will probably raise that to 20% later on, but I’m not ready to do that yet.

I will point out that there are some really smart people who think that gold is not ready to move substantially higher yet. The most notable, in my opinion, is Robert Prechter. He’s very bearish on the stock market (and I mean very bearish). And he is very bullish on gold for the long-term. But he thinks that we’re going to enter into a period of severe deflation, and he thinks that gold can go down to $200 an ounce before it enters into a multi-year bull market. He did say that if gold were to trade above $400 an ounce he would re-evaluate his stance. I don’t think that Prechter is right on his near term outlook for gold. But I’ve been familiar with his work for too long not to respect his opinion.

By the way, Csaba, I don’t think that being “a small guy from Hungary” is a disadvantage at all. In fact, it’s probably an advantage. You probably don’t have to deal with all the market babble and “noise” that we’re bombarded with here in the U.S.

Larry