swon@globeandmail.com
WHAT ARE WE LOOKING FOR?
Precious metals funds are shining the brightest this year.
Gold futures surged this week after India bought 200 tonnes of the metal from the International Monetary Fund. Gold for December delivery hit a record high of $1,100 (U.S.) an ounce yesterday, but closed at $1,095.70 in New York.
This week, DundeeWealth Inc. chairman Ned Goodman told a group of analysts that the reaction to a potential rising gold price since 1999 has gone through disbelief, acceptance and now optimism.
"The next stage will be euphoria, leading to the mother of all bubbles," he predicted.
TODAY'S SEARCH
We checked out how precious metals funds are faring this year to Thursday. We included BMG BullionFund, which invests in gold, platinum and silver. (It is in the miscellaneous category.) U.S.-dollar and duplicate versions of the funds were excluded.
WHAT DID WE FIND?
A reverse of 2008.
Active managers are leading by a wide margin compared with the iShares CDN Gold Sector exchange-traded fund (XGD), which is near the bottom with a 10-per-cent gain. Last year, this ETF was the star with a 1-per-cent return as the others fell into the red amid a global market meltdown.
This ETF holds larger miners, and is nearly 50-per-cent invested in three names: Barrick Gold Corp., Goldcorp Inc. and Newmont Mining Corp.
Now, it is funds with smaller companies that are glittering. Sentry Select Mining Opportunity Class, which is 48-per-cent invested in gold stocks and the rest in base metals, is at the top of the heap with a 118-per-cent gain this year.
And Sentry Select Precious Metals Growth has surged nearly 73 per cent. It has also posted a stunning 151-per-cent gain for the year ended Oct. 31.
Both funds are focused on small to mid-sized miners that offer potential upside from rising cash on the balance sheet and exploration success in adding to their resource base, said Kevin McLean, who runs both Sentry Select funds.
A senior miner needs a rising gold price to help its stock, he said.
"I haven't owned Barrick since 1996 ... If you buy a selection of companies that tend to rise with no help from gold, you'll find they tend to rise a lot when prices are healthy."
His winners this year have included Semafo Inc., Red Back Mining Inc. and Golden Star Resources Ltd. All three are West Africa gold miners.
"I am bullish [on gold] because of weakening supply," Mr. McLean said.
"That is the main driver of rising prices ... I have been saying for the past five years that the gold price should rise about $100 a year even if the U.S. dollar stays strong," he said. "If the U.S. dollar weakens, gold will rise faster ..."
He now expects the price of gold can rise faster than $100 per year, and "do that for several years easily ... That will be underpinned by a complete absence of central bank selling, and [also by] central bank purchases of gold."
Mr. McLean never buys bullion. "Historically, I have been able to outperform with gold or silver equities," he said.
***
| Precious Metal Funds as of Nov. 5, 2009 | |||||||||
| (As of Oct. 2009) | Latest | YTD % rtn | YTD % rtn | % rtn | % rtn as of Oct. 31, 2009 | ||||
| Fund name Assets ($-mil) | MER | (Nov. 5) | (Oct. 30) | 2008 | 1-yr | 3-yr | 5-yr | 10-yr | |
| Sentry Select Mining Opportunity Cl | 26.4 | 2.88 | 118.1 | 101.0 | -69.8 | 106.6 | -9.2 | ||
| Sprott Gold and Precious Minerals | 427.0 | 2.84 | 93.2 | 79.6 | -49.6 | 139.8 | -6.7 | 6.0 | |
| Sentry Select Precious Metals Grwth | 292.7 | 2.75 | 72.6 | 56.6 | -37.1 | 151.3 | 6.7 | 21.6 | 13.9 |
| Mackenzie Univ Wld Prec Metal Class | 86.0 | 2.51 | 61.7 | 51.8 | -45.0 | 113.1 | 0.7 | 11.5 | |
| Mackenzie Univ Precious Metals | 402.2 | 2.44 | 60.3 | 50.5 | -46.1 | 106.8 | -0.7 | 9.5 | 17.3 |
| IG MK Global Precious Metals Cl-A | 51.2 | 2.68 | 57.5 | 48.3 | 103.0 | ||||
| BMO Precious Metals | 77.0 | 2.31 | 57.1 | 47.0 | -40.8 | 93.0 | -1.0 | 9.6 | 11.9 |
| BMO GDN Precious Metals Ad Sr | 2.5 | 57.1 | 46.9 | ||||||
| AGF Precious Metal | 538.0 | 2.58 | 56.9 | 46.0 | -36.4 | 100.4 | 3.7 | 14.3 | 19.6 |
| TD Precious Metals | 226.4 | 2.15 | 52.1 | 42.0 | -33.4 | 114.1 | 3.7 | 13.2 | 15.4 |
| CIBC Precious Metals | 103.3 | 2.47 | 51.6 | 42.0 | -42.0 | 103.6 | -0.2 | 12.1 | 14.9 |
| RBC Global Precious Metals | 767.9 | 2.04 | 51.2 | 40.0 | -26.2 | 106.2 | 6.9 | 15.8 | 23.9 |
| Altamira Precious & Strategic Metal | 52.4 | 2.35 | 48.3 | 36.5 | -29.4 | 103.5 | 1.9 | 9.7 | 13.8 |
| Claymore S&P/TSX Global Mining ETF | 53.3 | 46.5 | 38.9 | -38.8 | 51.5 | ||||
| Dynamic Precious Metals | 568.5 | 2.75 | 45.4 | 37.3 | -27.6 | 123.8 | 7.7 | 15.9 | 17.5 |
| Middlefield Precious Metals Class | 1.6 | 2.47 | 25.3 | 16.0 | 81.1 | ||||
| BMG BullionFund-A | 282.2 | 3.31 | 19.2 | 16.0 | -4.1 | 35.8 | 7.7 | 9.3 | |
| iShares CDN Gold Sector Index | 1,087.9 | 0.55 | 9.6 | 1.4 | 1.0 | 66.3 | 5.0 | 9.8 | |
| Dynamic Strategic Gold Class* | 26.5 | 5.7 | 0.9 | ||||||
| Sprott Gold Bullion Fd-A* | 92.2 | 1.0 | -1.7 | ||||||
| S&P/TSX Total Return | 27.9 | 24.8 | -33.0 | 15.7 | -1.2 | 6.9 | 6.4 | ||
| S&P/TSX Composite Index | 24.4 | 21.4 | -35.0 | 11.8 | -4.0 | 4.2 | 4.2 | ||
| S&P/TSX Global Gold | 10.2 | 2.0 | 0.3 | 66.3 | 1.8 | 7.8 | 8.5 | ||
| S&P/TSX Capped Divers Metals & Mining | 290.8 | 273.2 | -68.4 | 160.8 | 13.8 | 30.6 | 22.3 | ||
| * Since inception date. The inception date for Dynamic Strategic Gold Class was August, 2009. The inception date for Sprott Gold Bullion was March, 2009. | |||||||||
| Source: Globe Investor | |||||||||
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