MILLBROOK, NY – January 20, 2022
Federal Reserve Chairman Jerome Powell recently noted his surprise with price inflation over the past year. U.S. inflation, as measured by the Consumer Price Index, which reached a low of almost 0.0% in March 2020 and has since risen dramatically to 7.0% in December 2021, the highest rate in almost 40 years. Similarly, another inflation indicator, the Producer Price Index for final demand, rose 9.6% for the 12 months ended in November 2021, the largest advance since 12 month data was first calculated in 2010. Federal Reserve Bank of Cleveland President Loretta Mester has stated that the inflation case is “very compelling” for the Reserve Bank to move toward raising its short term target interest rate in March 2022 and believes the Bank might raise interest rates a total of three times in 2022. Interestingly, given the current 7% rate of inflation and essentially 0% short term yields, hard assets, such as gold, that are expected to appreciate at least at the rate of inflation, should outperform bonds and many other financial assets. If interest rates do rise, as expected by Ms. Mester, then prices of longer maturity bonds normally fall, making the relative attractiveness of hard assets even more compelling.
Midas Fund The Fund’s holding of Sandstorm Gold Ltd., a gold royalty company with a portfolio of 230 royalties, performed well in the last month. Shares of Fresnillo plc, a Mexican precious metals mining company, have underperformed in the last 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. Using a disciplined approach, the 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 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 Warrior Met Coal Inc., a non-thermal metallurgical coal mining company and supplier to the global steel industry, performed well in the last month. The Fund’s holding of Williams-Sonoma, Inc., a retail company that sells kitchen-wares and home furnishings, 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 cyclical companies, such as financial services, and is underweight in economically sensitive and defensive industries. The Fund generally focuses on companies that appear to have strong operations showing superior returns on equity and assets with reasonable valuations.
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.