Blackrock gold and general - worth investing now after the drop?

bowlhead99

MARTYM8` wrote: »

Seems to me this fund moves the opposite direction almost to the wider stock market - so if stocks fall (they remain at record high) this along with the price of gold may rebound?

So its a good accompaniment to a balanced portfolio?

If you look at the " wider stock market" from Dec 08 to Dec 10, the wider market rose massively and the fund almost quadrupled in value. Similarly, scroll back to late 2002 and you could have quadrupled your money by early 2008, another strong bull market. So, if you think it moves the opposite direction to the "normal" market you're not looking at enough time periods.

Remember it is not just the price of gold and copper etc that drive the value of underlying companies held by the fund but also cost of mining (energy prices etc), availability of project finance and so on. It will be highly leveraged to the commodity prices of course because at some levels of output price, the mines are uneconomic and get mothballed or can no longer obtain finance even though the last movement in the gold price was only -5%.

Now world inflation is lower and interest rates in many places in the world are only going up from hereon, gold is rather less attractive, and as China's GDP growth is not heading back above 10% any time soon, there's more than enough metals and industrial resources to go around. So, those things don't bode well for a change of direction of the fund and a quick reversal back to old levels.

But if the question is, is it a good accompaniment to a portfolio, the answer isn't necessarily no. Sometimes it goes up with developed markets and looks correlated and sometimes more correlated with emerging markets and sometimes inversely correlated with either or both or goes sideways when other things are moving. So basically it's not really very correlated with most of your equities or bonds. Which makes it a great diversifier if a diversified rather than conviction-driven portfolio is what you want.

Assuming of course you can handle the volatility and the fact it might continue to go down for a long time without you wanting it to. Sure, feed it monthly as part of your regular investments but not at the expense of everything else. If you only had £50pm savings to put into funds, it would be a bizarre choice. If you already had a broad portfolio and were putting £500pm away, some of it could go into this.

Ryan_Futuristics

And a lot of these stocks will already be in your indexes and funds ... So you've probably already got reasonable exposure to mining stocks (I suspect people buy the fund thinking it's exposed to gold itself, where there aren't many other open fund options)

I think you need a good reason to put additional faith in a specialist sector like this ... And my perspective would be: whatever reason you're likely to find is probably already priced in, so look for undervalued sectors (or just let your fund managers decide how much exposure to each sector is sensible)

verybigchris

Now at it's lowest for almost 7 years:

cloud_dog

I have to admit I have started drip feeding money in. I don't know where the bottom is going to be for resources / this fund.

They are likely to have to reduce their divi at some point in the very near future (as their underlying investments do the same) and this is also likely to have a negative impact on the SP.

fun4everyone

Gold getting trounced again overnight and today. A lot of this funds biggest holdings down again today because of this. I don't have any specific gold exposure, I tend to believe in what Warren Buffet had to say about it . I don't really indulge in market timing either usually but it is tempting to place an order to buy this fund today. If it goes through at lunchtime you will probably get a decent discount!

verybigchris

Now up 50% in 6 months

bowlhead99

Stands to reason really, as gold was only £700 an once last July/August and November/December, while it's now pretty much £900 (about 30% higher) while debt continues to be cheap or even cheaper, while oil/energy costs have remained low but recovering a little in the last week or so.

Mining operations are essentially a leveraged play on the price of what they dig up and what it costs them to do it, so there will be operations which are now economic to run which were once not, and operations which were profitable which are more profitable, and the reserves in the ground are worth more, etc.

If the gold (and other commodities) price going up hadn't made the fund's holdings more valuable you'd have to question your position in the fund! Its largest holding over the paid has been Randgold - I hold that directly, it's done 75% since early September.