Four Dividend-paying Gold Funds to Purchase as Shields from Crises

Four dividend-paying gold funds to purchase as shields from inflation and crises near and far.

The four dividend-paying gold funds to buy for protection from catastrophes should serve as safe havens for investors seeking a proven hedge against inflation. BofA Global Research correctly predicted several weeks ago that the price of gold would top $2,000 per ounce.

On April 5, the price of gold futures reached $2,040.00 an ounce, up 25.08% since slipping to $1,630.90 about six months ago on Nov. 3. The price of gold futures pulled back slightly but stayed above $2,000 an ounce to close at $2,023.70 on Thursday, April 6.

“Gold’s price moves based on several factors,” said Bob Carlson, a long-time pension fund chairman who leads the Retirement Watch investment newsletter and recommends several portfolios of his favorite stocks and funds. “Many think of gold as an inflation hedge and, in general, it is. But gold also is sensitive to other factors. When interest rates rise, that often hurts gold’s price because it doesn’t pay income. Gold also is correlated with the amount of liquidity in the economy. When the Fed reduces liquidity as it did in 2022, that tends to put downward pressure on gold.”

Inflation Lifts Four Dividend-paying Gold Funds to Purchase as Shields from Crises

Carlson further said gold’s price tends to rise when inflation climbs in the United States. The price of gold jumps even more when longer-term inflationary expectations increase in the United States.

Despite inflation going up through most of 2022 and staying high, expectations for inflation remained fairly low, Carlson said. Futures markets indicated that most investors believed inflation’s ascent was temporary. They expected inflation to fall quickly, so those expectations of low long-term inflation hurt gold in 2022, he added.

Since gold is a “crisis hedge,” that perception by investors recently has boosted the precious metal’s price, Carlson said. Banking problems in the United States and elsewhere, rising probability of a recession in 2023, verbal sparring between leaders in America and Russia, China and Iran, as well as other events, spiked uncertainty and the potential for further crises, he added.

Retirement Watch leader Bob Carlson meets with Paul Dykewicz.

Four Dividend-paying Gold Funds to Purchase as Shields from Crises Take Flight

“Investors should have some exposure to gold in their portfolios unless they believe the potential for crises is low,” Carlson said. “Stocks of gold mining companies tend to move in the same direction as gold but are more volatile. The stocks will rise more than gold in bull markets and decline more than gold in bear markets.”

Gold mining funds basically serve as leveraged plays on the precious metal, Carlson counseled. The companies have hefty fixed costs but low variable costs. When the price of gold rises above a company’s cost of production, most of the price hike goes to the company’s bottom line, he added.

But many mining companies now make their revenues less volatile by entering into contracts that sell much of their future production at fixed prices. They’ll profit less from gold price increases but reduce the fallout from price decreases.

Shares of mining companies not always move in line with gold. A company may have management or labor problems, carry too much debt, or have other characteristics that cause its share price to decline when gold’s price is rising.

Four Dividend-paying Gold Funds to Purchase as Shields from Crises Offer Variety

ETFs provide many ways to invest in stocks of gold mining companies. For the adventurous, there are ETFs that aim to earn two to three times the change in indexes of the companies, on both the upside and downside, through leverage. There also are funds that sell short the shares for those who are bearish on the sector.

Most investors should look at funds that either actively invest in gold miners or aim to track an index of the miners. Almost all the ETFs invest in miners of other precious metals mining or some diversified miners aside from pure gold mining companies.

The relative performance of the major ETFs varies over time. That’s why Carlson said he recommends that an investor interested in profiting from gold mining stocks buy a basket of the largest and oldest ETFs in the sector.

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Carlson Chooses Four Dividend-paying Gold Funds to Purchase as Shields from Crises

Carlson is recommending four gold mining funds. The first is iShares MSCI Global Gold Miners (RING), an exchange-traded fund (ETF) that seeks to invest in companies that are mainly engaged in the business of gold mining.

RING holds a sizable cost advantage over its competitors, according to Morningstar. The fund has an array of gold mining stocks but the largest weighting by far is with Newmont Corporation (NYSE: NEM), consisting of 18% of the fund’s portfolio. Other top holdings and their respective percentage of the fund are Barrick Gold Corp. (NYSE: ABX), 15.05%; Agnico Eagle Mines Ltd. (NYSE: AEM), 11.79%; and Gold Fields Ltd. (NYSE: GFI), 5.42%.

The fund, with 34 holdings, zoomed 5.70% in the past week, 23.00% in the last month, 8.61% in the prior three months and 19.75% so far this year. However, RING is down 11.73% in the past year, partly due to inflation not soaring until the latter part of 2022.

Chart courtesy of www.stockcharts.com

Four Dividend-paying Gold Funds to Purchase as Shields from Crises: Sprott Gold Miners

The second gold fund Carlson highlighted is Sprott Gold Miners Exchange Traded Fund (NYSE Arca: SGDM). The ETF seeks investment results that correspond, before fees and expenses, to the performance of the Solactive Gold Miners Custom Factors Index. That index aims to track large-sized gold companies whose stocks are listed on Canadian and major U.S. exchanges.

The index uses a transparent, rules-based methodology that is designed to emphasize large gold companies with the highest revenue growth, free cash flow yield and lowest long-term debt to equity. The Index is reconstituted quarterly to reflect the companies with the highest scores.

The top five holdings and their weightings in SGDM are: Barrick Gold, 11.71%; Agnico Eagle Mines Ltd., 10.41%; Franco-Nevada Corp. (NYSE: FNV), 10.19%; Newmont Corp., 9.36%; and Pan American Silver Corp. (NASDAQ: PAAS), 5.66%. The fund rose 6.15% in the last week, 18.48% in the past month, 13.06% in the prior three months and 20.68% so far this year, but slid 7.93% in the last year.

Chart courtesy of www.stockcharts.com

Four Dividend-paying Gold Funds to Purchase as Shields from Crises: GOAU

The third gold fund Carlson praised is US Global GO Gold and Precious Metal Miners (NYSE ARCA: GOAU). The fund provides investors access to companies engaged in the production of precious metals either through activities such as mining or production, or passive ownership of royalties or production streams.

GOAU’s top five of 28 holdings and their weightings consist of: Wheaton Precious Metals Corp. (NYSE: WPN), 10.07%; Royal Gold Inc. (NASDAQ: RGLD), 9.50%; Franco-Nevada Corp., 9.29%; Anglo Gold Ashanti Ltd. (NYSE: AU), 4.97%; and DRDGold Ltd. (NYSE: DRD), 4.49%. The fund climbed 5.71% in the last week, 23.10% in the past month, 12.68% in the prior three months and 23.50% so far this year, after dropping 6.53% in the previous 12 months.

Jim Woods, who heads the Bullseye Stock Trader advisory service, is familiar enough with Royal Gold to recommend it along with a related call option on March 30. The service, offering both recommendations of stocks and options, already has a 7.05% gain in the stock. 

Jim Woods heads Bullseye Stock Trader.

“Royal Gold manages precious metal royalties and streams, with a focus on gold,” Woods wrote to subscribers of his premium Bullseye Stock Trader service. “The company operates by purchasing a percentage of the metal produced from a mineral property for an initial payment, without assuming the responsibility for overseeing mining operations. Precious metal streams are purchase agreements with mine operators providing the right to purchase all or a portion of one or more metals produced from a mine in exchange for an upfront deposit payment.”

Generally, Royal Gold does not conduct any work on the properties in which it holds royalty and streaming assets, Woods continued. The company owns a portfolio of producing, development, evaluation and exploration royalties and streams, he added.

During the past three years, RGLD has posted an annual earnings per share (EPS) growth rate of 23%, a robust metric that put it in the top quartile of earnings growers. On the price front, the company’s six-month gain of 38% at the time of its recommendation in Bullseye Stock Trader propelled it into the top 13% of all stocks in terms of relative price strength, Woods wrote.

Chart courtesy of www.stockcharts.com

Four Dividend-paying Gold Funds to Purchase as Shields from Crises: GDX

The fourth gold fund championed by Carlson is VanEck Gold Miners (NYSE ARCA: GDX). The ETF seeks to replicate, as closely as possible before fees and expenses, the price and yield performance of the NYSE Arca Gold Miners Index (GDMNTR). That index is intended to track the overall performance of companies involved in gold mining.

GDX is highly liquid and arguably is the popular investment product of its kind. The fund also retains a cost advantage compared to its competitors, according to Morningstar.

The top five of 48 equity holdings of GDX and their weightings encompass: Newmont Corp., 10.49%; Barrick Gold Corp., 8.80%; Franco-Nevada Corp., 7.48%; Agnico Eagle Mines, 7.28%; and Wheaton Precious Metals Corp., 5.70%. GDX gained 7.18% in the last week, 19.94% in the past month, 12.04% in the prior three months, 19.82% so far this year, but fell 8.75% in the prior 12 months.

Chart courtesy of www.stockcharts.com

Four Dividend-paying Gold Funds to Purchase as Shields from Crises Omit GLD

A fifth gold fund, SPDR Gold ETF (GLD), does not pay a dividend but is recommended by Mark Skousen, PhD, in his Forecasts & Strategies investment newsletter. GLD is up 24.19% with his recommendation of SDR Gold ETF since it became a recommendation in Forecasts & Strategies.

“Gold is a long-term hedge against inflation and geo-political instability,” Skousen wrote to his subscribers in the April 2023 edition of his newsletter.

Mark Skousen heads Forecasts & Strategies.

GLD, listed on the New York Stock Exchange in November of 2004, has traded on NYSE Arca since December 13, 2007. SPDR Gold is the world’s largest physically backed gold exchange traded fund.

The fund’s sole assets are physical gold bullion and sometimes cash. Since GLD is not leveraged to the price of gold to the extent of miners, its gains in the last year were not as volatile as the exploration and production companies. GLD rose 2.90% in the last week, 8.89% in the past month, 10.15% in the prior three months, 10.72% so far this year and 4.79% in the previous 12 months.

Chart courtesy of www.stockcharts.com

Russia Threatens to Retaliate Against Finland for Joining NATO

Finland officially joined the North Atlantic Treaty Organization on Tuesday, March 4, more than doubling the alliance’s border with Russia. The move followed Russia’s invasion of neighboring Ukraine and Finland’s desire for enhanced national defense.

Despite driving Finland’s leaders to NATO to deter Russia’s brutal aggression, the administration of Vladimir Putin warned of “retaliatory measures.” Russia now faces the prospect that NATO forces may be positioned near its border, if needed to defend Finland.

“Finland is stronger and safer within the alliance, and the alliance is stronger and safer with Finland as its ally,” said U.S. Secretary of State Antony Blinken.

With a goal of avoiding a direct conflict with Russia, Finland President Sauli Niinistö said the country’s desire is to promote stability in Europe. Finland, along with Sweden, sought expedited NATO membership just weeks after Russia’s invasion of Ukraine on Feb. 24, 2022. Sweden, in contrast, has been slowed in its progress to join NATO by dissent from Turkey. Despite both Finland and Sweden having reputations and traditions as peaceful nations, Turkey claims both countries, but especially Sweden, are weak in responding to terrorist organizations. Turkey identified Kurdish groups among those that pose a security threat to its national interests.

In early March 2023, Sweden presented a draft law to its parliament aimed at outlawing support of or participation in terrorist organizations. Sweden’s leaders expressed hope such action would reduce Turkey’s opposition to it joining NATO.

Ukraine President Volodymyr Zelenskyy congratulated Finland in a tweet for joining NATO, which he called the “only effective security guarantee in the region amid Russian aggression.”

CDC Shows the Number of People with Vaccinations Against New Bivalent Variant of COVID-19 Keep Rising

The U.S. Centers for Disease Control and Prevention (CDC) reported rising vaccination rates against COVID-19 and its bivalent variant. The CDC announced that 270,045,602 people, or 81.3% of the U.S. population, have received at least one dose of a COVID-19 vaccine, as of April 5. Those who have completed the primary COVID-19 doses totaled 230,418,632 of the U.S. population, or 69.4%, according to the CDC. Also on April 5, the United States had given a bivalent COVID-19 booster to 52,023,617 people who are age 18 and up, equaling 20.1%. Vaccinations tend to help consumers feel comfortable to shop at stores, travel and otherwise spend money.

The four dividend-paying gold funds to purchase offer investment hedges against inflation and crises. Any of the the four dividend-paying gold funds to purchase for protection could prove to be profitable picks, regardless of Russia’s raging war against Ukraine, China’s conflict-prone saber-rattling and unexpected calamities.