merrill lynch gold and gen v etf-gold

dunker1

Hi knowledgeable people,
Want to invest in gold somehow through a fund, i know that the gold and general oeic which contains silver and platinim etc has performed well over a period lately,but obviously dealing costs are higher than if i buy via an etf.
does anyone one know how the two have compared lately and if its better to go through the g&g or the etf?
Any info or stats would be much appreciated.

jon3001

If you do buy ML G&G then do it thru' a discount broker such as Hargreaves Lansdown. Otherwise you could end up paying a 5% initial charge.

Going off this chart it seems that ML G&G has outperformed an ETC such as PHAU lately. However this isn't necessarily a given going forward. For instance this FSA report on commodity investment shows crude oil outperforming Shell and BP and copper outperforming Xstrata and Rio Tinto.

Your choice will also depend on why you want exposure to precious metals. If it's a hedge against falling equity markets then the ETC or physical ownership would be best. The actual commodity is uncorrelated with the stock market; whereas the fund would broadly follow the market's fortunes. It's also a purer play on the commodity since you don't assume the business risk. If that gold seam dries up then the mining company company can't take advantage of higher prices! Extreme example but ongoing business developments will weigh more on a share's price than just the commodity price.

The argument for investing for investing in the mining businesses is basically that they have fairly fixed costs. So when commodity prices rise it's all extra profit. But it works the other way too. E.g.

Extraction cost: $350/oz
Gold @ $450/oz: profit $100/oz
Gold @ $700/oz: profit $350/oz
gold @ $300/oz: loss $50/oz. [high prices encouraged extra supplies thus forcing down the price]

I just made those extraction costs figures up BTW.

wombat42_2

I think is theoretically best to just invest in the pure commodity. Investing in mining companies introduces other factors and the cmpanies profiatbility and share price isnt necessarily directly related to the underlying commodity price.

It would be great however if there was a pure commodity unit trust allowing a fund manager to work out a good mix of commodites but I dont think there is one.

jon3001

This chart compares ML G&G with against another ETC (GBS) which has a longer history. Although it looks like some data is missing between Jul 05-06.

Performance wise there wasn't much between them until recent (temporary?) spike on ML G&G.

wombat42_2

jon3001 wrote: »

This chart compares ML G&G with against another ETC (GBS) which has a longer history. Although it looks like some data is missing between Jul 05-06.

Performance wise there wasn't much between them until recent (temporary?) spike on ML G&G.

I think recent surge is partly down to market sentiment for commodity stocks etc. Mining shares could of course beat commodity prices but it is just that there are other factors involved.

cloud_dog

Wombat, as mentioned on a previously thread, I hold some monies in a fund which holds physical gold and silver bullion (approx 50/50 split) - Central Fund of Canada. Because of its structure it can also be held in an ISA (but funds supermarket do not provide access to the fund, bought it via my ISA broker - SelfTrade).

There is an agriculture ETF (ETFS AGRICULTURE) covering the four main products.

Galahad Gold Plc has also stated its intention to make a strategic move out of base / precious metals by the end of the year and into agriculture and agri infrastructure investments.

cloud_dog

cloud_dog

wombat42 wrote: »

I think recent surge is partly down to market sentiment for commodity stocks etc. Mining shares could of course beat commodity prices but it is just that there are other factors involved.

The general consensus is that we are atm in a period where miners will lag the commodity, although they will catch up and where gearing comes in to play the rewards will be significantly more than the commodity.

(Have to admit to believing we are in the middle of a commodity super cycle)

cloud_dog

wombat42_2

cloud_dog wrote: »

Wombat, as mentioned on a previously thread, I hold some monies in a fund which holds physical gold and silver bullion (approx 50/50 split) - Central Fund of Canada. Because of its structure it can also be held in an ISA (but funds supermarket do not provide access to the fund, bought it via my ISA broker - SelfTrade).

There is an agriculture ETF (ETFS AGRICULTURE) covering the four main products.

Galahad Gold Plc has also stated its intention to make a strategic move out of base / precious metals by the end of the year and into agriculture and agri infrastructure investments.

cloud_dog

Thanks but ETFs are like trackers. If only they were managed. As trackers they will probably have some crap in them. Yes i know there are ETF groupings, but for me I would just like one general pure commodity fund which is managed by a fund manger.

wombat42_2

cloud_dog wrote: »

(Have to admit to believing we are in the middle of a commodity super cycle)

As far as pure commodities is concerned probably yes unless China tanks. A little less certainty as regards the propects for mining shares.

shoi

On London stock Exchange I found 3 ETFs which say they represent physical
GBS (which says you really really own a little bit of a gold bar see lyxorgbs.com) 0.40% TER
PHAU 0.39% TER
BULL 0.49% TER

I think the security promise from GBS sounds most convincing). Tonight it has a tighter spread than the others (though it's out of trading hours so maybe that isn't a true indication)