Gold Stocks Enter a New Bull Market

After reaching a multi-year low a year ago, the Fidelity Select Gold Fund (FSAGX) has now decisively advanced past a treacherous up and down trading range and started the initial stage of a potentially long-term new bull market.

The first rally came in August 2013, which signaled the end of the bear market for the gold sector. However, prices unexpectedly reversed the bullish trend in September following the highly publicized selling of gold assets by hedge funds, which also coincided with low inflation expectations.

In December, gold stocks revisited the June lows, but were able to hold this level creating a chart pattern that is known as the double bottom. From the December low the sector rallied strongly and has been making higher highs and higher lows, which is one of the hallmarks of a bullish trend. As the result, the Fidelity Select Gold Fund (FSAGX) is the best performing Fidelity mutual fund so far in 2014 with an outstanding 35.11% return.

We must caution investors that the gold sector can be highly volatile and investing in gold stocks is often regarded as highly speculative. Investing in the broader natural resources sector provides more diversification and may be more appropriate for a conservative portfolio (read more on the Fidelity Natural Resources Fund).

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Top 10 Fidelity Mutual Funds

The salient feature of the bullish uptrend of the U.S. equity market this summer is low volatility. Most sectors are up since the last correction in February. The benchmark Fidelity Spartan 500 Index Fund (FUSEX) has returned 6.56% in the last three months.

As energy prices have slowly increased since January, it is not surprising to see Fidelity funds investing in the natural resources sector dominating the list of the top 10 Fidelity funds (ranking is provided by FidelitySignal):

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One of our favorite investments in this sector is the Fidelity Natural Resources Fund (FNARX). FNARX has provided an excellent 35.48% gain since the buy signal was issued on April 22, 2013. The top panel of the chart below shows that the relative strength of FNARX compared to the S&P 500 index has been increasing, which continues to make this mutual fund an attractive investment:

 

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Buy and sell signals for Fidelity funds are available at FidelitySignal.com

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