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Hey all, I recently bought into gold in my IRA to diversify a bit as my 401k does not offer any gold or minerals. I figured I would do a fund rather than GLD, to diversify a bit further into mining, ect. So I decided to buy BGEIX. Now since I started buying it its down almost 15%, but GLD and many other gold options are down less then 5%. I have no issues with it being down currently (gold will have a small permanant place in my retirement portfolio), but given the huge % drop difference between BGEIX and the bullion it has me concerend. Did I make a poor decision and should I jump ship?
Now since I started buying it its down almost 15%,
but GLD and many other gold options are down less then 5%.
Look at what it is invested in.
It might be invested in gold mining companies that traditionally go down
more than the metal, but go up faster when it is in a sustained climb.
Also, the two largest miners, NEM and ABX have recently taken a dump due to
many factors in their business. GG also dumped earlier for the same reasons.
Most gold ( or any ) funds have weightings based on the biggest players in the space.
There also might be some copper in the fund. ABX recently bought a large copper
interest and the stock price suffered.
When investing in gold funds, be prepared for declines. You can't pick the bottom.
As long as you are in while gold is $1600/oz then when it goes to $2,500, you'll do fine.
Also, as long as you don't keep expecting it to rise into infinity and
you sell some into long periods of price increases, you'll also do fine.
Hey all, I recently bought into gold in my IRA to diversify a bit as my 401k does not offer any gold or minerals. I figured I would do a fund rather than GLD, to diversify a bit further into mining, ect. So I decided to buy BGEIX. Now since I started buying it its down almost 15%, but GLD and many other gold options are down less then 5%. I have no issues with it being down currently (gold will have a small permanant place in my retirement portfolio), but given the huge % drop difference between BGEIX and the bullion it has me concerend. Did I make a poor decision and should I jump ship?
You answered your own question. Gold mines and Gold don't move in lockstep. You might want to see if
gold mining companies are or will soon be having their profit margins squeezed by increased production costs.
goild mines are are stocks first and a play on gold second. they respond more like stocks than gold.
Correction: "they often respond more like stocks than gold"
Quote:
Originally Posted by mathjak107
many times while gold is rising the stocks fall. we saw that many times.
2008 saw it , ...
You didn't see that at all in 2008.
Gold took a dump, so did the stocks. When gold turned up, so did the stocks. This happened on October 28th, 2008.
What did happen is that the miners "disconnected" from the metal and while the miners went up, just owing the metal has been better.
Every time gold "flatlined" the miners went down. When gold went down, the miners did it more. This is all due to mathjak107's reasons given.
Quote:
Originally Posted by mathjak107
1987 saw it and a gold mine strike in south africa had many mining stocks plunge while gold soared.
Right. You can have all the miners going up - but one - if that miner is having trouble with even one mine out of their portfolio of mines.
In 2000-2003, the miners had leverage. That is, if gold went up 10% a miner might double their profits at that level.
Now, most miners have production costs around $500/ounce. If gold goes up 25% their profits go up 33% ( for example ).
The metal offers no risk of all the stuff mentioned. Many investors have lost interest in the miners.
I think they are undervalued right now though. If you are trading on gold, the miners offer larger price swings.
sorry my dear friend mortimar, but your wrong ,gold was up in 2008 it closed at 869.00 and opened the year at 847.00.. gld did even better being up about 5% for 2008.
gold mining funds fell on average over 20%. fidelity select gold was down 21%, xau the post popular index of gold mining stocks plunged 28% in 2008.
Last edited by mathjak107; 08-01-2012 at 03:30 PM..
sorry my dear friend mortimar, but your wrong ,gold was up in 2008 it closed at 869.00 and opened the year at 847.00.. gld did even better being up about 5% for 2008.
gold mining funds fell on average over 20%. fidelity select gold was down 21%, xau the post popular index of gold mining stocks plunged 28% in 2008.
I'd expect someone with "math" in their username to realize that 86.52 / 84.86 is not "about 5%"...
Regarding the tracking of GLD and miners - you've done the ever so popular city-data trick of picking some arbitrary period that benefits your position in hindsight... simply examining the perf chart at stockcharts.com shows the miners and their respective tracking of the metal at most times. The miners track more or less with a high beta - and when there is a drift, they will recover back to the tracking with ferocity.
Let's just build on your little 2008 example and consider 2009... in 2009 gld up +25%... the HUI up 43%.
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