LONDON — The price of gold made modest gains last week, and gold for immediate delivery ended the week up 2.9%, at $1,386 per ounce.
Of course, the only practical way for most private investors to invest in gold is through exchange-traded funds. The largest gold ETF, the $51 billion SPDR Gold Trust (ETF) (NYSEMKT:GLD), ended the week 2% higher at $133.76, while London-listed Gold Bullion Securities Limited (LON:GBS) rose 3% to end the week at $133.79. So far this year, shareholders of Gold Bullion Securities Limited (LON:GBS) have seen the value of their holdings fall by 12.1%, while the value of SPDR Gold Trust (ETF) (NYSEMKT:GLD) shares has fallen by 18%.
Gold’s big movers Several miners made gains last week, despite the falling price of gold. Here are three of the biggest risers:
Kirkland Lake Gold Inc. (TSE:KGI) soared 29% to 284 pence last week after the firm said that its 2012 exploration activities had enabled it to replace the proven and probable reserves that had already been mined at its South Mine Complex (SMC) and Main Break mines and expand its total resource base. The firm’s proven reserves at SMC rose from 119,000 to 139,000 ounces, and its indicated resources at SMC rose from 777,000 to 962,000 ounces. As a result of this success, Kirkland Lake Gold Inc. (TSE:KGI) said that the firm’s 2013 exploration plans would be scaled back, so that mined ounces are replaced, but the group’s total reserves and resources are not expanded further.
Randgold Resources Ltd. (ADR) (NASDAQ:GOLD) gained 6.2% to 4,988 pence last week as the firm demonstrated the way in which gold mining shares can outpace any rise in the price of gold. Randgold Resources Ltd. (ADR) (NASDAQ:GOLD) also announced a new $200 million unsecured funding facility last week, which it says will be used for general corporate purposes. Randgold Resources Ltd. (ADR) (NASDAQ:GOLD) says that all of its gold reserves are commercially viable as long as the price of gold remains above $1,000.
Condor Gold PLC (LON:CNR) climbed 4.8% to 95 pence last week after the firm announced that it had begun a helicopter geophysics survey on its main asset, the La India Project in Nicaragua. The results of the survey will be used to help identify areas that are suitable for further exploration. The La India Project has a total indicated and inferred mineral resource of 16.2 million tonnes at 4.6g/t of gold, which equates to 2,375,000 ounces of gold.
Warren Buffett never mentions this but he is one of the first hedge fund managers who unlocked the secrets of successful stock market investing. He launched his hedge fund in 1956 with $105,100 in seed capital. Back then they weren’t called hedge funds, they were called “partnerships”. Warren Buffett took 25% of all returns in excess of 6 percent.
For example S&P 500 Index returned 43.4% in 1958. If Warren Buffett’s hedge fund didn’t generate any outperformance (i.e. secretly invested like a closet index fund), Warren Buffett would have pocketed a quarter of the 37.4% excess return. That would have been 9.35% in hedge fund “fees”.
Actually Warren Buffett failed to beat the S&P 500 Index in 1958, returned only 40.9% and pocketed 8.7 percentage of it as “fees”. His investors didn’t mind that he underperformed the market in 1958 because he beat the market by a large margin in 1957. That year Buffett’s hedge fund returned 10.4% and Buffett took only 1.1 percentage points of that as “fees”. S&P 500 Index lost 10.8% in 1957, so Buffett’s investors actually thrilled to beat the market by 20.1 percentage points in 1957.
Between 1957 and 1966 Warren Buffett’s hedge fund returned 23.5% annually after deducting Warren Buffett’s 5.5 percentage point annual fees. S&P 500 Index generated an average annual compounded return of only 9.2% during the same 10-year period. An investor who invested $10,000 in Warren Buffett’s hedge fund at the beginning of 1957 saw his capital turn into $103,000 before fees and $64,100 after fees (this means Warren Buffett made more than $36,000 in fees from this investor).
As you can guess, Warren Buffett’s #1 wealth building strategy is to generate high returns in the 20% to 30% range.
We see several investors trying to strike it rich in options market by risking their entire savings. You can get rich by returning 20% per year and compounding that for several years. Warren Buffett has been investing and compounding for at least 65 years.
So, how did Warren Buffett manage to generate high returns and beat the market?
In a free sample issue of our monthly newsletter we analyzed Warren Buffett’s stock picks covering the 1999-2017 period and identified the best performing stocks in Warren Buffett’s portfolio. This is basically a recipe to generate better returns than Warren Buffett is achieving himself.
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