Gold Funds Hoard Cash

With gold headed back toward its highest level in decades, why are so many gold fund managers holding so much cash?

Take Frank Holmes, chief investment officer at U.S. Global Investors in San Antonio. His $250 million (USERX Quote)Gold Shares (USERX) held 16.4% in cash as of Dec. 31, while the $1 billion (UNWPX Quote)World Precious Minerals (UNWPX) had 14.5% of its assets in cash at year's end.

While it might seem like a fund with that much money on the sidelines would have missed out on gold's rally of 20% from its low of around $560 an ounce last October, Holmes says it has provided much needed flexibility. ...