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Despite a small uptick last week due to Cyprus jitters, the price of gold has been heading south in fits and starts since hitting a record near $1,900 (U.S.) an ounce back in September, 2011. Gold-mining shares have been just about the worst investment on the stock market, with the TSX global gold index losing about a third of its value over the past two years.
Being a gold bug has clearly become a painful investment thesis and investors are responding accordingly by yanking money from the sector. Holdings in the world’s biggest bullion-backed fund, the SPDR Gold Trust, have recently fallen to their lowest since mid-2011, according to Bloomberg. Big-name investors, such as hedge fund operator George Soros, have been bailing from gold, too.
Amid the despondency, John Hathaway, manager of the $1.8-billion Tocqueville Gold Fund, remains optimistic, arguing that the current downturn is just a pause that will refresh the long-term gold bull market. “If anything, it looks better than ever,” says Mr. Hathaway of the outlook. The negative mood, in his opinion, is “usually what happens before you make a big low.”
A chat with Mr. Hathaway on gold is always worth the effort. He’s considered one of the world’s best gold managers, with his fund’s performance ranking No. 1 over the past five years in the sector, according to Morningstar.
He had the impeccable timing of setting up his fund in 1998, just when everyone on the Street had gone delusional by chasing dot-coms, overlooking the incredible value that had been building up during the long bear market in gold that began in 1980. The fund has been among the best investments in the world since then, returning 17.8 per cent annually, net of fees, from inception to the end of December, although recent performance has been weak because of the decline in gold shares.
Many people have been spooked by Mr. Soros’ selling but not Mr. Hathaway, who views the well-known U.S. hedge fund manager as a contrary indicator when it comes to gold. “I don’t think he’s ever gotten it right,” Mr. Hathaway says, dismissing Mr. Soros’s gold trading as being “like a retail investor.”
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