Trade the Congressional Effect: How To Profit from Congress's Impact on the Stock Market

Gold Funds: Avoiding Congressional Debasement

As central banks get bigger and place more strain on the public balance sheets of their countries, it is essential to have some gold. The question is, how much? Jean-Marie Eveillard compares owning gold to having insurance. It protects you from outlier events. A different way to say it is that you hope the gold you own does not appreciate or depreciate very much. If that is the case, then you are likely to be living in normal times, where the rest of your portfolio can do its job of preserving your purchasing power.

One way to have exposure to gold is to own a mutual fund focused on gold and gold related investments. Many of the funds in the First Eagle Family of Funds have historically had some exposure to gold. When a portfolio manager at First Eagle was asked to comment about gold's price, the portfolio manager responded:

We have no view on the future direction of the price of gold. Gold ETFs, such as GLD (GLD), have risen [in price recently]. GLD may be the fifth-largest holder of gold in the world, after the central banks of the world. So people from the ground up have chosen to put some of their reserves in gold as a hedge against the currency. To me, it doesn't feel like speculation like in the late 1990s with Internet stocks, or the credit bubble. This seems to be rational behavior. Whether we're ahead of ourselves temporarily or not, I have no clue. What we've said…is [many investor should consider keeping a portion] of [their] ...