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Precious metals mutual funds are a solid solution for many low-key investors looking for a maintenance free way to play the precious metals bull market. And there are a number of fundamental factors undergirding the assertion that this is a wise place to invest. Some people like to buy silver or gold, or participate in a bullion fund. Masses, however, simply take the convenience of a mutual fund type of alternative.
Precious Metals Mutual Funds Allow You To Copy Countries
Precious metals mutual funds represent an easy way for individual investors to piggy back on the fondness for gold that key countries are presently displaying. In recent years, major central banks have reversed course and become net buyers of gold. For that last couple of decades, the banks have been liquidating gold. This is a significant shift, if not an epic one. Major players actually have sold absolutely no gold in one or more of the last few years, including France, Switzerland, and Germany. Big time buyers can be added to this equation as well. Specifically, China, Russia, and India are buying gold like never before.
The fact that some countries, such as Germany, Italy, France, and the United States supposedly have a large percentage of reserves in gold is significant. If they are adding to their positions, it indicates that too much ain’t enough. On another note, you have countries like China that have a very, very tiny amount of total reserves in gold. For China to bring its percentage of reserves in gold to just 20% or 30% would require massive gold purchases. This is due to the fact that China’s reserves are growing all the time. As a consequence, it’s percentage of gold holding is always being diluted to the extent that its growth outpaces gold acquisitions. For China to bring its gold holdings to 50%, 75% or more could push gold prices stratospheric in the face of reasonably stable supply. This is especially true as once-was big gold producers such as South Africa are producing considerably less gold today than in the decades prior. For those who are not familiar with buying and holding physical bullion, precious metals mutual funds offer a convenient way to play the precious metals bull market.
Precious Metals Mutual Funds Allow You To Copy High Profile Investors
Precious metals mutual funds allow you to mimic the investment priorities of astute nations, but also astute individual investors and popular talking heads. Amazingly, Jim Cramer has finally recommended that people buy silver in the $35 range. I’m not sure where he’s been the last decade, but it’s nevertheless noteworthy that he’s taken a public position in favor of silver. Mexican billionaire Carlos Slim apparently can’t find enough physical metal on the planet. Rather than buying it above ground, he’s going underground. Indeed, he’s purchasing large stakes in Mexican gold and silver miners.
Main street investors may not yet be on board, but the smart money is well-positioned. Consider names like Jim Rogers, Paul Tudor Jones, and David Einhorn. All of these folks have taken a position in gold. Money manager John Paulson has placed literally billions of dollars in gold and gold stocks. It’s even been reported that world’s wealthiest people are taking physical delivery of bullion, which can put a strain on ETFs, especially if they are short physical metal.
Precious Metals Mutual Funds Give You A Stake In A Minuscule, Yet Explosive Market
Precious metals mutual funds are an easy way to participate in what is likely to be viewed in the history books as an epic bull market run. Aside from all of the fear, factors, and forces driving interest in precious metals, the inherent size constraints of the market makes precious metals mutual funds well-poised to explode with even modest interest from the general buying public.
While I have some general concerns about ETFs in general, and wonder about the sufficiency of bullion stockpiles, these ETFs are, in the same breath, useful for making a point. Every silver ETF on the planet could be added up and the conglomerate would have to quadruple in order to be as big as fast food burger joint McDonald’s. The precious metals markets are very, very tiny. The pharmaceutical industry is literally hundreds of times bigger than the silver market. Tiny markets, as with tiny mining stocks, become very volatile in an upward direction when buying pressure mounts. It’s not unusual to see prices go parabolic.
From another vantage point, all of the gold ever mined on the planet is paltry when compared to the amounts of national economies, debt, and so on. For instance, the U.S. gross domestic product is double the entire world history of mined gold. U.S. debt levels are nearly three times as large and worldwide gold ever mined. So, as you can see, precious metals mutual funds are set to explode when even modest amounts of money begin flowing into them.
Precious Metals Mutual Funds – Last Call!
A couple of reputable precious metals mutual funds worth looking into are run by award winning expert mining stock manager Frank Holmes. The U.S. Global Investors Gold and Precious Metals Fund (USERX) focuses on the major metal producers that are established and bringing metal out of the ground. The sister fund is the U.S. Global Investors World Precious Minerals Fund (UNWPX). This is quite similar to USERX. The big difference is that it takes 20% of invested assets and allocates them to the junior mining companies, leaving the rest in large producers. This fund, therefore, grants access to the explosive returns that can be generated from exploration plays the work out extraordinarily well.
These precious metals mutual funds offer a number of benefits. Again, they are actively managed, so you don’t have to worry about being tied to an index and potentially married to a company you don’t like. They are also not known to be labor intensive, so inactive investors can more or less buy and hold during a bull market. Though they tend to have a higher annual expense ratio than other vehicles, you do get what you pay for in terms of management. So, as long as you don’t mind investing the required $5,000 to get started, this can be a great solution. Larger investors probably will not mind. Smaller investors either may not have the $5,000 to start, or else it may represent too large of a portion of their overall account. In any event, knowing about these precious metals mutual funds helps give you a well-rounded familiarity with your options.
