Is It Gut Check Time For Precious Metals Investors? (PHYS, GLD, ABX, KGC, GFI, SLW, GDX, DZZ, DGZ)

Second-quarter equity woes bolstered the bull case on gold and other safe-haven assets, but as Wall Street looks to earnings season to set the next trend in the market, it could be gut check time for precious metals investors. Bloomberg notes that some hedge funds are paring risk exposure and waiting on earnings data to meter strength of the U.S. economy. With heaps of cash on the sidelines, better-than-expected earnings could spur a continued rebound for stocks, thus dampening gold’s appeal as a hedge.

Still, inflation worries linger, and as commodity hedge fund manager Eric Sprott told TheStreet.com in June, “there’s only 162,000 tons of gold in the world.” A look at Sprott Asset Management’s top-15 U.S.-listed equity positions from the end of the first quarter shows he isn’t afraid to put his money where his mouth is. The firm’s gold-saturated portfolio holds a significant stake in the Sprott Physical Gold Trust ETV (PHYS), which differs from the massive SPDR Gold Trust (GLD) in that investors with enough capital in the trust can exchange their stake for gold bars on a monthly basis.

Sprott portfolio manager Charles Oliver told Reuters that miners are an offensive alternative to traditionally defensive bullion bets. Canadian giants Barrick Gold (ABX), Kinross Gold (KGC), Gold Fields (GFI), and Silver Wheaton (SLW) were all in the Toronto-based firm’s top holdings heading into the second quarter.

There are a number of other exchange-traded gold plays to take either side of the gold bet. David Einhorn — another notable gold bull — held the Market Vectors Gold Miners ETF (GDX) among Greenlight Capital’s top-15 end-of-Q1 equity positions. So did Blue Ridge Capital’s John Griffin. Meanwhile, gold bears can bet on the PowerShares DB Gold Short (DGZ) or PowerShares DB Gold Double Short (DZZ) ETFs to profit if the metal declines.

It will be interesting to see how precious metals perform as traders digest earnings data from the second quarter. Investors can track the Gold and Silver Stocks Index for performance trends, Pro holdings data, and a suite of other metrics at tickerspy.com.

Pro portfolio performance is based on institutions’ top-15 holdings as disclosed in quarter-end filings with the SEC. Pro performance does not take into account additional holdings beyond the top 15 nor does it include positions that are not required to be disclosed by the SEC. As such, Pro portfolio performance should be considered an approximation and not a precise record of how an institution has performed over time.

Tags: ABX, DGZ, DZZ, GDX, GFI, GLD, KGC, PHYS, SLW