Commodities
Precious-Metals Funds Rebound
Kevin Baker
05/10/08 - 12:01 PM EDT
As gold rebounded 3.4% to about $880 from last week's low around $853 per ounce, even the worst-performing funds focused on the precious-metals markets made money for their shareholders.
The average precious-metals fund we track gained 7.21% for the five trading days ending Thursday, May 8. Meanwhile, the benchmark Philadelphia Gold & Silver Index moved up 9.54%.
The best-performing funds in this sector are the mining shares that tend to move up or down two to three times as much as the underlying metal. The companies are benefiting from the double whammy of a potential turning point in the price of gold and optimistic earnings reports.
The reports reminded investors that even at current prices, the comparatively lower cash cost for most miners to produce gold allows them to be profitable.
Higher gold prices are just icing on the cake.
The ProFunds Precious Metals UltraSector ProFund(PMPIX Quote), leveraged 150% to the Dow Jones Precious Metals Index, rose 14.03% for the period under review, topping our best-performing list.
The fund is heavily weighted to a few of the mining companies with 23.0% Barrick Gold(ABX Quote), 22.3% Freeport-McMoRan Copper & Gold(FCX Quote), 16.5% Goldcorp(GG Quote) and 11.9% Newmont Mining(NEM Quote).
Barrick beat earnings estimates this week, flipping a loss in the same quarter last year to a profit of $514 million this year. It did that on the back of 80% higher sales of $1.96 billion.
Over the last year, Barrick's cash cost of gold was restricted to $350. The world's largest gold producer also reported the end of sales contracts at below market prices.
Goldcorp reported $1.2 billion in cash with no debt, and is building its own 200-megawatt power plant in Mexico to control costs and maintain a reliable supply of electricity. The recent power shortage experience by Freeport-McMoRan in the Democratic Republic of Congo after its power-line cable to the electric company was stolen serves as a cautionary tale for other heavy electric users.
Another mining company reporting a blowout first quarter was Newmont, which quintupled last year's first quarter on 59% higher sales of $1.94 billion. The company was able to shrink its production cost for an ounce of gold by 2.2% to $396 although costs are expected to inflate by 11% over the next year.
The second-place SPDR Metals & Mining ETF(XME Quote) finished the period 11.14% higher than where it started.
Up 17.58%, fund holding Cleveland-Cliffs(CLF Quote) predicted record prices in 2008 for the iron-ore pellets it produces. Another holding, Titanium Metals(TIE Quote), soared 16.99% on strong demand for titanium from Boeing(BA Quote) and Airbus SAS(EADSY Quote).
The OCM Mutual Fund - OCM Gold Fund(OCMGX Quote) popped 9.23% this week by investing in 67.2% Canadian, 18.9% U.S., 5.3% South African and 2.5% Australian mining shares.
Motherlode jumps like 25.18% from shares in Geologix Explorations(GXEXF Quote), 23.91% from Hana Mining and 23.71% from Red Back Mining(RBIFF Quote) help explain the fund's winning week.
On May 7, Geologix announced discoveries of high grade mineralization in Liscay, Peru; the next day Hana Mining did the same in Botswana. These were preceded by Red Back's report of debt free, un-hedged, first-quarter profits from its mines in Ghana and Mauritania.
| Best-Performing Precious Metals Funds for the Week Ending Thursday May 8 |
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| Fund | Ticker | Rating | Fund Type | 1 Week Total Return |
| ProFunds Precious Metals UltraSector ProFund | PMPIX | C- | Open-End | 14.03% |
| SPDR S&P Metals & Mining ETF | XME | B | ETF | 11.14% |
| OCM Mutual Fund - OCM Gold Fund | OCMGX | C+ | Open-End | 9.23% |
| American Century Global Gold Fund | BGEIX | B- | Open-End | 8.36% |
| DWS Gold & Precious Metals Fund | SCGDX | C | Open-End | 8.32% |
| USAA Precious Metals and Minerals Fund | USAGX | B | Open-End | 8.32% |
| Market Vectors Gold Miners ETF | GDX | B+ | ETF | 8.04% |
| Franklin Gold and Precious Metals Fund | FKRCX | B- | Open-End | 7.95% |
| RiverSource Precious Metals and Mining Fund | INPMX | C- | Open-End | 7.85% |
| Fidelity Select Gold Portfolio | FSAGX | B+ | Open-End | 7.79% |
| Source: Bloomberg & TheStreet.com Ratings | ||||
| Worst Performing Precious Metals Funds for the Week Ending Thursday May 8 |
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| Fund | Ticker | Rating | Fund Type | 1 Week Total Return |
| Streettracks Gold Trust | GLD | A+ | ETF | 3.87% |
| iShares COMEX Gold Trust | IAU | A+ | ETF | 4.09% |
| PowerShares DB Gold Fund | DGL | A+ | ETF | 4.16% |
| iShares Silver Trust | SLV | C+ | ETF | 4.41% |
| Tocqueville Gold Fund\The | TGLDX | C+ | Open-End | 5.17% |
| ELEMENTS Linked to the MLCX Precious Metals Index | PMY | U | ETF | 5.21% |
| First Eagle Gold Fund | SGGDX | C+ | Open-End | 5.77% |
| US Global Investors Gold and Precious Metals Fund | USERX | B | Open-End | 6.19% |
| US Global Investors World Precious Minerals Fund | UNWPX | C+ | Open-End | 6.21% |
| ING Global Natural Resources Fund | LEXMX | B | Open-End | 6.63% |
| Source: Bloomberg & TheStreet.com Ratings | ||||