Back to top

Image: Bigstock

3 Funds to Buy as Gold Soars Amid Coronavirus Outbreak

Read MoreHide Full Article

Gold futures pepped up earlier this week as investors who kept close tabs on the Coronavirus epidemic in China were disheartened by a surge in the number of new cases being confirmed and the rising death-toll because of the outbreak in the country. Investors soon rushed to safe-haven assets, such as gold, which accounted for a spike in the precious metal’s price.

In addition, Federal Reserve’s cautious outlook on Feb 11 due to the virus scare further dampened investor sentiments. Mutual fund investors wishing to hedge their investments from this epidemic’s negative effect on the economy could buy funds that invest in companies dealing in gold.

Gold Rose on Dashed Hopes of Coronavirus Slowdown

Gold futures took the road north on Fed 12, erasing earlier losses to finish higher. According to China’s National Health Commission, 2,015 new cases of the deadly virus were reported on Wednesday within a span of 24 hours.

However, on Feb 13, Hubei province reported 242 new deaths and confirmed 14,840 new cases of the epidemic. This drastic increase in a matter of 24 hours panicked investors as this is the fastest ascent in daily death count since the virus outbreak.

Spot gold inched up 0.4% to hit $1,571.23 per ounce while U.S. gold futures rose 0.2% to reach $1,574.90 on Feb 13.

Fed “Closely Monitoring” Coronavirus

Earlier this week, Fed Chairman JeromePowell stated that the central bank was “closely monitoring” the epidemic, its impact on the Asian country and its effect on global economic growth. The Fed chief expressed doubt over the low benchmark rates at present, saying that the low rates could restrict the central bank from reducing rates further to support the economy during a slump.

Although Fed’s comments bore a little impact on the financial markets on Feb 11, his comments on Wednesday led to the gold price surge. On Feb 12, Powellreassured his confidence in the U.S. economic outlook but stated that he expected some slowdown “soon” from the virus.

3 Best Precious Fund Choices

We have, therefore, selected three mutual funds that invest in securities of companies engaged in gold and precious metals business that carry a Zacks Mutual Fund Rank #1 (Strong Buy) or #2 (Buy). In addition, the minimum initial investment for these funds 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).

Franklin Gold and Precious Metals Fund Class A (FKRCX - Free Report) aims for capital growth. The fund invests the majority of its assets in securities of companies that are engaged in operations of gold and precious metals. The non-diversified fund may invest across all market capitalizations.

This Zacks sector – Precious 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.

FKRCX carries a Zacks Mutual Fund Rank #1 and has an annual expense ratio of 0.98%, which is below the category average of 1.39%. It has returned 51.5% over a year. The fund has a minimum initial investment of $1000.

American Century Global Gold Fund A Class (ACGGX - Free Report) aims for a total return that is at par with its investment. The non-diversified fund invests the majority of its assets in companies that are involved in mining, processing, exploring and other related operations of gold.

This Zacks sector – Precious 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.

ACGGX carries a Zacks Mutual Fund Rank #2 and has an annual expense ratio of 0.93%, which is below the category average of 1.39%. It has returned 37.7% over a year. The fund has a minimum initial investment of $2500.

Fidelity Select Gold Portfolio (FSAGX - Free Report) seeks capital appreciation. The fund invests the majority of its assets in securities of companies engaged in gold-related operations. FSAGX is a non-diversified mutual fund.

This Zacks sector – Precious 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.

FSAGX carries a Zacks Mutual Fund Rank #2 and has an annual expense ratio of 0.86%, which is below the category average of 1.39%. It has returned 35.5% over a year. The fund has no minimum initial investment.

Want key mutual fund info delivered straight to your inbox?

Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week.

Get it free >>