Money Pours Into Precious Metals Funds

Investors continued to pour into precious metals in March, adding a hefty $1.2 billion into the mutual funds and exchange-traded funds that concentrate on the specialty sector.

That brought the total flow of cash into the subsector for the first quarter to $3.6 billion as investors sought safe-haven assets amid the ongoing credit crisis, which brought investment bank Bear StearnsBSC to its knees, surviving only after a rescue by JPMorgan ChaseJPM.

But funds that solely held the metal won out over those that owned shares of mining companies by a factor of more than 5 to 2, according to the most recent data from Boston-based company Financial Research Corporation.

Topping the list of winners, as it did every month last quarter, was the streetTracks Gold SharesGLD ETF, which solely owns bars of gold bullion, taking in a net $590 million. The other two precious-metals bullion funds, iShares Silver TrustSLV and iShares Comex Gold TrustIAU, added $140 million and $139 million respectively, bringing the total added to the bullion group to $869 million.

That compares with a monthly total of $336 million flowing into all the mutual funds that invest in the stocks of mining companies. The mutual fund taking in the most was the $2.2 billion Fidelity Select GoldFSAGX, adding $172 million, while investors pulled out $25 million from $1.9 billion Market Vectors Gold MinerGDX, the fund that lost the most during March.

At least part of the reason for the success of the bullion products relative to their mining share-focused counterparts must be their relative ease of use, says Jean Marie Eveillard, portfolio manager of First Eagle Funds in New York, which runs the $1.2 billion First Eagle GoldSGGDX.