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Physical gold and gold stocks helped offset market losses


JThe US economy contracted 1.4% in the first quarter, leading some investors and analysts to raise the specter of the dreaded “R” word: recession. This, combined with historically high inflation and expectations that the Federal Reserve will raise rates faster than expected, could point to trouble ahead for a market already trying to fight off war in Eastern Europe, lockdowns ongoing Covid and more.

Investors, in fact, can anticipate an economic downturn.

Below is the Wilshire 5000 Total Market Index divided by the US Gross Domestic Product (GDP). Named after legendary investor Warren Buffett, who once called the ratio the best indicator of stock market valuations, the “Buffett Indicator” has also served as an interesting leading indicator. As you can see, valuations have historically peaked and then started to reverse between three and five quarters before a recession hit, the only exception being the pandemic-triggered recession in 2020. We are currently seeing the indicator to reverse, but the difference this time is that stocks have never been so overvalued relative to the US economy, making the risk even greater.

There are a number of things investors can do ahead of a possible recession, and this includes exposure to physical gold as well as gold mining stocks. Both asset classes have historically helped investors offset potential market losses, and I think there’s good reason to believe they could do so again.

Gold has risen in three of four past market routs

Take a look below. 40 years ago, whenever the S&P 500 fell into a bear market, that is, when it fell more than 20% from its recent peak, physical stocks of gold and gold mining outperformed, up 41 basis points. in the case of gold stocks during the dotcom bubble in 2000. The price of the yellow metal, meanwhile, generated positive returns on all but one occasion, and that’s when the whole world s is closed in response to the onset of the Covid-19 pandemic.Physical gold and gold stocks helped offset market losses

Past performance is no guarantee of future results, of course, but I still like gold and gold stocks as a potential hedge against recession risk.

In recent years, gold has had to compete with Bitcoin as a store of value. I also love Bitcoin, but unlike its digital cousin, gold has a centuries-old track record and enjoys near-universal trust and acceptance. Gold also has lower volatility than Bitcoin, is held by dozens of central banks, and remains one of the most liquid assets in the world. In 2021, the precious metal achieved over $130 billion in trade volume every day on average. Only euros, pounds, US Treasuries and S&P 500 stocks traded higher.

Our gold mutual funds beat the market in the first quarter

At US Global Investors, we have a history as pioneers in gold mining investing, and our team brings valuable experience in geology and industrial finance.

That said, we are proud to offer mutual fund investors two ways to invest in gold mining stocks: the Gold and Precious Metals Fund (USERX) and the Global Precious Minerals Fund ( UNWPX). While the USERX primarily focuses on the largest gold and precious metals miners, often referred to as “seniors”, UNWPX offers increased exposure to junior and mid-level explorers and producers for additional growth potential.

In the first quarter of the year, both funds behaved exactly as they were expected to behave. While the market fell 4.6% in the first three months, our gold funds generated positive returns, with UNWPX up 1.9% and USRX up 10.3%.Physical gold and gold stocks helped offset market losses

To explore USERS and UNWPXName today!

Originally published by US Global Investors on May 5, 2022.

For more news, insights and strategy, visit ETF Trends.


Please carefully consider a fund’s investment objectives, risks, charges and expenses. For this and other important information, get a fund prospectus visiting usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Foreside Fund Services, LLC, Distributor. US Global Investors is the investment advisor.

Total annualized returns as of 03/31/2022:

Funds One year Five years ten years Gross expense ratio
Gold and precious metals funds 12.63% 12.83% 1.35% 1.60%
Global Precious Minerals Fund -5.14% 2.57% -4.46% 1.83%
S&P 500 Index 10.42% 10.71% 14.70% n / A

Expense ratios as stated in the most recent prospectus. The performance data quoted above is historical. Past performance is not indicative of future results. The results reflect the reinvestment of dividends and other income. For some of the periods, the fund had spending limits, without which returns would have been lower. Actual performance may be higher or lower than quoted performance data. The principal value and return on an investment will fluctuate so your shares, when redeemed, may be worth more or less than their original cost. Performance does not include the effect of direct charges described in the fund’s prospectus which, if any, would reduce your total returns. Performance shown for periods of one year or less is cumulative and not annualized. Get up-to-date performance data up to the end of the most recent month at usfunds.com or 1-800-US-FUNDS.Gold, precious metals and precious minerals funds may be susceptible to adverse economic, political or regulatory developments due to their concentration on a single theme. The prices of gold, precious metals and precious minerals are subject to large price fluctuations over short periods of time and can be affected by unforeseen international monetary and political policies. We suggest that you invest no more than 5% to 10% of your portfolio in these sectors. S&P500 is a stock market index that tracks the stocks of 500 large-cap US companies. The Philadelphia Gold and Silver Index is an index of thirty precious metal mining companies that trades on the Philadelphia Stock Exchange. The Wilshire 5000 Total Market Index, or simply the Wilshire 5000, is a market capitalization-weighted index of the market value of all US stocks actively traded in the United States. Gross domestic product is a monetary measure of the market value of all final goods and services produced during a given period by countries.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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