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The Olympic Games Reflect Our Love of Gold


 -- Published: Friday, 12 August 2016 | Print  | Disqus 

By Frank Holmes

a gold laurel wreath dating from the 3rd or 4th century BCE

Every child knows Olympic gold medals are for first place, silver for second and bronze for third. But where does this tradition come from?

Like most everything else relating to the Olympics, we can trace the tradition back to the ancient Greeks, who assigned metals (not medals) to different Ages of Man. First among them was the Golden Age, characterized as a peaceful time when humans and gods lived in harmony and food was plentiful. The Greeks believed this to be the pinnacle of our existence, after which it all went downhill. Following that golden period came the Silver Age, when childhood lasted 100 years. Then, the Bronze Age, a time of violence and destruction among warring tribes.

The Greeks weren’t alone in their reverence of gold, of course. It fascinates me that nearly every ancient people, no matter the continent or region, imbued the precious metal with the same degree of sacredness and purity. One of the earliest known metals, gold was valued for its resemblance to the sun, itself worshipped as a powerful deity in many cultures. The ancient Incans, in fact, referred to gold as “sweat of the sun.” When you held a gold nugget, it was believed, you held a piece of the gods themselves.

Michael Phelps showing off his Olympic gold medals on the August 2008 cover of Sports Illustrated

Although most of us no longer believe gold emerged from the sweat glands of great celestial beings, we nevertheless still hold the metal in very high regard. This is what I often refer to as the Love Trade, the proof of which can be seen all around the globe—from beautiful gold wedding rings in the U.S., to finely crafted bridal jewelry in India, to gold coins given to newborn babies in South Korea. So high is our regard for gold that we reward the world’s most gifted athletes—our modern day Greek gods and goddesses—with a small disk of the stuff.

More or less.

Alas, today’s Olympic gold medals contain only a small trace of the yellow metal. According to Kitco News, they’re about 95 percent silver and 1.2 percent gold, making them worth nearly $570 at current prices. (Of course, the real value is much higher. A gold medal earned by an obscure athlete can go for $10,000 at auction, and the price goes up from there. Jesse Owens’ gold medal, awarded during the 1936 Berlin Games, sold for $1.47 million in 2013.) The last (and only) time medals were 100 percent pure was during the 1912 games in Stockholm.

If this seems disappointing, it’s better than it once was. In ancient Greece, winners weren’t awarded a medal of any kind. Instead, they were crowned with wreaths of olive branches, a tradition that was observed in the first modern Olympics, the 1896 Athens Games. It wasn’t until the 1904 St. Louis Games that the current practice of awarding gold for first, silver for second and bronze for third was standardized.

Gold Has Taken the Gold Compared to Most Major Asset Classes

the first Olympic gold medal was awarded during the 1904 Games in St. Louis 

Besides the pageantry and superhuman athleticism, fans and viewers are drawn to the competitiveness that’s on display at the Olympic Games. Athletes have trained for countless hours to prepare for their events, often costing their families tens of thousands of dollars in the hopes that they will stand atop the winners’ podium and be awarded the gold medal.

Likewise, many investors, myself included, gain a lot of pleasure (and heartache) watching their favorite asset classes perform in global markets—including gold.

There was much heartache indeed during the recent bear market that sunk gold from its 2011, all-time high of $1,900 an ounce to its trough of $1,053 near the end of 2015. Since the start of the year, however, the yellow metal has rallied more than 26 percent, leading many analysts and brokers— including Paradigm Capital, HSBC, RBC Capital Markets and the World Gold Council (WGC)—to declare this the beginning of a new upcycle, as uncertainty over central bank policy is deepening.

gold has outperformed most asset classes
click to enlarge

According to the WGC, gold has outpaced other major benchmarks and asset classes for both the one-year (horizontal axis) and year-to-date (vertical axis) periods of return. In addition, the metal’s volatility has been fairly comparable to S&P 500 Index stocks. (In the chart above, volatility is represented by the size of the circles.) The Love Trade is still strong globally, but much of gold’s appeal right now stems from investors’ concerns that unconventional monetary policies have not been effective at jumpstarting growth.

Gold is up not just in U.S. dollars. It’s also rising steadily in countries with a major presence in the gold-mining space, including the U.K., Turkey and Russia. Note the huge spike in pound sterling-priced gold following the Brexit vote and subsequent currency drop.

gold returns priced in various currencies
click to enlarge

These Gold Funds Are Built to Compete

That doesn’t mean all gold funds have provided the same level of performance. Like a highly trained Olympian, our Gold and Precious Metals Fund (USERX)and World Precious Minerals Fund (UNWPX) have demonstrated a competitive edge in a cutthroat competitive space.

Check out the stats: According to Morningstar data, the Gold and Precious Metals Fund ranked six out of 73 Equity Precious Metals funds for total return for the one-year period as of June 30, 2016. The fund also ranked seven out of 69 and 35 out of 50 such funds for total return for the five- and 10-year periods.

As for the World Precious Minerals Fund, it ranked two out of 73 Equity Precious Metals funds for the one-year period, 44 out of 69 funds for the five-year period and 47 out of 50 funds for the 10-year period as of June 30.

What’s more, USERX and UNWPX have BOTH been recognized by Morningstar, with USERX earning four stars overall among 71 Equity Precious Metals funds and UNWPX receiving five stars for the three-year period among the same number of funds.

Please consider carefully a fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Foreside Fund Services, LLC, Distributor. U.S. Global Investors is the investment adviser.

Performance data quoted above is historical. Past performance is no guarantee of future results. Results reflect the reinvestment of dividends and other earnings. For a portion of periods, the fund had expense limitations, without which returns would have been lower. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Performance does not include the effect of any direct fees described in the fund’s prospectus (e.g., short-term trading fees of 0.05%) which, if applicable, would lower your total returns. Performance quoted for periods of one year or less is cumulative and not annualized. Obtain performance data current to the most recent month-end here or by calling 1-800-US-FUNDS.

Gold, precious metals, and precious minerals funds may be susceptible to adverse economic, political or regulatory developments due to concentrating in a single theme. The prices of gold, precious metals, and precious minerals are subject to substantial price fluctuations over short periods of time and may be affected by unpredicted international monetary and political policies. We suggest investing no more than 5% to 10% of your portfolio in these sectors.

Morningstar Ratings are based on risk-adjusted return. The Morningstar Rating for a fund is derived from a weighted-average of the performance figures associated with its three-, five- and ten-year (if applicable) Morningstar Rating metrics. Past performance does not guarantee future results. For each fund with at least a three-year history, Morningstar calculates a Morningstar Ratingä based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a fund’s monthly performance (including the effects of sales charges, loads, and redemption fees), placing more emphasis on downward variations and rewarding consistent performance. The top 10% of funds in each category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars and the bottom 10% receive 1 star. (Each share class is counted as a fraction of one fund within this scale and rated separately, which may cause slight variations in the distribution percentages.)

The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies. The S&P GSCI Total Return Index in USD is widely recognized as the leading measure of general commodity price movements and inflation in the world economy. Index is calculated primarily on a world production weighted basis, comprised of the principal physical commodities futures contracts. The Barclays High Yield Index covers the universe of fixed rate, non-investment grade debt. Pay-in-kind (PIK) bonds, Eurobonds, and debt issues from countries designated as emerging markets (e.g., Argentina, Brazil, Venezuela, etc.) are excluded, but Canadian and global bonds (SEC registered) of issuers in non-EMG countries are included. Original issue zeroes, step-up coupon structures, and 144-As are also included. The Barclays 1-3 Month Treasury-Bill Index includes all publicly issued zero-coupon U.S. Treasury Bills that have a remaining maturely of less than 3 months and more than 1 month, are rated investment grade and have a $250 million or more of outstanding face value. The Barclays U.S. Credit Bond Index represents publicly issued U.S. corporate and specified foreign debentures and secured notes that meet the specified maturity, liquidity and quality requirements. To qualify, bonds must be SEC-registered. The index includes both corporate and non-corporate sectors. The corporate sectors are Industrial and Finance, which include both U.S. and non-U.S. corporations.

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. By clicking the link(s) above, you will be directed to a third-party website(s). U.S. Global Investors does not endorse all information supplied by this/these website(s) and is not responsible for its/their content.


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 -- Published: Friday, 12 August 2016 | E-Mail  | Print  | Source: GoldSeek.com

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