Golden Growth--and Income
07/18/2003 12:00 am EST
Several leading advisors continue to recommend positions in gold due to both expectations for increased demand as well as a continued hedge against political and economic uncertainty. Here we look at some commentary and top gold picks from Jim Stack, Mark Skousen, and Richard Band. (For more information on any of these advisors, please click on their photos below.)
"Gold has provided a protective hedge against the falling dollar," says Jim Stack, editor of InvesTech Market Analyst. "This has proven a valuable and effective insurance policy. Does that mean gold has served its purpose and we should exit the position? We don’t think so for two reasons: The Dollar is likely to remain under pressure, due to the ballooning trade and budget deficits and rock bottom interest rates. Gold is also in short supply and mining production hasn’t responded to rising prices. Today, mining production only meets 65% of demand. We still think gold is a valuable hedge and could move higher. Our preferred investment in this area is Newmont Mining (NEM NYSE), the largest gold company in the world in terms of both reserves and production. Further, Newmont follows a strict non-hedging philosophy, and has just unwound nearly all the hedges inherited through its merger with Normandy Mining. Alternatively, we recommend several top-rated gold mutual funds: Fidelity Select Gold (FSAGX), Gabelli Gold (GOLDX), and American Century Global Gold (BGEIX). We note that American Century and Gabelli carry short-term redemption fees."
"Gold remains in a long-term, major bull market," says Mark Skousen, editor of Forecasts & Strategies. "Amercian Century Global Gold (BGEIX) is approaching its $10 highs for the third time. I expect it to finally exceed the old high this time around. Keep buying. Tocqueville Gold (TGLDX) has the added advantage of investing in US silver coins directly. Newmont Mining (NEM NYSE) has been a spectacular blue chip performer and remains highly recommended. Meanwhile, gold stocks don't generally pay high dividends, but Anglo-Gold (AU NYSE) still pays a 3.5% dividend yield. It has a low price-to-earnings multiple of eight due to its South African exposure, but may be worth the risk."
"The perennial question fo gold investors is whether to buy the metal or mining shares. At the moment, I am partial to the shares because I don't like the retail markups on gold coins and bars. However, that could change when the SEC clears the new exchange-traded bullion fund, Equity Global Trust. Word is that regulatory approval may come in August. Meanwhile, my current vehicle of choice for gold continues to be Newmont Mining (NEM NYSE). However, if you are hungry for income, you might consider one of the major South African mining stocks-- Gold Fields (GFI NYSE). Unlike Newmont, which pays only a nominal dividend, Gold Fields yields 3%--roughly equivalent to the yield on ten-year US Treasury bonds. And, under the new tax law, dividends paid by foreign companies whose stocks actively trade on a US exchange qualify for the same low rate as domestic dividends. We'd also note that the South African government, unlike many foreign governments, does not impose a witholding tax on our dividends. This is a great benefit for American investors. Buy GFI at $12.50 or less."