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Tuesday August 03, 2010
Pro Timing's golden trio: GGC, GTU, CEF
by Curtis Hesler, Professional Timing Service  You need to be prepared for the possibility of a correction in gold. Looking at the long term, however, gold will probably double from current levels. As such, the key is to buy fear and sell comfort. Here we look at a trio of favorite closed-end funds invested in the metals sector. Gabelli Global Gold and Natural Resources & Income (GGN) is a closed-end fund investing in a variety of tangible asset plays. Some 90% of their holdings are in equities, which are balanced about 32% in energy and 58% in metals and mining. They also hold convertible bonds in these two sectors. 
It is not a pure precious metal play, but I like the exposure to energy. They engage in option writing and swap transactions to generate income. So far, they have done a great job in that regard. The dividend generates an 11% return at today’s price. It is not certain, of course, if they can continue to produce returns this generous, but the fund offers a balance between exposure to metals and energy capital appreciation, as well as nice dividends in the meantime. Their energy investments have been a drag on the stock price along with the general mood of the market; but as I will get to presently, energy is going to explode along with gold. The next 1,000 days will be very interesting indeed. Don’t pay over $15.50 for Gabelli. If you would like a deep “stink bid” on this one, shoot for $13.00 where there is significant major support. In all honesty, I don’t think we will see it fall that far. I recently made a couple of bullion recommendations. One was Central Gold Trust (GTU). Our buy price for GTU is $45.50. The second bullion recommendation was the Central Fund of Canada (CEF). Our buy price for CEF is $14.00. There is no reason to change either of these buy points. The difference in these two funds is that GTU holds only gold bullion and CEF invests approximately 50% in gold and 50% in silver bullion. These are both closed-end funds (not ETF’s) and are both run by the same management Unlike ETF’s, physical bullion is held at a custodian bank and belongs to the shareholders. I think we will easily be able to accumulate shares in each of these as the correction in gold runs to completion. Learn more about this financial newsletter at Curtis Hesler's Professional Timing Service. |
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