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Portfolio > Alternative Investments

Metals Poised to Rise in 2011; Silver Funds Top 2010 Lipper Charts

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Gold prices pushed past $1,400 late Tuesday to $1,404.60 an ounce for February delivery at the Comex division of the New York Mercantile Exchange. Analysts pointed to weakness in the U.S. dollar and technical trading as the major reasons for its latest surge.

At one point, gold surged to $1,405.90. Silver prices also rose to roughly $30.30 an ounce.

The U.S. dollar index dropped about 0.10% to $80.15 while the euro was flat at $1.31 vs. the dollar.

Gold Momentum

In his year-end letter to investors, John Hathaway (left), manager of the Tocqueville Gold Fund (TGLDX), described how the Greek debt crisis and the second round of quantitative easing have boosted the gold price in 2010 and what forces should propel gold prices higher in 2011.

"While many observers feel that the gold rally has been overdone, is too crowded, resembles a bubble or whatever, the simple fact remains that central banks of the Western democracies appear on course to debase paper currencies,” Hathaway said.

“On the one hand, currency debasement is the path of least resistance to grapple with the seemingly intractable fiscal issues of record deficits and unchecked growth in entitlements,” he explained.

“On the other hand, persistent economic weakness translates into political pressure for central banks to pursue extremely lax monetary policies. Under these circumstances, it is hard to argue against the notion that some exposure to gold offers protection against monetary damage still to come."

Gold hit a high of $1,431.25 on Dec. 7.

Fund Performance

For trading through Dec. 23, Lipper reports, funds with a focus on metals – especially silver – top the performance charts among funds across all fund and sector categories.

The ProShares Ultra Silver ETF (AGQ) has risen 149.1%, while the PowerShares DB Silver (DBS) has jumped 72.5%.

The ETF Securities Physical Silver Fund (SIVR) is up 71.3%, and the iShares Silver Trust (SLV) 70.9%.

The Dynamic Gold and Precious Metals Fund (DWGOX) has improved 66.2%, and the ProShares Ultra Gold (UGL) has increased 50.2%.

In its latest market commentary, U.S. Global Investors stated that“Gold markets are likely to close the year [2010] with 10 years of consecutive price gains in bullion …Historically, gold bull and bear market averages typically run about 20 years in duration.”


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