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Investors prefer bullion: A less-than-golden year for precious metal equity funds

What are we looking for?

How bullion and precious metals stock funds have fared over the past year.

The screen

Let's look for the eight best and worst performers among precious metals equity and bullion funds for the year ended April 30. (Some funds may have a mix of stocks and bullion.) U.S. dollar, segregated and duplicate versions of funds were excluded.

What did we find?

Pure gold bullion funds glittered, while some precious metals stock funds lost plenty of lustre.

Contrast returns between two Sprott funds: Sprott Gold Bullion was the top performer with a 9.9-per-cent gain, while Sprott Gold and Precious Minerals lost 38.4 per cent.

Lots of money has flowed into bullion exchange-traded funds instead of precious metals equities, but there will be a "tipping point," suggested Charles Oliver, a portfolio manager at Sprott Asset Management. "It's a good time to be looking at the area.... These companies are increasing their earnings and cash flow, but the multiples are compressing and getting cheaper."

A catalyst for the stocks could come from the miners' rising dividend yields, but it would have to be in the 3- to 6-per-cent range to get yield-hungry investors interested, said Mr. Oliver, who runs Sprott Gold and Precious Minerals. "That doesn't appear to have happened yet."

He remain "very positive" on gold even though the price did not hit $2,000 (U.S.) an ounce by April as he had predicted. Gold has retreated to below $1,600 an ounce from over the $1,900-level last fall.

The metal, a store of value, should benefit as countries debase their currencies, Mr. Oliver said.

When voters in France and Greece recently rejected austerity-minded politicians in their recent elections, "I believe that was a vote to print [money]," he said. "With printing continuing into the future, I think it is going to be very good for gold prices."



AssetsTo April 30, 2012To May 10, 2012Calendar year returns
FundCategoryMER(in $ mil.)1 YearYTD2011201020092008
Top 8 Gold Funds
Sprott Gold Bullion Fd-AMisc. - Commodity1.10249.29.91%-0.17%11.19%21.38%
iShares Gold Bullion (Non-Hedged)Misc. - Commodity0.5630.09.42%-0.26%
BMG Gold Bullion Fund-AMisc. - Commodity3.06116.98.21%-1.24%10.65%14.95%
Mackenzie Univ Gold Bullion Cl AMisc. - Commodity2.61105.65.88%-0.74%8.44%
iShares Gold Bullion (CAD-Hedged)Misc. - Commodity0.55562.05.25%1.46%10.93%26.58%
BMO Prec. Met Commod. Id ETFMisc. - CommodityN/A5.4-3.72%1.41%
CI Signature Gold Corporate ClassMisc. - Commodity2.4560.2-5.21%-4.93%-2.51%
Dynamic Strategic Gold ClassMisc. - Commodity2.51294.9-15.93%-8.85%-12.95%41.29%
Bottom 8 Gold Funds
Middlefield Precious Metals Cl. APrec. Metals Equity2.7711.1-39.17%-22.22%-33.67%89.26%33.81%
Sprott Gold and Precious MineralsPrec. Metals Equity2.93478.4-38.36%-21.24%-31.32%74.73%113.82%-49.63%
Altamira Precious & Strat. MetalPrec. Metals Equity2.3657.8-38.13%-20.95%-30.68%73.34%58.34%-29.41%
TD Precious MetalsPrec. Metals Equity2.27220.4-33.98%-18.61%-28.63%44.85%61.57%-33.40%
CIBC Precious MetalsPrec. Metals Equity2.48106.2-33.61%-17.18%-35.32%66.95%63.11%-41.96%
BMO Junior Gold Index ETFPrec. Metals Equity0.58106.4-32.99%-16.50%-27.95%
Dynamic Precious MetalsPrec. Metals Equity2.73727.6-32.86%-16.84%-29.17%68.39%60.92%-27.65%
RBC Global Precious MetalsPrec. Metals Equity2.141043.7-31.72%-15.44%-28.08%75.12%65.68%-26.18%
S&P/TSX Total Return-9.37%-0.93%-8.71%17.61%35.06%-33.00%
Source: Globe Investor

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