Gold Funds

Posted on 11 July 2011 by Douglas Chadwick

We have seen the price of Gold Bullion (the stuff on your finger) rise in steady steps over the recent years. From the price of 300 dollars when Gordon Brown made one of his inspired decisions and sold the UKs gold bullion stocks up to 1500 dollars where it hovers today. On the way up unit trusts have made gains,sometimes startling gains. Then again as in the last few months, inexplicably they just go sideways or even down. Why the latter happens I have to say is beyond my understanding. The funds are by and large invested in the "diggers and processors". So surely the higher the price of gold the more profit these businesses make. Why there is not  some sort of linear link is a mystery. However I don't care. I am a momentum investor. When the numbers show a wave is starting to build I will join in. Until then I stay out.
 
So something for you to ponder upon. During the Wall Street Crash the stock markets fell to a sixth of their previous highs. This tumble took three years from top to bottom.(1929-32). However, during this same period many gold mining shares did the reverse and soared by as much as five times. Today it could be said that we have similar economic conditions as existed in 1929. The world has been flooded with cheap dollars. The Emerging countries' governments are buying gold bullion as if it is going out of fashion. Western economies have failed to climb out of the 2008 financial collapse and some European countries are actually bankrupt. So although not wishing to see a repeat of the disastrous nineteen thirties now might be the time when we will see gold stocks and gold funds outperform gold bullion in a major way. So its yet again a question of watch this space and follow the Saltydog numbers. The thirties depression caused great hardship to many, but to a few it gave great riches.