Yield Curve Remains Inverted: 3 Gold Funds To Consider

The U.S. yield curve, which shows the relationship between interest rates and time to maturity of short- and long-term U.S. Treasury bonds, has inverted once again. It is a scenario in which long-term debt instruments have lower yields compared to their short-term counterparts. As a matter of fact, the yield curve inversion between 3-month Treasury bill and the 10-year Treasury note increased to its highest levels since 2007. This has made investors skittish. Such a phenomenon, also called the yield curve inversion, is an indicator of an impending recession.

Consequently, it has sent investors rotating out of stocks to safe-haven assets such as gold. This situation is likely to persist in the near term and will act as a tailwind for the yellow metal. As it stands, gold is currently priced at $1,354.30 an ounce.

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 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.

Further, 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. Therefore, investing in gold mutual funds at this point seems prudent.

Slash in Interest Rates in the Offing?

Per the latest report from the Bureau of Labor Statistics (BLS), the U.S. economy added only 75,000 jobs in the month of May. The metric came in well below the consensus estimate of 185,000 jobs. Furthermore, job additions for March and April together were revised down 75,000. Meanwhile, U.S. unemployment rate remained at a 49-year low and came in at 3.6% for the month of May.

Such lackluster jobs data reflects weakness in the U.S. economy and gave rise to speculations that the Fed might announce a rate cut in its next meeting scheduled for Jun 18-19. Per the CME FedWatch Tool, there is 32.5% probability of a rate cut by the Fed. Consequently, gold gains as Fed rate cut expectations provides support.

3 Best Choices

We have, thus, selected three gold 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 year-to-date (YTD) 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 the reasons 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 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 in its category, and other 1 and 2 Ranked Mutual Funds, please click here.

OGMYX has a Zacks Mutual Fund Rank of #1 and an annual expense ratio of 0.92%, which is below the category average of 1.37%. The fund has year-to-date (YTD) returns of 7.1%.

USAA Precious Metals and Minerals Adviser UPMMX 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 in 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 1.37%. The fund has year-to-date (YTD) returns of 4.2%.

Oppenheimer Gold & Special Minerals A OPGSX fund 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 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.

OPGSX has a Zacks Mutual Fund Rank of #1 and an annual expense ratio of 1.17%, which is below the category average of 1.37%. The fund has year-to-date (YTD) returns of 7%.

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