Russians will do better in rubles than dollars, finance minister promises

Section:

By Keith Damsell
The Globe and Mail, Toronto
Monday, January 10, 2005

http://www.theglobeandmail.com/servlet/story/RTGAM.20050110.wxrfundwa
tch10/BNStory/Business/

What the heck happened to your precious metals
mutual fund?

The volatile asset class had a miserable 2004,
down 17 percent on average, making it the
worst-performing sector of the year. That's a
dramatic tumble from three years of successive
double-digit gains, including a group average of
41 percent in 2003.

Investors would have done better buying the
precious metal itself. Gold ended the year at
$438.45 (U.S.) an ounce, up a modest 5.4
percent.

The comparative results torpedo the widely held
view that in a rising gold market, gold equities,
and, by extension, gold funds, outperform the
price of bullion.

A series of issues made 2004 a weird year for
gold, gold equities, and precious metal funds:

-- The U.S. Federal Reserve Board. Early in the
year, the market was convinced the Fed was on
track to raise interest rates, a sentiment that
prompted a selloff in gold equities. "People
started taking profits," said Kevin MacLean,
senior portfolio manager at Toronto's Sentry
Select Capital Corp.

-- No new money. From 2001 through 2003, gold
rose dramatically in price and resource-driven
investors, including mutual funds, snapped up
gold stocks; 2004 saw a shift in sentiment to
energy stocks and trusts. "There was no real
rush of new players into gold," said John Ing,
president of Maison Placement Canada Inc.

-- Dilution. Gold's return to favour saw many
producers tap the markets and the flood of
paper helped drive down prices. According to
data from Bloomberg LP, about $1.1-billion
(Canadian) in equity was raised by Canadian
gold firms in 2003 and again in 2004. That's a
remarkable figure when you consider the
pitiful $2.3-million raised in the dark days of
1999 when gold plunged to $252.55 (U.S.) an
ounce.

-- StreetTracks Gold Trust. The U.S. bullion fund
created in November has attracted a whopping
$1.5-billion from investors, making it the most
successful exchange-traded fund in history. To
the detriment of equities, StreetTracks has
become the most popular way to buy gold as
a hedge against a decline in the U.S. dollar.

-- Margins under pressure. Gold is reported in U.S.
dollars and 2004's weak greenback hurt the gold
sector. Why? The bulk of the world's gold is mined
overseas where local currencies were on the rise.
As a result, producers with operations in South
Africa, Australia, and Canada felt an income
statement "squeeze," said Gavin Graham, director
of investments at Guardian Group of Funds Ltd.
of Toronto.

But don't sell your precious metals fund yet. Bulls
and bears agree that this year looks favourable for
the volatile metal and its equity cousins. A weak
U.S. dollar, inflation fears, strong demand, an
absence of new discoveries, and political uncertainty
all lend themselves to strong gold prices.

Fund managers interviewed are on the watch for
promising juniors that, in the event of a discovery
or potential takeover, may see tremendous upside.
Large gold producers "would rather buy production
than explore for it," said Craig Porter, portfolio
manager of the Altamira Precious & Strategic
Metal Fund. "Why not spend your high cash flow
now? You buy production today; you can take
advantage of high commodity prices."

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http://www.mininglife.com/

http://www.financialsense.com

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http://www.depression2.tv

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http://www.goldcolony.com

http://www.miningstocks.com

http://www.mineralstox.com

http://www.freemarketnews.com

http://www.321gold.com

http://www.SilverSeek.com

http://www.investmentrarities.com

http://www.kereport.com
(Korelin Business Report -- audio)

http://www.plata.com.mx/plata/home.htm
(In Spanish)
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(In English)

http://www.resourceinvestor.com

http://www.miningmx.com

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Eagle Ranch discussion site:

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Ted Butler silver commentary archive:

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----------------------------------------------------

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178 West Service Road
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and
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314-965-9797
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1-888-218-9226, 931-766-6066

----------------------------------------------------

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