Second Quarter 2019

The Gold and Precious Metals Fund had a total return of 11.27 percent in the second quarter of 2019, underperforming its benchmark, the FTSE Gold Mines Index, which returned 17.36 percent. See complete fund performance here.

The seasonal strength in gold prices during the first quarter of 2019 amounted to about a $50 lift in prices with half of that amount given up by the end of the quarter. Gold has historically sold off during the summer months, but the threat of additional tariffs, coupled with ensuing economic uncertainty, may have reached an inflection point. Gold bullion jumped $104 in the month of June, nearly an 8 percent gain. Gold stocks responded in kind, with the largest and most liquid/leveraged companies seeing the most price appreciation. The market capitalization size factor accounts for the majority of our underperformance in what may be the early stages of a new gold bull market. Should a robust gold market materialize, we would expect to start outperforming our benchmarks.  

Past performance does not guarantee future results. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost.

Strengths

  • The biggest contributor to fund performance was Wesdome Gold Mines, with an average fund weighting of 8.31 percent for the quarter. The company gained 30.58 percent, contributing 103 basis points to the fund’s returns. Wesdome rose predominately on positive drill results, which indicate an increase in the size of its resource base. It is not a constituent of the FTSE Gold Miners Index.
  • Underweighting Newmont to less than 1 percent relative to its benchmark weighting of 14.70 percent helped our performance. Newmont underperformed both the fund and benchmark, so there was a 102 basis point relative contribution. The fund owned 3.06 percent of the Direxion Daily Gold Miners Index Bull 3X Shares as a proxy for some of the large capitalization miners, which gained 38.85 percent for the quarter, contributing 0.72 basis points to the fund. 
  • Silver Lake Resources was our third best contributor, with an average weight of 1.99 percent and a 51.20 percent gain. The company contributed 61 basis points to the fund and is not a member of the FTSE Gold Miners Index.

Weaknesses

  • The largest detractor from fund performance was Men?, an investment-grade jewelry manufacture of 24 karat gold and platinum pieces. The company declined 21.13 percent in the quarter, and with its average weighting of 2.89 percent, the fund lost 134 basis points. April was the first reporting of yearend financials for 2018, which showed revenue of $7.9 million and a profit of $1.6 million. Men? has warrants outstanding that expire in November, a year after its initial public offering (IPO), and this may limit some of its near-term price appreciation as some retail holders of the stock may need to sell some of their common shares to have the proceeds to exercise their warrant.
  • St. Barbara was our second biggest detractor to the fund due to its announced all-cash bid for Atlantic Gold during the quarter, which was not viewed favorable by the market. St. Barbara had only a 2.59 percent average weighting in the fund, compared to nearly 10 percent in prior periods, but profits have been taken in recent months. St. Barbara is member of the FTSE Gold Mines Index with an average weighting of 0.92 percent.
  • Kirkland Lake Gold was our third biggest detractor to fund performance. The fund reentered the position late in the first quarter. Previously the fund established its position at a little more than $1 per share in 2015 and began selling in 2018 as the share price approached our model value of around $20 per share. A subsequent resource update showed significant high grade growth in the resource at Fosterville, and share price appreciated another 42.06 percent in the second quarter. With Kirkland Lake now representing 5.27 percent of the FTSE Gold Miners Index, the fund’s current underweighting cost it 87 basis points.

Outlook

With gold finally trading above $1,400 per ounce by quarter-end, there may be a case for a new bull market. Central banks around the world, some that haven’t bought gold in decades, are adding bullion to their official reserves at a rather brisk rate compared to years past. Venezuela has been the exception, but the country is under sanctions, which has halted much of its oil trade. As a result, it has been a seller of gold in the last couple of years and likely have kept a cap on the price from moving up too much. However, its remaining supply of gold to sell is beginning to dwindle.

Palladium has been one of the strongest of the precious metals with increased pollution standards on gasoline powered vehicles. Platinum has been under pressure with a significant shift in consumer preference in Europe away from diesel powered vehicles—following the Volkswagen emissions scandal—towards gasoline fuel. Tariffs have disrupted economic growth, subduing silver relative to gold. Should gold continue higher, we would expect silver to realign with gold’s price trajectory.

The NYSE Arca Gold Miners Index is a modified market capitalization weighted index comprised of publicly traded companies involved primarily in the mining for gold and silver. The index benchmark value was 500.0 at the close of trading on December 20, 2002. The FTSE Gold Mines Index encompasses all gold mining companies that have a sustainable and attributable gold production of at least 300,000 ounces a year, and that derive 75% or more of their revenue from mined gold. The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies.

A basis point, or bp, is a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 1/100th of 1%, or 0.01% (0.0001). A warrant is a derivative that gives the right, but not the obligation, to buy or sell a security—most commonly an equity—at a certain price before expiration.

Fund portfolios are actively managed, and holdings may change daily. Holdings are reported as of the most recent quarter-end. Holdings in the Gold and Precious Metals Fund and the World Precious Minerals Fund as a percentage of net assets as of 6/30/2019: Wesdome Gold Mines Ltd. (8.05% in Gold and Precious Metals Fund, 5.70% in World Precious Minerals Fund), Newmont Goldcorp Corp. (0.94% in Gold and Precious Metals Fund, 0.00% in World Precious Minerals Fund), Direxion Daily Gold Miners Index Bull 3X Shares (4.02% in Gold and Precious Metals Fund, 2.28% in World Precious Minerals Fund), Silver Lake Resources Ltd. (2.60% in Gold and Precious Metals Fund, 0.61% in World Precious Minerals Fund), Mene Inc. (2.34% in Gold and Precious Metals Fund, 0.00% in World Precious Minerals Fund), St. Barbara Ltd. (1.51% in Gold and Precious Metals Fund, 0.00% in World Precious Minerals Fund), Atlantic Gold Corp. (0.00% in Gold and Precious Metals Fund & World Precious Minerals Fund), Kirkland Lake Gold Ltd. (1.26% in Gold Precious Metals Fund, 0.00% in World Precious Minerals Fund), TriStar Gold Inc. (0.00% in Gold and Precious Metals Fund, 5.59% in World Precious Minerals Fund), Royal Gold Inc. (0.00% in Gold and Precious Metals Fund & World Precious Minerals Fund), Wheaton Precious Metals Corp. (3.55% in Gold and Precious Metals Fund, 0.00% in World Precious Minerals Fund), Cia de Minas Buenaventura SAA (0.00% in Gold and Precious Metals Fund & World Precious Minerals Fund), Dolly Varden Silver Corp. (0.00% in Gold and Precious Metals Fund, 2.56% in World Precious Minerals Fund), Cardinal Resources Ltd. (0.00% in Gold and Precious Metals Fund, 4.36% in World Precious Minerals Fund), Volkswagen AG (0.00% in Gold and Precious Metals Fund & World Precious Minerals Fund).

Net Asset Value
as of 09/20/2019

Global Resources Fund PSPFX $4.46 No Change Gold and Precious Metals Fund USERX $8.94 0.16 World Precious Minerals Fund UNWPX $3.27 0.05 China Region Fund USCOX $8.40 -0.11 Emerging Europe Fund EUROX $7.05 -0.03 All American Equity Fund GBTFX $24.81 -0.14 Holmes Macro Trends Fund MEGAX $16.91 -0.13 Near-Term Tax Free Fund NEARX $2.22 No Change U.S. Government Securities Ultra-Short Bond Fund UGSDX $2.00 No Change