World's Largest Fund Company Gives Up on Precious Metals

The bottom is near in precious metals...

The world's largest mutual-fund company has just given up on gold and silver.

This is a big deal. We've seen moves like this happen before at major bottoms in an asset class. And I believe a huge, multiyear rally is likely.

Let me share the specifics...

The Vanguard Group – with more than $5 trillion under management in mutual funds and exchange-traded funds – is getting rid of its precious metals fund.

Here's what Vanguard said...

The $2.3 billion Vanguard Precious Metals and Mining Fund (VGPMX) will be renamed to Vanguard Global Capital Cycles Fund as part of a restructuring intended to broaden the fund's mandate and diversify its portfolio.

Vanguard is keeping some precious metals and mining stocks... But it's adding other industries to the mix, like telecommunications and utilities. Vanguard says the new fund will follow a broader strategy.

In other words, Vanguard is throwing in the towel.

The fund's assets are down dramatically... VGPMX had nearly $6 billion in assets as recently as 2011. That means it lost roughly two-thirds of its value.

After years of bad returns, nobody wants to go near precious metals. Nobody that is... except you and me.

You see, as contrarian investors, this is exactly what we want to see.

When one of the world's largest investing companies closes the door on an entire asset class, it's a promising sign that nobody is left to sell.

Legendary commodities investor Jim Rogers saw a similar opportunity back in 1998...

After years of poor performance in commodities, investors were giving up. The prestigious wealth-management firm Merrill Lynch closed its commodities business that year. Rogers said...

In 1998, for instance, Merrill Lynch – which at the time was the largest broker, certainly in America and maybe the world – decided to close their commodity business, which they had had for a long time. I bought...

The fact that Merrill Lynch was getting out buttressed – in my own mind, anyway – that I must be right, because, you know, everybody was out. Who was left to sell? There was nobody left to sell at that point.

Jim Rogers' timing was excellent. Commodity prices soared more than 200% over the next decade.

Merrill Lynch closed its commodity business right around the time commodity prices bottomed out. Nobody was interested in owning commodities. It was a huge opportunity for contrarian investors.

We have a similar situation setting up in precious metals today.

Investors and money managers hate precious metals right now. And after years of trending down, they're also dirt-cheap...

To give you a sense of how extreme this situation is, take a look at the S&P 500 Index versus the Philadelphia Gold and Silver Sector Index...


The chart shows gold and silver stocks are the second-cheapest they've been compared with the overall U.S. market in nearly three decades. The last time we saw a similar level was in late 2015... right before gold stocks went on a six-month rally.

One piece is still missing... We don't have the uptrend yet in precious metals today. And I can't say exactly when the reversal will happen.

Gold, gold stocks, and silver are all at 12-month lows. That means we can't act just yet. But we are getting close to a bottom in precious metals.

When the uptrend returns, we will start buying. It could be the beginning of a multiyear rally.

Good investing,

Chris Igou

Further Reading

One precious metal recently hit new multiyear lows – and Brett Eversole believes we'll see big gains when the trend reverses. "The rubber band is stretched... and it's just a matter of waiting for it to snap back," he writes. Read more here.

"It's nearly time to go 'all in' on precious metals," Steve says. "I have rarely done this in my career. But I look forward to doing it – soon." For more details on the reward-to-risk setup he's looking for in precious metals – plus the story on gold – check out his essay right here.

DailyWealth Premium

The downside in precious metals is limited. And my colleague Bill Shaw believes this silver miner could take off as metal prices bounce back...

Market Notes


Today, we check in on the U.S. economy with one of our favorite indicators...

Longtime DailyWealth readers know we use different "bellwethers" to gauge how the economy is doing. For example, shipping trends and recreational spending can show us how money and goods are moving in the U.S. Right now, we're taking a look at a giant in the railroad industry...

Union Pacific (UNP) runs the second-largest railroad system in the country. It sends more than 8,000 locomotives on routes spanning the western U.S. This transport company hauls everything from food and cars to coal and chemicals... all signs that the economy is humming along. Union Pacific recently reported $1.5 billion in net income for the second quarter. That amounts to a record $1.98 in earnings per share.

Union Pacific's stock is also trending higher... UNP is up nearly 50% over the past year and recently hit a new all-time high. With demand for freight haulers still going strong, the outlook is good for the U.S. economy...