ASA Gold Fund: Why a 69% Surge Doesn’t Signal a ‘Buy’
Despite a remarkable 69.4% gain so far in 2025, ASA Gold and Precious Metals Ltd (NYSE:) isn’t necessarily a sound investment – but a strategic approach could unlock potential profits. The fund, with just over $600 million in assets under management, remains relatively unknown despite its recent performance.
ASA’s Composition and Core Challenges
ASA primarily focuses on gold and other precious metals, with 72.5% of its portfolio allocated to gold itself. Mining stocks contribute another 24.8%, while silver makes up a smaller 2% slice. However, a significant drawback is its exceptionally low dividend yield of 0.2%. “This is a good reason to avoid ASA,” one analyst noted, especially when compared to the average closed-end fund (CEF) yield of 8.5%, as tracked by CEF Insider.
Despite this low yield, ASA currently trades at an 11% discount to its net asset value (NAV), meaning it’s priced below the value of its underlying holdings. While this might suggest undervaluation, history reveals a consistent pattern. For nearly 25 years, ASA has maintained a roughly 11% discount, fluctuating with market dynamics – declining in the early 1990s when gold fell out of favor, and rising during the late 1990s stock market bubble.
Performance: A History of Boom and Bust
ASA’s impressive 69.4% surge in 2025 is directly tied to the soaring price of gold. However, past performance indicates a volatile cycle. In early 2016, ASA experienced an even more substantial gain of 119% in just seven months, coinciding with a surge in gold investments. But, as the source material indicates, a chart illustrating ASA’s performance following the 2016 surge would be beneficial here. Following that peak, the fund spent the next three years in negative territory.
This pattern highlights a critical risk: buying ASA too late can lead to prolonged losses, even when gold itself performs well. The SPDR® Gold Shares (NYSE:), often used as a benchmark for gold performance, demonstrates this contrast.
Long-Term Performance: Gold Outpaces ASA
A comparison of ASA’s NAV return versus GLD reveals a clear trend: gold consistently outperforms ASA over the long term. While ASA can briefly outpace gold during short-term spikes, its higher-risk portfolio ultimately weighs down its overall returns. “The strategy with ASA is to always bear in mind that the fund can deliver profits to short-term traders—but it’ll weigh down investors who buy for the long haul,” a senior official stated.
A Cyclical Investment Strategy for ASA
The key to potentially profiting from ASA lies in understanding its cyclical nature. The recommended strategy is as follows:
- Buy: When gold has recently underperformed, and ASA’s NAV returns are weak.
- Hold: During short-term spikes in gold prices, capitalizing on increased demand for gold miners and precious metal funds.
- Sell: When gold prices plateau after a significant run-up.
Currently, gold prices have been plateauing since around March, while ASA continues to soar. This signals a potential sell point. Investors looking to re-enter the market should wait for a pullback in gold prices, as that’s when ASA could offer a short-term opportunity.
