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Time To Run From Your Vanguard Fund!

Gold is traditionally a safe haven in times of political and economic uncertainty…

Traditionally.

This year gold dropped below key support at $1,200 an ounce, the lowest price since January 2017.

One of the smartest traders in the business, Fred Hickey, thinks he knows why. Take a look at his recent tweet.

He’s talking about mutual fund giant Vanguard, one of the world’s biggest index investors dropping the word “Precious Metals” from the name of its flagship gold fund.

The name change got my attention.

But what really matters is the former Vanguard Precious Metals and Mining fund had $2.3 billion in assets – 80% of that invested in gold and silver mining stocks.

But, not anymore. Along with the name change the fund drastically lowered its allocation of precious metals mining stocks to 25%. We’re talking over $1 billion in mining stocks getting dumped!

And this isn’t the first time that Vanguard has tinkered with its gold fund either. The question is how did it work for them before?

In short, not very good. In 2001, Vanguard removed the word “gold” from what was then the Gold and Precious Metals fund. See the chart below.

Source: Bloomberg, U.S. Global Investors

Talk about bad timing. Gold went on to soar from $271 an ounce to an all-time high of $1,900 in September of 2001. A 700%-plus gain.

The point today is the world’s largest fund company no longer offers investors a way to participate significantly in a precious metals rally. And it may be doing so at a time when gold is about to take off again.

Smart investors know discipline is key when putting their money to work in the stock market. Volatility is normal, but markets eventually correct.

Smart fund managers follow the same discipline. Even when the waters are choppy, they stay the course. That lesson seems lost on Vanguard’s leadership.

As a result, they’re aggressively dumping precious metals at a very wrong time.

Regardless of the reasoning, what’s certain is that all of Vanguard’s loyal gold investors will soon be left without a way to participate in gold’s next run.

Here’s my recommendation…

Consider moving your precious metals money to a fund that’s in it to win it over the long run with gold. One of my favorites is the U.S. Global Investors Gold and Precious Metals Fund (USERX).

The team behind USERX is one reason for its resilience. The active fund managers dig deep into understanding the gold market and they know how to stay calm during tough times for precious metals.

Fund managers Frank Holmes and Ralph Aldis each have over 30-years of experience in the gold and mining space.

Plus, USERX beats its competition time after time. Check out its performance versus Vanguard’s $2.3 billion Precious Metals and Mining Fund over time below. USERX has absolutely crushed Vanguard’s poor performance.

Here’s the last year:

Source: Bloomberg

The last three years:

Source: Bloomberg

The last five years:

Source: Bloomberg

If you own shares of the newly named Vanguard Global Capital Cycles Fund — and $2.3 billion worth of investors do — I strongly recommend  you consider voting with your feet and move your money to a fund like USERX.

This fund is much better positioned to deliver big gains in the next precious metal bull market.

Here’s to growing your wealth,

Mike Burnick

Mike Burnick
Chief Income Expert, Mike Burnick’s Wealth Watch

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Mike Burnick

With over 25-years of professional investment experience, Mike Burnick was a Registered Investment Adviser and portfolio manager responsible for the day-to-day operations of a mutual fund. Mike joined Weiss Research in 2002 as an analyst and writer, and in 2008 was named Director of Research and Client Communications at Weiss Capital Management, where he assisted...

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