The US markets were closed today for the MLK holiday. Stocks worldwide fell sharply so be prepared when the US markets open Tuesday morning.
Sometimes I try to adjust (relax) RSI’s parameters to glean any clues of what could be potential candidates. In doing so I have discovered some “under the surface” funds. They are:
- CEF – Central Fund of Canada Ltd.
- IAU – iShares COMEX Gold Trust
The parameter I relaxed was price potential. This is a mathematical function I concocted that gives an estimate of the six month potential price move, in percentage, based on its past performance and current performance. The algorithm is a bit complex to totally describe on this blog, but suffice it to say I believe it is a good discriminator for stocks and funds. So I cranked the algorithm down from 30% to 10% and came up with these two gold funds. You can see from the chart below that these two funds have had a strong run over the past year and RSI says they have at least another 10% price potential (over the next six months).
CEF is a closed end fund that holds real gold and silver bullion, not gold mining companies. It trades at a slight premium of 3.83%, it pays no interest since gold & silver in a vault don’t earn interest. Its holdings are split roughly gold/silver in a ratio of 50/50. IAU is a true ETF that mimics the price of gold billion. Since gold alone is more valuable than a 50/50 gold/silver combo, IAU has outperformed CEF.
Okay, what RSI is saying is there is a flight to precious metals and with world markets taking a hit today this flight could accelerate. But don’t expect big price moves, since these funds have made strong runs in the past five months.
