Until now investors interested in gold and silver mining shares have had to rely on only one barometer of this global market: The venerable Philadelphia Stock Exchange Gold & Silver Index, commonly referred to as the XAU. Since its creation the XAU has been composed of just a handful of stocks, which hopefully represented the global universe of a few thousand gold and silver mining stocks from the six continents. Although recently the XAU has added three new companies and deleted one to the index, it still remains an index composed of ONLY 12 stocks, which supposedly are representing the entire precious metals market. These 12 stocks are:
Agnico Eagle Anglogold Barrick Gold Durban Deep Freeport McMoran
Copper & Gold
Goldcorp Gold Fields Harmony Gold Kinross Gold Meridian Gold Newmont Mining Placer Dome
In our opinion it is NOT reasonable to believe that ONLY 12 stocks can possibly be an accurate representation of the world's gold and silver stocks. Here is the basis of our rationale. Firstly, only one of the XAU components (Anglogold) represents gold stocks of the largest producer of the noble metal in the world: South Africa - which still produces about 25% of the western world's mine output. Secondly, the world's third largest gold producing area is Australia - and the XAU shows no representation of this very important gold mining sector. And lastly, even if the XAU component mix were a good geographical cross-section of the global precious metals mining areas, statistically ONLY 12 components cannot equitably represent a universe of many thousands. It is NOT a statistically significant sample, and therefore cannot be an accurate barometer of the international market. In essence the XAU is too narrow and is a biased North-American Gold & Silver stock index.
It is precisely the inherent weaknesses of the XAU, which motivated us to create the GOLD-EAGLE Gold Fund Index. Our index is so designed as to be the best and most representative surrogate for the global gold and silver shares market. The criteria employed to develop our index are the following.
4 Mutual Funds whose portfolios are 100% North-American and Australian - Designated as (A). 3 Mutual Funds whose portfolios consist of approximately 50% North-American and Australian and about 50% South African issues - Designated as (A/SA). 2 Mutual Funds whose portfolios are 100% South African shares - designated as (SA).
Equal weight will be given to all 8 components.
Based upon the stated criteria the Gold-Eagle Gold Fund Index is composed of the following mutual funds and one closed-end Investment Trust (ASA):
1. FSAGX - Fidelity Select American Gold (A)
2. FGLDX - Invesco Strategic Gold (A)
3. SCGDX - Scudder Gold (A)
4. UNWPX - U.S. World Gold (A)
5. VGPMX - Vanguard Specilized Gold (A/SA)
6. FKRCX - Franklin Gold (A/SA)
7. ASA - American South African Investments (SA)
8. USERX - US Gold Shares (SA)
Our index is composed of 8 Global Gold Mutual Funds. Their investment portfolios contain many hundreds of different mining companies, whose operations span the earth - USA, Canada, South America, South Africa, Australia and Indonesia. The GOLD-EAGLE Gold Fund Index is truly a surrogate for the global precious metals mining shares universe.
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