How You Buy Gold Matters
It’s no secret that gold’s been rising rapidly. But not all investors who saw this coming and sought to profit from it are doing well. Some investors bought shares of gold mining companies or mutual funds that do the same. Normally, that’s a good move. The mining companies usually rise more than the price of gold bullion does, because their costs are relatively fixed. When gold’s price rises, the rise is almost all additional profit to the miners.
But sometimes mining companies react more to the same news that affects other stocks than they do to the price of gold. This year, gold mining stocks lagged the price of gold. When commodity and energy prices rose earlier this year, that increased the cost of mining and hurt mining stocks. Higher interest rates and political turmoil also hurt mining company stocks. Yesterday Venezuela President Hugo Chavez announced he’s nationalizing the gold mining industry in the country.
Take a look at this chart. iShares COMEX Gold is up almost 50% over the last 12 months. Tocqueville Gold Fund, on the other hand, is up less than 30%. They’ve really diverged over the last month, with IAU up about 12% while TGLDX is down about 2%. Yes, the fund is down while gold’s been soaring.
It makes a difference how you buy gold. If you want to profit from a move in gold, buy gold (directly or through an ETF) or gold futures contracts. The further you get form buying actual gold, the more likely there are to be divergences from your returns and those of gold.
|
TGLDX
Tocqueville Gold Fund (FUND)
Delayed quote data
|
8/18/2011 12:00 AM | ||||
| Last:
88.37
|
Change:
 +0.70 |
Open:
88.37
|
High:
88.37
|
Low:
88.37
|
Volume:
n/a
|
| Percent Change:
+0.80%
|
Yield:
n/a
|
P/E Ratio:
n/a
|
52 Week Range:
68.03 to 91.56
|
||
?
