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Steady Interest Rates Buoy Gold: 3 Fund Winners

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Gold prices rallied to a three-week high after the Fed chose to keep interest rates steady on Mar 20. Gold ETFs have also peaked since then. As it stands, gold is currently priced at $1,310.97 an ounce.

The Fed has indicated that even if economic conditions change in the near term, it would adopt a more controlled approach toward hiking interest rates this year, which means that gold will surge in the near term. Under such circumstances, investing in gold mutual funds at this point seems prudent.

Fed Leaves Interest Rates Unchanged

At the end of its two-day policy meeting on Mar 20, the Federal Reserve decided to hold interest rates steady at the current levels, in the range of 2.25% to 2.5%. Further, the central bank also stated that it sees no likelihood of any further rate hikes this year. However, there might a hike if “conditions changed.” Also, the Fed stated that it would be “patient” when it comes to hiking interest rates this year.

This move was largely expected, given the market conditions. At the same time, it reflects a sharp dovish turn in Fed’s stance from its last meeting three months ago. In the last meeting, members of the Federal Open Market Committee (FOMC) had stated that there might be about two rate hikes in 2019 after that four in 2018.

Gold Will Remain Solid This Year

The impact of global economic and political dynamics over the past two years is largely expected to be felt in 2019. There has been an increase in the adoption of protectionist trade and economic policies by major economies across the globe. Needless to say, such practices contribute to an increase in volatility in the markets.

On Jan 21, the International Monetary Fund (IMF) reduced its global economic growth forecast for 2019 to 3.5% from 3.7% last October. Likewise, global growth projection for 2020 was reduced to 3.6% from 3.7%, marking the second reduction in the last three months.

Domestically, Fed officials expect the U.S. GDP to slow to just 2.1% in 2019, reflecting a decline from the 2.3% estimate in December. Further, expected inflation levels were pegged at 1.8%. Moreover, the Fed also increased the expected unemployment rate by 0.2 percentage points to 3.7% in 2019.

Meanwhile, equity valuations remain stretched across the world. Such factors point toward a global recession this year. Therefore, there will be a surge in demand for gold in 2019 as a hedge against global financial risks.

3 Best Choices

We have, thus, selected three passive mutual funds with a Zacks Mutual Fund Rank #1 (Strong Buy) and 2 (Buy) that are poised to gain from such factors. Moreover, these funds have encouraging one and three-year returns. Additionally, the minimum initial investment is within $5000.

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) fund 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 to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

OGMYX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.92%, which is below the category average of 1.39%. The fund has one and three-year returns of 6% and 9.9%, respectively.

USAA Precious Metals and Minerals Adviser (UPMMX - Free Report) fund targets capital appreciation and protects the 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 to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

UPMMX has a Zacks Mutual Fund Rank of 2 and an annual expense ratio of 1.30%, which is below the category average of 1.39%. The fund has one and three-year returns of 3.5% and 5.1%, respectively.

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 to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

OPGSX sports a Zacks Mutual Fund Rank #1 and has an annual expense ratio of 1.17%, which is below the category average of 1.39%. The fund has one and three-year returns of 5.8% and 9.7%, respectively.

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