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The Commodity Investor Q&A

By Matt Badiali, editor, S&A Resource Report
Wednesday, October 7, 2009

Q: Fine article on precious metals funds. You asked about unmentioned funds – What about MLCX Precious Metals Plus Total Return Index (PMY)? I bought at $6.25 in 10/08, now can't even find it listed. – B.B.
 
A: Too many funds cover precious metals. As you saw last week, eight different funds cover gold. There were even more before the bear market hit...
 
Credit Suisse Securities, which issued PMY, delisted it on April 3, 2009. The fund does not trade anymore. PMY wasn't alone. In the first quarter of 2009, exchange-traded funds lost 13.5% of their value. That was about $58 billion. The funds' sponsors yanked 21 funds off the market.
 
PMY may be delisted. But it didn't disappear. You can track the fund's value by the CUSIP number (22542D506) or through this website, which lists a share value of $9.04 right now. Your broker should be able to sell your shares back to Credit Suisse.
 
If you've had a fund delisted, the first place to check is with the issuer. It should have all the information. But you can avoid future precious-metals fund closures with one simple rule: go big.
 
The SPDR Gold Shares (GLD), for example, is huge – $36 billion and unlikely to delist. It trades about 600,000 shares per day, $60 million worth. E-TRACS Gold Fund (UBG), on the other hand, is just $4 million... It's lucky to trade 1,000 shares, about $28,000 worth. That's a fund on the ropes.
 
Q: You didn't mention the miners, such as GDX! – M.M.
 
A: There were so many precious-metals funds, I didn't have room to get into the mining funds.
 
Besides, buying mining stocks is not at all the same as investing in precious metals. Miners can run into all sorts of problems – the workers could strike, the mine could collapse, costs could rise, and so on. It's a much riskier investment. And it can provide you with a much larger reward.
 
When the price of gold is going up, gold miners can go up even higher. So for those of you looking for "one-click" leverage to metals prices, here's a short list of mining stock funds.
 
Name
Symbol
Fees
Market Value
GDX
0.55%
$4,900 million
SPDR S&P Metals and Mining
XME
0.35%
$745 million
PowerShares Global Gold & Precious Metals
PSAU
0.75%
$22.5 million
EGS Emerging Mkts Metals and Mining
Titans
EMT
0.10%
$7.8 million
 
I'm not a big fan of XME or EMT. Neither focuses enough on gold miners for me... XME only had five gold or silver miners in its top 25 holdings. EMT's only precious metals are platinum miners. I'd also avoid PSAU, because it's pretty small.
 
The only fund that meets my criteria for investing in precious-metals – and is big enough to be safe is – GDX.
 
Good investing,
 
Matt Badiali




In The Daily Crux
Market Notes
Gold hits all-time record... the yellow metal spikes 2% to $1,045 per ounce.
 
Emerging markets surge higher... fund VWO up 100% since March low.
 
Muni bond funds continue relentless bull market... scores of bond funds at new highs.
 
Q3 earnings announcements begin tomorrow... Alcoa, Costco, Family Dollar, Monsanto.
Market Watch
Symbol Price
Change
52-Wk
S&P 500 1221.53 +1.3% +10.1%
Oil 38.31 +1.4% -0.6%
Gold 138.07 +2.1% +16.3%
Silver 28.60 +2.4% +53.6%
US-Dollar 80.67 -0.8% +8.1%
Euro 1.32 +0.6% -12.1%
Volatility 18.01 -7.1% -19.8%
Gold Stocks 581.56 +3.0% +17.0%
10-Year Yield 3.02 +0.7% -10.7%

World ETFs
Symbol Price
Change
52-Wk
USA 122.89 +0.3% +11.3%
Canada 30.50 +0.2% +16.2%
Russia 21.94 +1.4% +18.1%
India 37.85 +0.3% +22.3%
Israel 16.69 +1.3% +10.8%
Japan 10.64 +0.6% +6.5%
Singapore 13.73 -1.1% +18.8%
Taiwan 14.78 +0.4% +19.2%
S. Korea 57.31 +1.3% +23.4%
S. Africa 71.87 +1.4% +28.2%
China 44.42 -1.4% -0.6%
Lat.America 53.17 +0.7% +8.4%

Sector ETFs
Symbol Price
Change
52-Wk
Oil Service 137.59 +1.0% +18.9%
Big Pharma 64.14 +0.0% -3.2%
Internet 72.07 -0.1% +23.4%
Semis 16.22 +1.2% +29.4%
Utilities 31.28 +0.2% +1.5%
Defense 18.52 +0.1% +10.6%
Nanotech 10.03 +0.4% +1.6%
Alt. Energy 10.08 +1.3% -3.3%
Water 18.49 +1.0% +14.5%
Insurance 16.14 +0.4% +21.1%
Biotech 20.54 -0.2% +28.1%
Retail 19.70 +0.3% +30.2%
Software 24.79 +0.8% +25.9%
Big Tech 53.87 +0.3% +22.7%
Construction 13.10 +0.9% +15.7%
Media 13.64 +0.5% +26.0%
Consumer Svcs 67.39 +0.2% +24.5%
Financials 55.04 +0.3% +7.4%
Health Care 64.30 +0.1% +2.0%
Industrials 63.54 +0.5% +21.0%
Basic Mat 74.35 +1.1% +25.3%
Real Estate 55.32 +0.1% +25.0%
Transportation 91.77 +0.7% +26.9%
Telecom 22.59 +0.5% +17.8%

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