Gold ETF: iShares Gold Trust
If you’re looking for an ETF that’s backed by physical gold holdings, iShares Gold Trust (NYSE:IAU) might just fit the bill. Its $8.8 billion in assets consist of physical gold bullion. IAU offers an excellent way to gain physical gold exposure without buying coins or bullion — one share of IAU is equal to approximately one-tenth of an ounce of gold
ETFs typically have lower fees than mutual funds –- in IAU’s case, expenses are just 0.25% — and also offer enhanced liquidity in that they trade like stocks over an exchange. IAU is bouncing off a low in May and currently is up about 3% year-to-date.
Silver ETF: iShares Silver Trust
iShares Silver Trust (NYSE:SLV) is to silver what IAU is to gold. The fund holds $8.7 billion worth of physical silver bullion in trust, with each share of this ETF equaling 1 ounce of silver, less applicable fees. The expense ratio of 0.5% is double that of IAU, but still relatively low. Bears mauled SLV last year to the tune of 23%, but it has bounced back by about 3% in 2012.
I think SLV is headed up for two reasons: It’s time for a rally in commodity prices in general, and there are enough scary things happening in Europe, China and the U.S. to give the more affordable white metal a bounce. Besides, any big rise in gold prices probably will have coattails for silver.
Gold Mutual Fund: Gabelli Gold Fund
The big debate over whether mutual funds or ETFs are the better investment won’t be settled soon. As is the case with all investments, the best choice depends on your specific objectives.
On the one hand, mutual funds tend to have higher expenses than ETFs, higher minimum investments and lower liquidity because they don’t trade over a major exchange. However, the best mutual funds are larger, have been around longer and are actively managed with a specific objective in mind — and often by rock-star fund managers. ETFs usually are passively managed, and many track major indices.
That brings us to Gabelli Gold Fund (MUTF:GOLDX), which has been around since July 1994 and has been managed since its inception by Caesar Bryan, partner and international equity manager in GAMCO’s Alternative Investment Group. Bryan’s expertise — and GOLDX’s focus — is on international equities. The fund’s top four holdings are Randgold Resources (NASDAQ:GOLD), Fresnillo PLC, Newmont Mining (NYSE:NEM) and Goldcorp (NYSE:GG).
Gabelli Gold Fund is down nearly 15% in the past year, but has gained more than 6% in the past month. The minimum initial investment is $1,000, and its expense ratio is nearly 1.5%
Silver Mutual Fund: Tocqueville Gold Fund
I know it seems odd, but my favorite silver mutual fund is John Hathaway’s Tocqueville Gold Fund (MUTF:TGLDX) because it’s well-diversified and Silver Wheaton is one of its top five holdings. Other holdings include Goldcorp, Newmont Mining and Eldorado Gold (NYSE:EGO).
The fund has been around since 1998, and Hathaway — Tocqueville’s senior managing director — has been managing it from the start. The fund has $2.1 billion in assets under management and focuses on long-term capital appreciation by investing largely in precious metals mining and processing stocks.
The minimum initial investment for Tocqueville also is $1,000, and its expense ratio is 1.25%. TGLDX has shed 17% in the past year, though it has clawed back about 5% in the past month.
As of this writing, Susan J. Aluise did not hold a position in any of the investments named here.