ROCHESTER, NY – February 27, 2023
Investors may be confused by recent mixed economic data. Positive economic news, such as low unemployment and payroll increases exceeding consensus estimates, is being reported at the same time as typically negative news such as a revised lower GDP growth, lower consumer spend, and lower consumer confidence. Of particular worry, according to the Mortgage Bankers Association Builder Application Survey, mortgage applications for new home purchases decreased 3.5% year-over-year in January 2023. Also, for the week ending February 17, 2023, mortgage applications decreased 13.3% compared to the previous week. In addition, an inverted yield curve, the bond market’s classic recession indicator, recently reached a level of inversion not seen since 1981. While the negative economic data and yield curve inversion may all be signs of an imminent recession, that conclusion remains difficult to square with continued low employment and payroll increases. This differing data also may make the Federal Reserve’s decision on adjusting interest rates difficult. Further signs of economic deterioration may force the Federal Reserve to halt interest rate increases or even begin cutting rates, which may be positive for the price of gold. The price of gold in U.S. Dollars is down nearly 5% since the start of February 2022. However, with the risk of a recession possibly increasing as indicated by the inverted yield curve and worsening economic outlook, portfolio diversification to gold via gold mining companies whose valuations remain below long-term averages, may be prudent for the defensive investor.
Midas Fund The Fund’s holding of Olin Corporation, an American manufacturer of chlorine and sodium hydroxide, performed well in the past month. Shares of Silver Lake Resources, an Australian gold producer, underperformed in the past month.
The Fund seeks primarily capital appreciation and protection against inflation and, secondarily, current income through investments primarily in precious metals mining and other natural resource companies, as well as gold, silver, and platinum bullion. The Fund currently is invested in a global portfolio of primarily large and medium gold and diversified mining companies, precious metals royalty companies, and ETFs holding gold and silver bullion.
Midas Magic The Fund’s position in Encore Wire Corporation, a manufacturer of electrical building wire and cable, performed well in the past month. The Fund’s holding of Medifast Inc., a nutrition and weight loss company, hindered the Fund’s performance in the past month. Each of Mastercard Inc. Class A and Alphabet Inc. Class A currently comprise more than 10% of the Fund’s net assets.
The Fund seeks capital appreciation. Relative to the S&P 500, the Fund’s portfolio currently is more weighted in economically sensitive sectors, such as communications, and cyclical sectors, financial services, and is underweight in defensive industries, such as utilities.
How to Invest in Gold?
Three alternatives investors often consider when seeking the advantages of gold are gold bullion, stocks of gold mining companies, and funds that invest in gold and gold-related securities, such as Midas Fund. Using a disciplined approach, Midas Fund seeks to emphasize gold and other natural resource companies offering financial strength, expanding production profiles, strong free cash flow, and promising exploration potential. The Fund’s portfolio is focused on what we believe to be some of the best companies in the sector and so we view Midas Fund as currently well positioned to seek capital appreciation and protection against inflation.