Some Say Gold Still Glitters in Dark Times

Right now the fund has an uncharacteristically large allocation to large-cap stocks, with stalwarts Newmont Mining(NEM - Cramer's Take - Stockpickr) and Barrick Gold(ABX - Cramer's Take - Stockpickr) taking the first two slots after bullion, each making up 9% of the overall value. Other top holdings include Gold Fields(GFI - Cramer's Take - Stockpickr), Newcrest Mining and AngloGold Ashanti(AU - Cramer's Take - Stockpickr), all firms with substantial market caps.

Fenwick isn't the only gold fund manager spinning his wheels. Other specialty precious-metals funds with lackluster performance include the (USERX - Cramer's Take - Stockpickr)U.S. Global Investors Gold Shares fund (USERX), which lost almost 7% in the first half.

Frank Holmes, portfolio manager of U.S. Global Investors Gold Shares, says a narrow investment mandate isn't the only thing holding his fund back. Some of the mid-cap firms he has owned, such as Gammon Gold(GRS - Cramer's Take - Stockpickr), have failed to deliver on their production forecasts and have then seen their stocks punished as a result.

Some of the best-performing funds in the sector have taken the opposite tack. For instance (VGMX - Cramer's Take - Stockpickr)Vanguard Precious Metals and Mining (VGPMX) grew 23% in the first half, fueled by gains from what can only be described as a non-gold portfolio.

At the end of June, not one of fund's the top 10 holdings was a gold firm, according the data on Vanguard's Web site. And information for the first quarter shows that the vast majority of the portfolio was similarly skewed. Instead, the fund's top 10 include platinum producers Lonmin, Johnson Matthey and Impala Platinum. Platinum is technically a precious metal, but its price is determined almost exclusively by industrial demand, and in that sense it is more like a super-expensive base metal.

Vanguard Precious Metal's other top holding sinclude diversified miner Rio Tinto (RTP - Cramer's Take - Stockpickr), as well as K+S, a European fertilizer maker, and Sims Group, a metals recycler.

Likewise, the (MIDSX - Cramer's Take - Stockpickr)Midas Fund (MIDSX) which increased about 12% over the first 26 weeks of 2007, held more than a few non-gold stocks. It had some of the same top holdings as Vanguard Precious Metals, including Rio Tinto and Lonmin, as well as Freeport McMoRan Copper and Gold(FCX - Cramer's Take - Stockpickr), which despite its name is primarily a base-metals miner, and diversified mega-miner BHP(BHP - Cramer's Take - Stockpickr).