The yellow metal has always been considered a safe haven for investments in uncertain times. In fact, when the pandemic was throwing curve balls at the economy, traders rushed toward gold for stability. On Aug 6, gold prices hit a historical high of $2,067.15 per ounce and rose an annual 25% in 2020. For the past two years, gold has appreciated considerably due to various reasons, starting from geo-political tensions to the global health crisis. Despite dropping 12% in March, when the virus outbreak shut down businesses worldwide, gold was among the best-performing assets.
In 2020, gold funds offered average returns of 26.84%. The SPDR Gold Shares jumped 24.4% last year and has attracted $15 billion in net inflows for the year. Additionally, gold bullion gained more than 24% in 2020 to reach $1,902 per ounce, ending the year at its best since 2010. It also outperformed the S&P 500, which rose nearly 15%.
Most of the macroeconomic conditions that supported the gold rally in 2020 have been carried forward to 2021. Gold is expected to remain in investors’ focus as central banks pledged to keep rates low and provide easy liquidity to aid economic growth. Despite coronavirus vaccine prospects and economic revival post the pandemic, the yellow metal will remain strong mainly due to fresh stimulus expectations. The stimulus package from the government will addup to the existing dollar liquidity and may end up weakening the dollar bill. Subsequently, a weak dollar may push gold prices up.
What will guide this gold price movement in 2021 is the vaccine’s efficacy, proper logistics and implementation of the vaccine worldwide, low-interest rate environment, and central bank's stance on liquidity. The risk sentiments on which the gold outlook depends now is how the U.S. government manages the coronavirus resurgence and how economic recovery progresses.
4 Best Choices
Given the current scenario, we have shortlisted four gold mutual funds with a Zacks Mutual Fund Rank #1 (Strong Buy) and 2 (Buy) that could gain from the turbulent markets. Additionally, the minimum initial investment is within $5000.
We expect these funds to outperform peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance but also on the likely future success of the fund.
The question here is: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily the reasons why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
Franklin Gold and Precious Metals Fund Class A FKRCX aims for capital appreciation and current income is a secondary consideration. The fund invests majority of assets in securities of gold and precious metals operation companies located globally.
This Zacks sector - Precious Metal product has a history of positive total returns for more than 10 years. Specifically, FKRCX has returned 19.7% and 20% over the past three and five-year period, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FKRCX is a non-diversified fund and has a Zacks Mutual Fund Rank of #1 and an annual expense ratio of 0.93%, which is below the category average of 1.37%.
Invesco Gold & Special Minerals Fund Class Y OGMYX aims for capital appreciation. The fund invests majority of assets in common stocks of companies that are engaged in mining, processing or dealing in gold or other metals or minerals. The non-diversified fund may also invest in gold bullion, other physical metals and precious metals-related ETFs.
This Zacks sector - Precious Metal product has a history of positive total returns for more than 10 years. Specifically, OGMYX has returned 20.3% and nearly 25% over the past three and five-year period, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
OGMYX has a Zacks Mutual Fund Rank of #1 and an annual expense ratio of 0.96%, which is below the category average of 1.37%.
Fidelity Select Gold Portfolio FSAGX aims for capital appreciation. The fund invests majority of assets in securities of companies, principally engaged in gold-related activities, and in gold bullion or coins. FSAGX is a non-diversified mutual fund.
This Zacks sector – Precious has a history of positive total returns for more than 10 years. Specifically, FSAGX has returned 14.3% and 18.1% over the past three and five-year period, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FSAGX carries a Zacks Mutual Fund Rank #2 and has an annual expense ratio of 0.79%, which is below the category average of 1.37%.
Franklin Gold and Precious Metals Fund Advisor Class FGADX aims for capital appreciation with current income being a secondary consideration. The fund invests majority of assets in the securities of companies that have gold and precious metals operations. The non-diversified fund invests across all market capitalizations.
This Zacks sector – Precious has a history of positive total returns for more than 10 years. Specifically, FGADX has returned nearly 20% and 20.3% over the past three and five-year period, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FGADX carries a Zacks Mutual Fund Rank #1 and has an annual expense ratio of 0.68%, which is below the category average of 1.37%.
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