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3 Precious Metal Funds to Counter a Global Economic Slump

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From slowdown in global economic growth to the ongoing partial U.S. government shutdown to weak data from China and Europe to Apple’s poor sales outlook, all unnerved investors.

Trump’s dislike for Powell’s policies was not encouraging either. In such a gloomy scenario, it is advisable to invest in gold to hedge against macroeconomic headwinds.

Global Economic Slowdown Projections

Per a UBS report, global economic growth might slow down this year, owing to tighter monetary policy, weaker projected earnings growth and changes on the political front in world’s major economies.

The investment bank projects 3.6% global economic growth for 2019 compared with 3.8% last year. "The decline in global growth will mean a weaker tailwind for global markets, which could begin to anticipate an end of the economic cycle as 2019 progresses," UBS said.

In addition, returns on benchmark 10-year notes dropped to a fresh 11-month low of 2.62% on Jan 2, their lowest since January 2018. This was the effect of Apple’s announcement of decreasing demand for iPhones in China.

A dip in China’s manufacturing activity in December was a concern for investors. Apple CEO Tim Cook’s remarks about China’s slowing economy were made evident by China’s poor retail sales growth and a decline in November exports.

Referring to data by National Bureau of Statistics of China, Coresight Research noted that Chinese retail sales grew 8.1% in November, the slowest rate in 15 years. Growth in exports decreased to 5.4% in November from 15.5% the month before.

The effect of the slowdown in Chinese economy has already been felt by American companies such as Apple and Ford among others, with the latter’s sales falling more than 30% in the first 11 months in 2018 against the same timeframe in 2017.

What Makes Gold a Good Investment Now?

Investors turned to safe haven investments such as the yellow metal amid continuing stock market volatility and the unwelcoming effect of macroeconomic issues on financial markets.

Investors’ inclination toward safe bets like precious metals is evident from gold climbing 7.2% over the last three months of 2018 amid a highly turbulent equity market. The trend continued into the first session of 2019, as February gold gained 0.2% on Comex to amount to $1,284.10 an ounce on Jan 2 and March silver rose 0.7% to reach $15.649 an ounce.

Jim Wyckoff, senior analyst at Kitco.com, noted on Wednesday that gold prices saw “more safe-haven buying interest amid a still very wobbly U.S. stock market.”

3 Mutual Funds to Buy

Given such uncertainty and volatility in equity markets and projections of a global economic growth slowdown, it will be prudent to add a couple of precious metal mutual funds to your portfolio to survive a market slump.

We have selected funds that carry a Zacks Mutual Fund Rank #1 (Strong Buy). Moreover, these funds have encouraging three-year returns. Additionally, the minimum initial investment is within $5,000.

We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but also on the likely future success of the fund.

The question here is why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).

Oppenheimer Gold & Special Minerals Y (OGMYX - Free Report) seeks capital growth by investing 80% of its net assets in common stocks of companies that are engaged in mining and processing gold, precious metals and related ETFs. This is a non-diversified fund.

This Zacks sector – Precious Metal product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.

OGMYXhas an annual expense ratio of 0.92%, which is below the category average of 1.37%. The fund has a three-year return of 12.75%.

Oppenheimer Gold & Special Minerals A (OPGSX - Free Report) is a non-diversified fund that seeks capital appreciation by investing 80% of its assets in common stocks of companies that are involved in mining and processing gold, precious metals and related ETFs and therefore may invest in all of its assets in these securities.

This Zacks sector – Precious Metal product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.

OPGSXhas an annual expense ratio of 1.16%, which is below the category average of 1.37%. The fund has three-year return of 12.48%.

USAA Precious Metals and Minerals Adv (UPMMX - Free Report) targets capital appreciation and protects purchasing power of capital against inflation. The fund does so by investing 80% of its assets in equity securities of U.S. and non-U.S. companies that are involved in mining and processing gold, precious metals and minerals etc.

This Zacks sector – Precious Metal product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.

UPMMXhas an annual expense ratio of 1.30%, which is below the category average of 1.37%. The fund has three-year return of 7.73%.

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