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Gabelli
Gold
Fund,
Inc.
FIRST QUARTER REPORT
MARCH 31, 1999
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Gabelli Gold Fund, Inc.
First Quarter Report - March 31, 1999
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Caesar Bryan
To Our Shareholders,
Most commodity prices rallied strongly during the first quarter of 1999.
Gold participated in this upward movement until the middle of March. However, at
that time, a number of world leaders endorsed a plan for the International
Monetary Fund ("IMF") to sell part of its gold holdings. These comments helped
push the gold price down from almost $295 per ounce to $280 per ounce by the end
of March. This compares with a price of $288 per ounce at the end of 1998.
In this gold price environment, most of the Fund's holdings fell during
the quarter. On a relative basis, the larger, more liquid gold stocks performed
best. For example, Newmont Mining declined 3.1% compared with declines of over
10% for many gold stocks. The only holdings to perform well during the quarter
were the Fund's two South African platinum holdings, Impala Platinum and Northam
Platinum, which rose by over 30% each. Both companies benefited from higher
platinum prices.
Investment Performance
For the first quarter ended March 31, 1999, The Gabelli Gold Fund's (the
"Fund") net asset value declined 3.7%. The Lipper Gold Fund Average and
Philadelphia Gold & Silver ("XAU") Index of large North American gold companies
declined 4.5% and 7.9%, respectively, over the same period. The XAU index and
Lipper average are unmanaged indicators of stock market and investment
performance. The Fund was down 17.8% over the trailing twelve-month period. The
Lipper Gold Fund Average and XAU Index declined 21.6% and 26.2%, respectively,
over the same twelve-month period.
For the three-year period ended March 31, 1999, the Fund's total return
averaged (26.7)% annually versus average annual total returns of (24.0)% and
(24.4)% for the Lipper Gold Fund Average and XAU Index, respectively. Since
inception on July 11, 1994 through December 31, 1998, the Fund had a cumulative
total return of (45.0)%, which equates to an average annual return of (11.9)%.
<PAGE>
INVESTMENT RESULTS (a)
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<TABLE>
<CAPTION>
Quarter
------------------------------------------------------
1st 2nd 3rd 4th Year
--- --- --- --- ----
<S> <C> <C> <C> <C> <C>
1999: Net Asset Value $ 5.45 -- -- -- --
Total Return .. (3.7)% -- -- -- --
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1998: Net Asset Value $ 6.63 $ 5.68 $ 6.17 $ 5.66 $ 5.66
Total Return .. 12.9% (14.3)% 8.6% (8.3)% (3.6)%
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1997: Net Asset Value $ 11.83 $ 9.79 $ 9.17 $ 5.87 $ 5.87
Total Return .. (4.0)% (17.2)% (6.3)% (35.4)% (51.9)%
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1996: Net Asset Value $ 14.00 $ 13.40 $ 13.46 $ 12.32 $ 12.32
Total Return .. 22.7% (4.3)% 0.4% (8.5)% 8.0%
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1995: Net Asset Value $ 11.00 $ 11.96 $ 12.27 $ 11.41 $ 11.41
Total Return .. (0.6)% 8.7% 2.6% (7.0)% 3.1%
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1994: Net Asset Value -- -- $ 12.37 $ 11.07 $ 11.07
Total Return .. -- -- 23.7%(b) (10.5)% 10.7%(b)
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</TABLE>
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Average Annual Returns - March 31, 1999 (a)
-------------------------------------------
1 Year...................... (17.8)%
3 Year...................... (26.7)%
Life of Fund (b)............ (11.9)%
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Dividend History
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Payment (ex) Date Rate Per Share Reinvestment Price
- ----------------- -------------- ------------------
December 29, 1997 $0.058 $5.86
(a) Total returns and average annual returns reflect changes in share price and
reinvestment of dividends and are net of expenses. The net asset value of the
Fund is reduced on the ex-dividend (payment) date by the amount of the dividend
paid. Of course, returns represent past performance and do not guarantee future
results. Investment returns and the principal value of an investment will
fluctuate. When shares are redeemed they may be worth more or less than their
original cost. (b) From commencement of investment operations on July 11, 1994.
Note: Investing in foreign securities involves risks not ordinarily associated
with investments in domestic issues, including currency fluctuation, economic
and political risks. Investing in gold is considered speculative and is affected
by a variety of worldwide economic, financial and political factors.
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Our Investment Objective
The Fund's objective is to obtain long term capital appreciation by
investing in equity securities of foreign and domestic issuers principally
engaged in gold and gold-related activities.
Our Approach
We look at a number of company specifics in order to determine which gold
stocks are relatively undervalued. Our primary focus is on capitalization per
ounce of production and, more importantly, on capitalization per ounce of
recoverable reserves. This determines how much gold actually backs every dollar
invested in a gold company. We appreciate that every mining company must replace
the gold that it mines, and we place a heavy emphasis on the quality of
management and their ability to create shareholder wealth. We invest globally
with an emphasis on gold-producing companies.
2
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Global Allocation
The accompanying chart presents the Fund's holdings by geographic region
as of March 31, 1999. The geographic allocation will change based on current
global market conditions. Countries and/or regions represented in the chart and
below may or may not be included in the Fund's future portfolio.
[GRAPHIC OMITTED]
Holdings by Geographic Region 3/31/99
[The following table was depicted as a pie chart in the printed material.]
North America 57.7%
South Africa 29.0%
Australia 9.1%
Europe 2.7%
Latin America 1.5%
COMMENTARY
The improved outlook for the global economy as evidenced by higher equity
prices, especially in emerging markets, has helped commodity prices recover. In
most cases, this recovery has originated from very depressed levels. These rises
in equities have been accompanied by continued reductions in interest rates.
Interest rate reductions outside the United States have been very aggressive as
authorities seek to encourage economic growth. Interest rates in Japan are
almost zero and short term interest rates in Europe are 2.5%. Lack of growth
overseas relative to the U.S. has caused the U.S. trade deficit to grow to a
level that is probably unsustainable over an extended period of time.
In the past, gold usually participated in any commodity rally. However,
this time the two recent rallies in the gold price have been snuffed out by
announcements of official sales. First in mid-March, following the International
Monetary Fund ("IMF") meetings, government leaders of the U.S., the U.K. and
France endorsed a plan for the IMF to sell gold to help forgive lesser developed
countries debt.
After an initial fall, the gold price then began to recover and reached
$290 per ounce when the Bank of England announced that the U.K. would reduce its
gold holdings. This caused gold to fall $12 per ounce and gold equities to
decline by almost 20%. The Bank of England announcement shocked the gold market.
This decision raises many questions. Will other central banks sell gold and will
they sell in the same manner; namely in a public auction? In the past, a number
of central banks have both sold and purchased gold. The U.K. was not one of the
largest holders of gold but others could follow their lead. The announcement
that the sales would be by public auction is unusual. Most often, central banks
sell first and then inform the market. They may be setting a precedent for the
IMF to follow. With a large deficit between mine supply and demand, some central
bank selling is required to keep the market in balance. A key issue is will gold
retain a monetary role? Obviously, we do not know if central banks will continue
to own gold but we do believe that gold will retain monetary attributes for
individuals all over the world. Gold remains the only currency that is no one
else's liability. Currently, confidence in paper money is high but should this
alter, we believe investors will return to the gold market.
3
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Let's Talk Stocks
The following are stock specifics on selected holdings of our Fund.
Favorable earnings prospects do not necessarily translate into higher stock
prices, but they do express a positive trend which we believe will develop over
time. The share prices of foreign holdings are stated in U.S. dollar equivalent
terms as of March 31, 1999.
Anglogold Ltd. (ANGJ.J - $40.06 - Johannesburg Stock Exchange) comprises the
South African gold assets of the Anglo American Group. The company's
reorganization involved an offering of shares in Vaal Reefs to shareholders in
the other mines and then a name change from Vaal Reefs to Anglogold. The company
is solely focused on gold and in the future, management efforts will not be
diluted by other mining activities. Over time, we expect the company will expand
outside South Africa, possibly by acquiring Minorco's gold assets. In the
meantime, further improvements can be expected from the company's extensive
South African assets.
Barrick Gold Corp. (ABX - $17.0625 - NYSE) is one of the world's leading gold
mining companies. Much of Barrick's growth has come from their very high quality
mines near Elko in Nevada, which the company purchased in the early 1980s.
Barrick has used cash flows from its Nevada Mines and the profits from the
industry's most successful hedging programs to acquire other gold assets in both
North America and overseas. Barrick has low operating costs, a strong balance
sheet and entrepreneurial management.
Euro-Nevada Mining Corp. (EN.TO - $13.32 - Toronto Stock Exchange) is a sister
company of Franco-Nevada and shares the same management. However, Euro-Nevada
only invests in gold royalty properties. The company's flagship royalty
properties are its 4% net smelter return and 5% net profits interest royalty on
Barrick Gold's Meikle Mine in the Carlin Trend of Nevada. The company has
assembled impressive royalty properties, many of which are in production. Among
a number of recent exciting developments is the continuing flow of news from the
company's Midas joint venture in Nevada with Franco-Nevada. Euro-Nevada owns 50%
of this project, which will be one of the lowest cost gold mines in the world
when it comes into production.
GoldCorp Inc. (GA.TO - $5.98 - Toronto Stock Exchange) is a mid-sized Canadian
gold producer with two producing gold mines and two industrial mineral
operations. The company's most significant asset is the Red Lake Mine, which is
part of a major gold camp in Canada. Exploration drilling has revealed
previously unknown high-grade ore zones, which will add significantly to the
mine's reserves. These new discoveries will result in increased production at
significantly lower costs. GoldCorp is undervalued relative to other mid-sized
producers and we expect management to add significantly to shareholder value.
Gold Fields Ltd. (GFLJ.J - $5.78 - Johannesburg Stock Exchange) is South
Africa's second largest gold producer and was created by the amalgamation of a
number of South African mines. The company controls the vast gold mines of Kloof
and Driefontein as well as smaller mines in South Africa. Outside South Africa,
Gold Fields is bringing a mine to production in Ghana and is continually seeking
other opportunities.
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Harmony Gold Mining Ltd. (HARJ.J - $4.66 - Johannesburg Stock Exchange) is a
medium size gold company producing nearly one million ounces of gold per year.
The company has developed a core competency in mining low grade ore from
underground very efficiently. Harmony Gold Mining has taken these skills and
applied the techniques to other poorly managed mines with success. Any small
increase in the gold price will likely have a very positive impact on profits.
Homestake Mining Co. (HM - $8.625 - NYSE) is the fourth largest North American
gold mining company with operations in all of the major gold regions except
South Africa. The company has been aggressive in replacing production due to the
depletion of older mines in the United States. Homestake has recently made
acquisitions in Australia, Canada and South America. The company does not hedge
its gold production and is a higher cost producer. This makes Homestake highly
operationally leveraged to changes in the gold price.
Meridian Gold Inc. (MDG - $5.875 - NYSE) is a small Nevada-based gold mining
company that expects to produce 250,000 ounces of gold in 1999. The company is
currently building a mine in Chile that is on budget for startup later in 1999.
Meridian has an active exploration program focused near their Chilean mine and
in Nevada on the Carlin Trend.
Stillwater Mining Co. (SWC - $26.375 - AMEX) is the only U.S. producer of
platinum and palladium, rare precious metals used in many industrial
applications and in the jewelry industry. The largest use for platinum is in
catalytic converters for the auto industry, while about half of the supply of
palladium is consumed in the production of electronic components for personal
computers and cellular telephones. Historically, platinum has traded at a
premium to the gold price. Russia is the world's major producer of palladium.
However, due to uncertainties about supplies, combined with strong demand, the
price of palladium has risen sharply during the past year. Stillwater controls a
massive high-grade platinum/palladium ore body in southern Montana. New
management has been successful in improving mining operations and is now
embarking on an expansion program. The company has excellent growth potential.
Minimum Initial Investment - $1,000
The Fund's minimum initial investment for both regular and retirement
accounts is $1,000. There are no subsequent investment minimums. No initial
minimum is required for those establishing an Automatic Investment Plan.
Additionally, The Gabelli Gold Fund and other Gabelli Funds are available
through the no-transaction fee programs at many major discount brokerage firms.
Internet
You can now visit us on the Internet. Our home page at
http://www.gabelli.com contains information about Gabelli Asset Management Inc.,
the Gabelli Mutual Funds, IRAs, 401(k)s, quarterly reports, closing prices and
other current news. You can send us e-mail at [email protected].
5
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In Conclusion
The Fund remains concentrated in leading gold companies and mid-sized gold
producers with excellent growth potential. These companies are highly
operationally leveraged and should perform well in a higher gold price
environment.
The Fund's daily net asset value is available in the financial press and
each evening after 6:00 PM (Eastern Time) by calling 1-800-GABELLI
(1-800-422-3554). The Fund's Nasdaq symbol is GOLDX. Please call us during the
business day for further information.
Sincerely,
/s/ Caesar Bryan
Caesar Bryan
President and Portfolio Manager
April 30, 1999
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Top Ten Holdings
March 31, 1999
--------------
Stillwater Mining Co. Barrick Gold Corp.
GoldCorp Inc. Euro-Nevada Mining Corp.
Harmony Gold Mining Ltd. Meridian Gold Inc.
Gold Fields Ltd. Anglogold Ltd.
Homestake Mining Co. Impala Platinum Holdings Ltd.
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NOTE: The views expressed in this report reflect those of the portfolio manager
only through the end of the period stated in this report. The manager's views
are subject to change at any time based on market and other conditions.
6
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Gabelli Gold Fund, Inc.
Portfolio of Investments -- March 31, 1999 (Unaudited)
================================================================================
Market
Shares Value
------ -----
COMMON STOCKS - 100.9%
Metals and Mining - 100.9%
Australia - 9.2%
345,000 Lihir Gold Ltd.+ .................................. $ 297,301
300,000 Normandy Mining Ltd. .............................. 245,944
80,000 Ranger Minerals NL+ ............................... 184,751
300,000 Resolute Samantha Ltd. ............................ 178,462
100,000 Ross Mining NL .................................... 56,203
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962,661
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Ireland - 1.2%
214,771 Glencar Explorations plc+ ......................... 121,347
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North America - 58.3%
30,000 Barrick Gold Corp. ................................ 511,875
32,600 Bema Gold Corp.+ .................................. 22,413
35,700 Euro-Nevada Mining Corp. .......................... 475,515
26,700 Franco-Nevada Mining Corp. ........................ 421,823
13,600 Getchell Gold Corp.+ .............................. 355,300
122,900 GoldCorp Inc., Cl. A+ ............................. 735,227
35,000 Golden Star Resources Ltd.+ ....................... 27,763
94,200 Guyanor Resources SA, Cl. B+ ...................... 33,003
63,640 Homestake Mining Co. .............................. 548,895
124,700 IAM Gold+ ......................................... 333,843
55,000 Kinross Gold Corp.+ ............................... 113,796
10,000 Meridian Gold Inc.+ ............................... 58,750
70,000 Meridian Gold Inc., Instl.+ ....................... 402,567
168,800 Moydow Mines International Inc.+ (a) .............. 167,373
17,700 Newmont Mining Corp. .............................. 309,750
40,000 Placer Dome Inc. .................................. 447,500
35,025 Stillwater Mining Co.+ ............................ 923,785
201,000 TVX Gold Inc.+ .................................... 250,153
22,437 Venoro Gold Corp., Cl. A+ ......................... 1,038
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6,140,369
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Peru - 1.5%
23,801 Cia De Minas Buenaventura SA, Cl. B ............... 158,934
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South Africa - 29.1%
8,529 Anglogold Ltd. (a) ................................ 341,639
5,400 Anglogold Ltd., ADR ............................... 108,675
21,658 Ashanti Goldfields Ltd. (a) ....................... 2,166
15,000 Ashanti Goldfields Ltd., ADR ...................... 131,250
205,000 Avgold Ltd.+ (a) .................................. 102,006
46,000 Driefontein Consolidated Ltd., ADR ................ 184,000
120,000 Durban Roodepoort Deep Ltd.+ (a) .................. 246,308
95,000 Gold Fields Ltd. (a) .............................. 549,528
70,000 Harmony Gold Mining Ltd. (a) ...................... 326,545
58,000 Harmony Gold Mining Ltd., ADR ..................... 271,875
26,000 Impala Platinum Holdings Ltd., ADR ................ 448,500
128,355 Kalahari Goldridge Mining Co. Ltd.+ ............... 36,939
367,750 Northam Platinum Ltd.+ ............................ 258,643
52,200 West Rand Consolidated Mines Ltd.+ ................ 49,372
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3,057,446
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United Kingdom - 1.6%
34,273 Randgold Resources Ltd., ADR+ ..................... 168,795
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TOTAL COMMON STOCKS................................ 10,609,552
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OPTIONS - 0.2%
South Africa - 0.2%
47,000 Durban Roodepoort Deep Ltd.+ ...................... 12,918
23,630 Durban Roodepoort Deep Ltd., Ser. B+ .............. 8,405
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TOTAL OPTIONS...................................... 21,323
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TOTAL INVESTMENTS - 101.1%
(Cost $13,115,834) .............................. 10,630,875
Other Assets and
Liabilities (Net) - (1.1)% ..................... (119,107)
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NET ASSETS - 100.0%
(1,930,345 shares outstanding) .................. $10,511,768
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NET ASSET VALUE,
Offering and Redemption
Price Per Share.................................. $5.45
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(a) Security fair valued as determined by the Board of Directors.
+ Non-income producing security.
ADR - American Depositary Receipt.
Instl - Institutional Receipt.
% of
Market Market
Geographic Diversification Value Value
- -------------------------- ----- -----
North America 57.7% $6,140,369
South Africa 29.0% 3,078,770
Australia 9.1% 962,661
Europe 2.7% 290,141
Latin America 1.5% 158,934
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100.0% $10,630,875
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7
<PAGE>
Gabelli Gold Fund, Inc.
One Corporate Center
Rye, New York 10580-1434
1-800-GABELLI
[1-800-422-3554]
fax: 1-914-921-5118
http://www.gabelli.com
e-mail: [email protected]
(Net Asset Value may be obtained daily by calling
1-800-GABELLI after 6:00 P.M.)
Board of Directors
Mario J. Gabelli, CFA Werner J. Roeder, MD
Chairman and Chief Director of Surgery
Investment Officer Lawrence Hospital
Gabelli Asset Management Inc.
E. Val Cerutti Anthonie C. van Ekris
Chief Executive Officer Managing Director
Cerutti Consultants, Inc. BALMAC International, Inc.
Anthony J. Colavita Daniel E. Zucchi
Attorney-at-Law President
Anthony J. Colavita, P.C. Daniel E. Zucchi Associates
Karl Otto Pohl
Former President
Deutsche Bundesbank
Officers and Portfolio Managers
Caesar Bryan Bruce N. Alpert
President and Vice President
Portfolio Manager and Treasurer
James E. McKee
Secretary
Distributor
Gabelli & Company, Inc.
Custodian, transfer agent and dividend agent
State Street Bank and Trust Company
Legal Counsel
Willkie Farr & Gallaghera
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This report is submitted for the general information of the shareholders of
Gabelli Gold Fund, Inc. It is not authorized for distribution to prospective
investors unless preceded or accompanied by an effective prospectus.
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