How to Protect Against Possible Gold Decline

First Eagle favors miners that trade for less than the value of their gold reserves. Holdings include Lihir Gold(LIHR), which has mines in New Guinea, and Gold Fields(GFI), a South African producer.

Another fund with a gold stake is IVA International(IVIOX), which has 6% of assets in bullion. Portfolio manager Charles de Vaulx says gold can offer some protection at a time when so much is uncertain about financial markets. "If you do not necessarily trust the wisdom of policymakers and central bankers, then it is prudent to have a little bit of gold," he says.

Worried that the global economy could be headed for an extended period of poor performance, de Vaulx has most of his portfolio in precious metals and fixed income. He holds only 40% of assets in equities, a low position for a fund in Morningstar's category of foreign small- and mid-cap value. IVA would likely lag in a bull market for equities. But the fund's defensive posture will protect shareholders if stocks suddenly sink.

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