GGN: Getting Paid While Waiting For New Gold Highs!

January 21, 2012 Company Profiles No Comments

Gold has bounced off the bottom of this latest correction and is moving higher in an orderly fashion as it readies for the push through $2,000 to $2,100 later this year. There are strong indications that gold will launch a new move soon. Many factors would have to come together at exactly the same time to keep gold held down past this spring. I am of the opinion that there are too many “cats” in the gold bag for this artificial suppression to last very much longer, and that is why I am profiling GGN, Gabelli Global Gold and Natural Resource Income Fund. I say, let’s get paid while waiting for the new gold highs that are just around the corner!

Before we get into the details of GGN, there are some key factors that should be understood before you consider this fund. The most important factor to keep in mind is that there will be no fundamental change to the reason why gold and oil are going to rise. Both will continue to be in demand. One as a protection for real wealth as opposed to paper currency and the other as the fuel for the engine of growth in the emerging markets and the old world economy countries.

Gold has seen tremendous demand from the central banks of China, Russia and many other nations along with unprecedented private party purchases across the globe. Oil will be in demand due to the chaos that is the Middle East, and America’s refusal to develop its own fossil fuel resources due to the ideologically driven Marxist leanings of “The Community Organizer In Chief”. We would have to see major changes around the world and in America for any change in the direction of gold’s and oil’s upward spiral.

The European Debt Crisis is coming to a head with Greece teetering on the brink of bankruptcy that, when it falls, will cause a ripple affect throughout Europe. The Federal Reserve has laced the U.S. tight into the bundle, so once Europe crumbles, the financial world will open its eyes to what is going on with Japan and the America’s unprecedented debt levels. The results will not be pretty.

If this does not make sense to you, then maybe you should move on to some other site and see something more to your liking. If it does ring true to your ears, then continue on as we take a look at GGN.

GGN is a closed-end fund that offers between 9% and as much as an 11% dividend yield, paid monthly, depending on the funds performance. The fund pays 14 cents per share, per month in dividends by using covered calls to generate the income. GGN holds long position in assets and writes call (selling) options on those assets in order to boost their return from the assets. GGN uses covered calls when it does this. The combination of selling covered calls, earning portfolio dividends, and accrued interest allows GGN to pay it’s high monthly income.

The covered call options limit the upside potential of the assets in the portfolio, but the dividends allow you to get paid while you wait for the next round of price increases in oil and gold. During the move that takes gold to and through the $2,100 per ounce mark, the miners and energy producers in the fund will greatly appreciate, which will, in turn, move GGN well above its current $15.47 per share price.

Mario J. Gabelli, the Chairman and CEO of GAMCO Investors, Inc., first introduce the Gold and Natural Resources Fund on March 31, 2005. The Gabelli Global Gold and Natural Resource Income Fund, GGN is split roughly, 51% in gold mining companies and 45% in energy companies. The remaining 4 % is held in cash. The fund has $1.2 plus billion in assets, according to their March 31st, 2011 financial statement.

GGN’s top ten holdings include Agnico-Eagle MinesLtd., Randgold Resources Ltd., Newmont Mining Corp., Gold Fields Ltd., Barrick Gold Corp., Anglogold Ashanti Ltd., Halliburton Co., Kinross Gold Corp., Suncor Energy Inc. and Newcrest Mining Ltd. The portfolio has net assets of $1.2 plus billion and an expense ration of 1.33%.

When GGN first opened in March of 2005 it traded at $20.00 per share. At $15.47 per share today, there is a lot of upside potential that you can afford to wait for as you collect your 9% plus monthly dividend. It should easily surpass its $19 per share price of last May with the next move up in gold and energy.

GGN is certainly worth a look for anyone that believes gold an oil are still in a major uptrend. Go to the company website, www.gabelli.com and look for the fund under “closed end funds”. GGN is the perfect vehicle for making monthly income in this market while waiting for gold’s next move up. The upside potential in the underlying securities is not to be ignored, but your individual miners will do much better on that score. This play is strictly for those that want to cash in while waiting for the move.

As is always the case, do your own due diligence before investing in anything, because my risk tolerances may not be the same as yours. I am not a professional trader and offer my thoughts on the gold markets, for your consideration, as an every day person that is interested in making money from the gold market, and not as an insider from the market.

Till next time, good luck and good trading