Gabelli Gold Fund, Inc. Shareholder Commentary September 30, 2015

Transcription

1 Gabelli Gold Fund, Inc. Shareholder Commentary September 30, 2015 Caesar M. P. Bryan Portfolio Manager To Our Shareholders, For the quarter ended September 30, 2015, the net asset value ( NAV ) per Class AAA Share of the Gabelli Gold Fund, Inc. decreased 16.7%, compared with a decrease of 26.8% for the Philadelphia Gold & Silver ( XAU ) Index. See page 2 for additional performance information. The price of gold ended the quarter at $1,115 per ounce, which is a decline of $58 per ounce or 4.9%. July was a very poor month for gold and towards the end of the month the gold price fell below $1,080 per ounce. This was largely due to expectations that the Federal Reserve (Fed) would raise short term interest rates at their September meeting leading to further strength in the dollar and fears of economic weakness in China. The devaluation of the Chinese yuan in early August provided some support to the gold price and towards the end of the month it had rallied to over $1,165 per ounce. Gold then declined into the end of the quarter. Global Allocation The accompanying chart presents the Fund s holdings by geographic region as of September 30, The geographic allocation will change based on current global market conditions. Countries and/or regions represented in the chart may or may not be included in the Fund s future portfolio. Commentary HOLDINGS BY GEOGRAPHIC REGION North America 68.0% Europe 22.2% Latin America 0.9% Asia/Pacific Rim 6.3% South Africa 2.6% As the price of gold and gold equities have declined over the past few years we are inclined to believe that the reasons to own gold have actually strengthened. Assuming that gold can be considered as some kind of financial insurance, the lower price of gold means that the cost of insurance has fallen. Merely because the

2 Comparative Results Average Annual Returns through September 30, 2015 (a) Since Inception Quarter 1 Year 5 Year 10 Year 15 Year (7/11/94) Class AAA (GOLDX) (16.73)% (26.09)% (19.73)% (1.50)% % XAU Index (26.75) (42.98) (25.16) (8.54) (0.51) (4.12) Lipper Precious Metals Fund Classification... (20.00) (33.28) (22.30) (3.28) Standard & Poor s ( S&P ) 500 Index (6.44) (0.61) (d) Class A (GLDAX) (16.68) (26.03) (19.68) (1.45) With sales charge (b) (21.47) (30.28) (20.63) (2.04) Class C (GLDCX) (16.89) (26.62) (20.32) (2.22) With contingent deferred sales charge (c).... (17.72) (27.36) (20.32) (2.22) Class I (GLDIX) (16.63) (25.87) (19.53) (1.30) In the current prospectuses dated April 30, 2015, the expense ratios for Class AAA, A, C, and I Shares are 1.58%, 1.58%, 2.33%, and 1.33%, respectively. Class AAA and Class I Shares do not have a sales charge. The maximum sales charge for Class A Shares and Class C Shares is 5.75% and 1.00%, respectively. (a) Returns represent past performance and do not guarantee future results. Total returns and average annual returns reflect changes in share price, reinvestment of distributions, and are net of expenses. 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. Current performance may be lower or higher than the performance data presented. Visit for performance information as of the most recent month end. The Fund imposes a 2% redemption fee on shares sold or exchanged within seven days after the date of purchase. Performance returns for periods of less than one year are not annualized. Investors should carefully consider the investment objectives, risks, charges, and expenses of the Fund before investing. The prospectuses contain information about these and other matters and should be read carefully before investing. To obtain a prospectus, please visit our website at 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. The Class AAA Share NAVs are used to calculate performance for the periods prior to the issuance of Class A Shares and Class C Shares on December 23, 2002, and Class I Shares on January 11, The actual performance of the Class A Shares and Class C Shares would have been lower due to the additional fees and expenses associated with the class of shares. The actual performance of the Class I Shares would have been higher due to lower expenses related to this class of shares. The XAU Index is an unmanaged indicator of stock market performance of large North American gold and silver companies, while the Lipper Precious Metals Fund Classification reflects the average performance of mutual funds classified in this particular category. The S&P 500 Index is a market capitalization weighted index of 500 large capitalization stocks commonly used to represent the U.S. equity market. Dividends are considered reinvested. You cannot invest directly in an index. (b) Performance results include the effect of the maximum 5.75% sales charge at the beginning of the period. (c) Assuming payment of the 1% maximum contingent deferred sales charge imposed on redemptions made within one year of purchase. (d) The S&P 500 Index since inception performance is as of June 30, We have separated the portfolio manager s commentary from the financial statements and investment portfolio due to corporate governance regulations stipulated by the Sarbanes-Oxley Act of We have done this to ensure that the content of the portfolio manager s commentary is unrestricted. Both the commentary and the financial statements, including the portfolio of investments, will be available on our website at 2

3 price of insurance, gold in this case, has declined it does not mean it is unnecessary or unwarranted. Homeowners who are fortunate enough never to have suffered a loss generally are ill advised to cancel their fire protection policy. A couple of developments occurred during the quarter which suggests that cracks are appearing in the veneer of financial stability. First, the Fed chose not to raise short term interest rates at their most recent meeting in September. This was a surprise for financial markets. For so long various monetary officials had expressed a desire to lift interest rates from what has become known as zero bound. Short term interest rates have been at this emergency rate for years, the economy is doing well and there seemed to be a kind of institutional desire to make a move to see how the financial plumbing would work. Whether the Fed raised rates or not is probably not the issue. Twenty five basis points is neither here nor there. What this did is raise questions about what is driving Fed policy. And with that comes the inevitable issue of investor confidence in the Fed s monetary policy. Second, the central plank of recent Fed monetary policy has been to raise asset prices through their asset purchase programs. During the third quarter cracks appeared in some asset markets such as equities, junk bonds, and commodities. For example, the price of Brent crude oil fell by 23.5% during the quarter. Also, various emerging market currencies weakened considerably. So with consumer price inflation so low, the Fed decided to back down and sit on their hands. Complicating matters for policy makers has been the strength of the dollar. This has made exports less competitive and tended to lower inflation. Also a stronger dollar is awkward for many foreign borrowers who have taken out cheap dollar debt but often have local currency revenues. A stronger dollar, lower equities, higher junk spreads does represent a monetary tightening without the Fed having to do anything. The key will be to see how the real economy behaves. Should growth weaken, the Fed will be reluctant to raise rates. Indeed, the surprise could be another easing move in response to a stagnant economy or a weakening asset prices or both. This would probably weaken the dollar and be very positive for gold. Investment Scorecard We visit with the managements of many gold companies. Our observation is that gold companies are serious in their efforts to cut costs and to only commit capital to projects that have a satisfactory return. The market seems to have ignored this or it disagrees with our premise. Gold equities, in our experience have never been as cheap relative to gold or on an absolute basis. A large upward move would be necessary for gold stocks to trade at their mean valuation over the past decade. There is an argument to be made that these companies should be more valuable now than in the past because mine production is declining and so few new deposits are being discovered. Please see the report titled Five Answers from Denver at the end of this commentary. As the quarter was so awful for gold equities, we only had a handful of stocks that appreciated in price during the three months under review. Worthy of mention were Northern Star Resources (1.6% of net assets as of September 30, 2015) and Saracen Minerals (1.3%). These are two Australian based gold producers that are benefitting from a strong Australian dollar gold price. Northern Star appreciated by 12.1%, and Saracen by 6.3%. Our top performer was Golden Queen (1.8%), a long time Fund holding, that is building a mine in California. It rose by 13.8%. To illustrate just how terrible a quarter it was for gold stocks, the two leading gold companies, Barrick Gold Corp. (2.1%) and Newmont Mining (3.5%) declined by 40.6% and 31.1%, respectively. We own both companies but at a much lower weighting than the XAU Index. 3

4 During the quarter we purchased four new positions. These included Continental Gold (0.2%), Klondex Mines (0.2%), Redstar Gold (0.1%), and Regis Resources (0.3%). Alamos completed its purchase of Aurico Gold and we received stock in Alamos and shares in a new royalty and development company called Aurico Metals (0.3%), comprising some assets from the acquired company. 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 that we believe will develop over time. Individual securities mentioned are not necessarily representative of the entire portfolio. For the following holdings, the share prices are listed first in United States dollars (USD) and second in the local currency, where applicable, and are presented as of September 30, Agnico-Eagle (8.3%) (AEM CN $25.35 $33.83 CAD Toronto Stock Exchange), is a mid tier gold producer with operations in Canada, Mexico, and Finland. The company is the dominant operator in the Val d Or region of Northern Quebec, and the only gold producer in the Canadian sub Arctic region. The company is in the process of delineating a new discovery in the Arctic region which could serve to extend the life of its large Meadowbank mine. Agnico is also delineating a deposit in Mexico which could be its third mine in the country. The company has a strong balance sheet and low unit cash costs which should allow it to comfortably complete these new projects while continuing to return cash to shareholders in the form of a dividend. Fresnillo, Plc (7.4%) (FRES LN $ London Stock Exchange), headquartered in Mexico City, is one of the largest primary silver producing companies in the world. The majority of the company s production is generated from its namesake Fresnillo Mine complex in the central Mexican state of Zacatecas. The Fresnillo vein system is comprised of very high grade, low cost, mineral bearing deposits containing silver, gold, zinc, and lead. The company is currently undertaking a meaningful growth plan, aiming to almost double production within the next four years. Fresnillo is very conscious of not diluting the quality of its operations by building substandard mines for the sake of growth. Fresnillo s new production should come from high quality, low cost operations which will generate significant additional free cash flow to the firm. Once these projects are complete, we estimate Fresnillo s dividends will increase. MAG Silver (1.8%) (MVG $7.12 $9.50 CAD Toronto Stock Exchange) owns 44% of one of the highest quality silver deposits in the world. The Juanicipio project in Zacatecas, Mexico is adjacent to Fresnillo Plc s, namesake silver mine. Having Fresnillo as the 56% majority partner and operator of the mine limits development risk for the asset, and should allow for the project to be financed with little trouble. Once operations, Juanicipio should be highly cash flow positive. A new discovery on the Juanicipio property has the potential to either extend the mine s life or increase production at the project meaningfully. Newmont Mining (3.5%) (NEM $16.07 NYSE) is the second largest gold producer in the world. The company has operations in the United States, Ghana, Peru, Indonesia, and Australia. Newmont is in the process of cutting costs and becoming a more efficient enterprise. Its Full Potential project has been instrumental in optimizing efficiencies at mine sites, allowing for maximum throughput at minimized costs. The company recently acquired the Cripple Creek mine from Anglogold Ashanti (2.3%), a company saddled with a high debt burden that sold the mine to reduce debt. Cripple Creek, located approximately 100 miles south of Denver, CO, is a low cost open pit operation with the potential to extend mine life if underground resources are converted to reserves. 4

5 Randgold Resources (12.8%) (GOLD $59.09 Nasdaq) is an African based gold mining company. The company s production is expected to ramp up over the next few years from 400,000 ounces in 2009 to over 1.2 million ounces in Randgold owns 45% of a project in the Democratic Republic of the Congo named Kibali. The Kibali project adds to Randgold s resource base while providing for growth opportunities far into the future. Randgold s currently producing properties are lower cost, which should allow the company to be cash flow positive in most gold price environments. The company has no debt and carries a net cash position on its balance sheet which provides Randgold with the ability to deploy capital in a capital starved market. Oceana Gold (0.3%) (OGC CN $1.46 $1.95 CAD Toronto Stock Exchange) is an Australian based company with mines in the Philippines and New Zealand. The company s flagship Didipio operation is an open pit copper/gold mine which operates at high operating margins and generates significant free cash flow. Oceana recently consummated the acquisition of Romarco Minerals (1.0%), also a holding in the Fund. Romarco owned one of the best undeveloped gold mines in the world. The company s Haile deposit in South Carolina is a high grade mineral deposit which will be extracted using open pit mining methods. A third party engineering study on the project envisions an operation which will produce 150,000 ounces of gold per year for 13 years at a cash operating cost of below $400 per ounce. The combination of Oceana and Romarco will result in a well capitalized, low cost multi-asset producer with the potential to generate meaningful free cash flow once Haile is built. Semafo, Inc (0.9%) (SMF CN $2.17 $2.89 CAD Toronto Stock Exchange) is a gold producer with its primary producing property in Burkina Faso in West Africa. Semafo s Mana operation has a centralized mill surrounded by multiple pits used as sources of feed. Mana is a high margin operation given the high grade of its Siou pit. The company recently completed the acquisition of Orbis Gold to gain control of its second project in Burkina Faso. This second deposit could have a high internal rate of return given the high grade nature of the deposit. Its development should be funded with cash on hand and free cash flow from Mana. Saracen Mineral Holdings (1.3%) (SAR $0.35 $0.50 AUD Australian Stock Exchange) is an Australian based gold producer which owns and operates the Carosue Dam mining complex in Western Australia. The company is expected to produce 160,000 ounces of gold in the current fiscal year at an all in sustaining cost of below $1000 per ounce. The company has a net cash position and will use this cash and cash flow from operations to build its second mine, also in Western Australia. Saracen recently released a five year plan which delineates the potential to increase production to 300,000 ounces annual through the construction of a new mine near its current operations in Western Australia. The company has the ability to finance the projects construction through cash on its balance sheet and free cash generated from Carosue Dam. Torex Gold (1.8%) (TXG CN $0.94 $1.25 CAD Toronto Stock Exchange) is a development company with a project in Guerrero, Mexico. The company is close to having built its Limon/Guajes project on time and on budget. Once at full commercial production the company should produce over 300,000 ounces of gold per year at unit cash costs in the lower half of the cost curve. The company has a second deposit near its current operation which can be its second mine. In developing its second deposit, the company has the ability to double production to 600,000 ounces while finding development with free cash flow from its first mine. Conclusion The grand global monetary experiment continues. Yet debt levels continue to rise which makes any normalization of interest rates that much more onerous and economic growth disappoints. Will economic conditions and financial market conditions allow for monetary policy normalization? If so, then gold will likely continue to languish. If not, gold will attract investor interest. 5

6 Gold equities have experienced a bear market that is hard to fathom. This is the fifth year of lower gold equity prices which we believe has never happened before. Hopefully, the fourth quarter will see a gold equity rally that prevents this from becoming a reality. From the top in December 2010 to its low on 11 September 2015, the XAU Index declined by over 80%. For comparison the gold price peaked in September 2011 at $ 1,921 per ounce and made a recent low of $1,072 on 20 July This represents a decline of 44%. We sense that gold equities have endured enough punishment. Companies have taken meaningful steps to improve operations and balance sheets and even in a flat gold price environment there is opportunity for gains and with a better gold price the upside potential for our portfolio of gold equities is immense. October 16, 2015 Top Ten Holdings September 30, 2015 Randgold Resources Ltd. 12.8% Franco-Nevada Corp. 8.6% Agnico Eagle Mines Ltd. 8.3% Fresnillo plc. 7.4% Royal Gold Inc. 4.9% Goldcorp Inc. 4.7% Detour Gold Corp. 4.3% Newmont Mining Corp. 3.5% Eldorado Gold Corp. 2.7% Centerra Gold Inc. 2.6% Note: The views expressed in this Shareholder Commentary reflect those of the Portfolio Manager only through the end of the period stated in this Shareholder Commentary. The Portfolio Manager s views are subject to change at any time based on market and other conditions. The information in this Portfolio Manager s Shareholder Commentary represents the opinions of the individual Portfolio Manager and is not intended to be a forecast of future events, a guarantee of future results, or investment advice. Views expressed are those of the Portfolio Manager and may differ from those of other portfolio managers or of the firm as a whole. This Shareholder Commentary does not constitute an offer of any transaction in any securities. Any recommendation contained herein may not be suitable for all investors. Information contained in this Shareholder Commentary has been obtained from sources we believe to be reliable, but cannot be guaranteed. Minimum Initial Investment $1,000 The Fund s minimum initial investment for regular accounts is $1,000. There are no subsequent investment minimums. No initial minimum is required for those establishing an Automatic Investment Plan. Additionally, the Fund and other Gabelli/GAMCO Funds are available through the no-transaction fee programs at many major brokerage firms. The Fund imposes a 2% redemption fee on shares sold or exchanged within seven days or less of a purchase. See the prospectuses for more details. Please visit us on the Internet. Our homepage at contains information about GAMCO Investors, Inc., the Gabelli/GAMCO Mutual Funds, IRAs, 401(k)s, current and historical quarterly reports, 6

7 closing prices, and other current news. We welcome your comments and questions via at The Fund s daily NAV is available in the financial press and each evening after 7:00 PM (Eastern Time) by calling 800-GABELLI ( ). Please call us during the business day, between 8:00 AM 7:00 PM (Eastern Time), for further information. You may sign up for our alerts at and receive early notice of quarterly report availability, news events, media sightings, and mutual fund prices and performance. e-delivery We are pleased to offer electronic delivery of Gabelli fund documents. Direct shareholders of our mutual funds can elect to receive their Annual and Semiannual Reports, Manager Commentaries, and Prospectuses via e-delivery. For more information or to sign-up for e-delivery, please visit our website at Multi-Class Shares The Gabelli Gold Fund began offering additional classes of Fund shares in December Class AAA Shares are no-load shares offered directly through selected broker/dealers. Class A and Class C Shares are targeted to the needs of investors who seek advice through financial consultants. Class I Shares are available directly through the Fund s distributor, or brokers that have entered into selling agreements specifically with respect to Class I Shares. The Board of Directors determined that expanding the types of Fund shares available through various distribution options would enhance the ability of the Fund to attract additional investors. 7

8 Five Answers From Denver September 25, 2015 A GOLD Market Update from the Desk of Christopher Mancini, CFA I attended the Denver Gold Forum from September Attendance at the conference was down from last year, and the mood was the lowest I ve ever seen. There was a consensus amongst conference participants that generalist investors were absent, while natural resource investors lamented losses. Despite the broad negative sentiment, the companies with which I met, mostly holdings in the Gabelli Gold Fund, were relatively well positioned for a turnaround in the gold price. These companies are generally well funded, free cash flow positive, and have options for growth. Prior to my attendance at the conference, I illuminated five pertinent questions. Please find my answers to these questions below. 1. How low can gold go? Five Golden Questions Q: If the price of gold falls below the marginal cost of production, mines will close and gold supply will decline. This should provide a level of price support for gold. Have we reached this point of support at $1,100 per ounce, or could we go lower? A: At $1,100 per ounce, gold mines will not close. Mining costs have declined over the past year as weaker producer country currencies, lower energy prices, and internal cost cutting efforts have had a positive effect on costs. If gold were to trade below $1,050 per ounce for a sustainable period, a few high cost mines would most likely close, aiding the supply/demand balance in a small way. At this point in time, an increase in the gold price will have to be driven by an increase in demand and not a decline in supply. 8

9 2. When will the strong pounce? Q: Some gold miners have low cash costs and net cash balances. These companies are in a position to exploit the current weakness in the sector by buying good assets at low valuations. Some of the best positioned companies, such as Randgold Resources (12.8% of net assets as of September 30, 2015) and Fresnillo, Plc (7.4%) have been reticent to act. Is this due to unwillingness amongst sellers, inherent conservatism, a view on precious metals prices, or other factors? A: I met with the managements of both Randgold and Fresnillo. Fresnillo plans on building or expanding eight projects within the next four years, spending roughly $1.4 billion to nearly double its production over this time period. Although much of this expense will be covered by cash flow, the company will have to borrow given current metals prices. I believe Fresnillo s conservative culture will limit its desire to acquire while it stretches its balance sheet somewhat to build. Randgold answered my question two days before the start of the conference in its announcement of a deal to fund the redevelopment of Anglogold s (2.3%) Obuasi mine. Obuasi is an old mine in Ghana with a long legacy. Many legacy issues at the mine have led to inefficient operating practices which, coupled with a declining gold price, caused the mine to close late last year. Anglogold and Randgold have entered into an agreement whereby Randgold has a free option to redesign and eventually rebuild and operate Obuasi. If Randgold decides to proceed with the project, it and Anglogold will each fund 50% of the capital costs of project, and be 50/50 joint venture partners in the operation. Randgold is using its strong balance sheet and operating expertise to get something for free which I believe would have cost the company hundreds of millions of dollars a few years ago. Randgold has pounced, and I believe that shareholders will benefit. 3. Has all the fat been cut, or do further opportunities exist to reduce costs? Q: According to data compiled by Scotiabank, average all-in sustaining costs for gold miners peeked in 2012 at almost $1200/oz. As the price of gold declined, so too did production costs, which now average below $1000/oz. Some of this decline has been due to exogenous factors such as currency depreciation and lower energy prices, while some has been due to internal cost cutting efforts. How much lower can operating costs go? A. Some fat cutting opportunities still exist. Barrick Gold (2.1%), the largest gold mining company in the world by volume, highlighted to me its current $2 billion cost cutting effort. Some of these cuts will come from operating efficiencies, while others will come from deferred capital 9

10 expenditures, and lower project assessment costs as fewer projects are assessed. Although much has been cut already, some of the historically fatter organizations have the ability to reduce still more. 4. What is the appropriate level of debt for a mining company, if any? Q: Many gold mining companies took on too much debt during the bull market, and some which did so are now issuing equity or selling assets into a depressed market to de-lever balance sheets and reduce financial risk. If (when) the industry rebounds, what might be considered an appropriate level of debt to hold? A: I sensed no desire for the winners to change their strategies which have worked. To the degree that any debt might be used to fund new projects in this low price environment, I believe it will be paid back as quickly as possible. Over-levered companies which are now looking over the brink and being forced to sell assets into a depressed market might also opt for a zero debt position if given the opportunity. Debt has been damning for those in the industry who relied on it, and I sensed no desire amongst past sinners to repeat the same mistakes. 5. How does the gold industry regain investor confidence? Q: While the gold price rose during the last bull market, mining companies overspent on capital projects, took on too much debt, and hardly returned cash to shareholders. Investors are rightfully disgruntled, and many seem to be avoiding the sector completely. What can the industry do as a whole to help gold regain its shine? A. I believe that the industry can regain investor confidence by staying lean, continuing to reduce debt, limiting growth to only the best projects with high projected risk-adjusted returns, and returning excess capital to shareholders in the form of dividends. An industry positioned as such should be able to provide investors with less volatile exposure to movements in the gold price, while also providing income and growth. The current crisis in the gold mining industry is creating many opportunities. These include opportunities for the strong to get stronger, and the weak to permanently modify their bad habits of the past. When the gold price turns, the industry should be stronger than it was before the crisis began. I believe that investors who are able to endure the interim uncertainty relative when this upturn in price might occur will be rewarded for their courage and patience when it does. This report is not an offer to sell any security nor is it a solicitation of an offer to buy any security. 10

11 GABELLI GOLD FUND, INC. One Corporate Center Rye, NY Portfolio Manager Biography Caesar M. P. Bryan joined GAMCO Asset Management in He is a member of the global investment team of Gabelli Funds, LLC and portfolio manager of several funds within the Gabelli/GAMCO Funds Complex. Prior to joining Gabelli, Mr. Bryan was a portfolio manager at Lexington Management. He began his investment career in 1979 at Samuel Montagu Company, the London based merchant bank. Mr. Bryan graduated from the University of Southampton in England with a Bachelor of Law and is a member of the English Bar.

12 GABELLI GOLD FUND, INC. One Corporate Center Rye, NY t 800-GABELLI ( ) f e info@gabelli.com GABELLI.COM Net Asset Value per share available daily by calling 800-GABELLI after 7:00 P.M. BOARD OF DIRECTORS Mario J. Gabelli, CFA Chairman and Chief Executive Officer, GAMCO Investors, Inc. E. Val Cerutti Chief Executive Officer, Cerutti Consultants, Inc. Anthony J. Colavita President, Anthony J. Colavita, P.C. Werner J. Roeder, MD Former Medical Director, Lawrence Hospital Anthonie C. van Ekris Chairman, BALMAC International, Inc. Salvatore J. Zizza Chairman, Zizza & Associates Corp. Daniel E. Zucchi President, Daniel E. Zucchi Associates OFFICERS Bruce N. Alpert President Andrea R. Mango Secretary Agnes Mullady Treasurer Richard J. Walz Chief Compliance Officer DISTRIBUTOR G.distributors, LLC CUSTODIAN, TRANSFER AGENT, AND DIVIDEND DISBURSING AGENT State Street Bank and Trust Company LEGAL COUNSEL Paul Hastings LLP GABELLI GOLD FUND, INC. Shareholder Commentary September 30, 2015 This report is submitted for the general information of the shareholders of the Gabelli Gold Fund, Inc. It is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. GAB008Q315SC

13 Gabelli Gold Fund, Inc. Third Quarter Report September 30, 2015 Caesar M. P. Bryan Portfolio Manager To Our Shareholders, For the quarter ended September 30, 2015, the net asset value ( NAV ) per Class AAA Share of the Gabelli Gold Fund, Inc. decreased 16.7% compared with a decrease of 26.8% for the Philadelphia Gold & Silver ( XAU ) Index. See below for additional performance information. Enclosed is the schedule of investments as of September 30, Comparative Results Average Annual Returns through September 30, 2015 (a) (Unaudited) Since Quarter 1 Year 5 Year 10 Year 15 Year Inception (7/11/94) Class AAA (GOLDX)... (16.73)% (26.09)%(19.73)% (1.50)% 8.29% 2.47% XAU Index... (26.75) (42.98) (25.16) (8.54) (0.51) (4.12) Lipper Precious Metals Fund Classification... (20.00) (33.28) (22.30) (3.28) Standard & Poor s ( S&P ) 500 Index... (6.44) (0.61) (d) Class A (GLDAX)... (16.68) (26.03) (19.68) (1.45) Withsalescharge(b)... (21.47) (30.28) (20.63) (2.04) Class C (GLDCX)... (16.89) (26.62) (20.32) (2.22) With contingent deferred sales charge (c)... (17.72) (27.36) (20.32) (2.22) Class I (GLDIX)... (16.63) (25.87) (19.53) (1.30) In the current prospectuses dated April 30, 2015, the expense ratios for Class AAA, A, C, and I Shares are 1.58%, 1.58%, 2.33%, and 1.33%, respectively. Class AAA and Class I Shares do not have a sales charge. The maximum sales charge for Class A Shares and Class C Shares is 5.75% and 1.00%, respectively. (a) Returns represent past performance and do not guarantee future results. Total returns and average annual returns reflect changes in share price, reinvestment of distributions, and are net of expenses. 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. Current performance may be lower or higher than the performance data presented. Visit for performance information as of the most recent month end. The Fund imposes a 2% redemption fee on shares sold or exchanged within seven days after the date of purchase. Performance returns for periods of less than one year are not annualized. Investors should carefully consider the investment objectives, risks, charges, and expenses of the Fund before investing. The prospectuses contain information about these and other matters and should be read carefully before investing. To obtain a prospectus please visit our website at 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. The Class AAA Share NAVs are used to calculate performance for the periods prior to the issuance of Class A Shares and Class C Shares on December 23, 2002, and Class I Shares on January 11, The actual performance of the Class A Shares and Class C Shares would have been lower due to the additional fees and expenses associated with these classes of shares. The actual performance of the Class I Shares would have been higher due to lower expenses related to this class of shares. The XAU Index is an unmanaged indicator of stock market performance of large North American gold and silver companies, while the Lipper Precious Metals Fund Classification reflects the average performance of mutual funds classified in this particular category. The S&P 500 Index is a market capitalization weighted index of 500 large capitalization stocks commonly used to represent the U.S. equity market. Dividends are considered reinvested. You cannot invest directly in an index. (b) Performance results include the effect of the maximum 5.75% sales charge at the beginning of the period. (c) Assuming payment of the 1% maximum contingent deferred sales charge imposed on redemptions made within one year of purchase. (d) The S&P 500 Index since inception performance is as of June 30, 1994.

14 Gabelli Gold Fund, Inc. Schedule of Investments September 30, 2015 (Unaudited) Market Shares Value COMMON STOCKS 96.3% Metals and Mining 96.3% Africa 2.6% 401,200 AngloGold Ashanti Ltd., ADR... $ 3,285, ,000 Gold Fields Ltd., ADR ,000 50,362 Sibanye Gold Ltd., ADR ,680 3,785,508 Australia 6.3% 382,079 Newcrest Mining Ltd.... 3,400,503 1,176,227 Northern Star Resources Ltd.... 2,204,342 4,450,000 Perseus Mining Ltd ,683 1,500,000 Perseus Mining Ltd , ,000 Regis Resources Ltd ,869 5,077,272 Saracen Mineral Holdings Ltd.... 1,781,874 9,017,391 North America 64.4% 140,246 Agnico Eagle Mines Ltd., NewYork... 3,551, ,186 Agnico Eagle Mines Ltd., Toronto... 8,167, ,000 Alacer Gold Corp , ,675 Alamos Gold Inc., New York, Cl. A... 2,371, ,000 Alamos Gold Inc., Toronto, Cl. A... 1,295,616 5,500,000 Alexandria Minerals Corp. (a) , ,000 Asanko Gold Inc.... 1,022, ,532 AuRico Metals Inc ,857 2,029,650 B2Gold Corp.... 2,144, ,700 Barrick Gold Corp., New York... 2,249, ,661 Barrick Gold Corp., Toronto , ,000 Centerra Gold Inc.... 3,672, ,000 Comstock Mining Inc , ,000 Continental Gold Inc , ,000 Dalradian Resources Inc , ,000 Detour Gold Corp.... 6,078,007 1,950,000 Eastmain Resources Inc , ,000 Eldorado Gold Corp., New York ,500 1,073,333 Eldorado Gold Corp., Toronto... 3,442, ,700 Franco-Nevada Corp.(a)... 11,665, ,800 Goldcorp Inc... 6,692, ,000 Golden Queen Mining Co. Ltd., New York ,895 3,027,000 Golden Queen Mining Co. Ltd., Toronto... 2,245, ,000 Klondex Mines Ltd , ,000 MAG Silver Corp.... 2,491,570 1,500,000 Mandalay Resources Corp ,812 1,400,000 Merrex Gold Inc ,871 1,000,000 Midas Gold Corp , ,871 Newmont Mining Corp.... 4,995, ,000 OceanaGold Corp , ,860 Osisko Gold Royalties Ltd.... 2,608, ,000 Petaquilla Minerals Ltd.... 1,873 2,440,000 Petaquilla Minerals Ltd. (a)... 45,710 Shares Market Value 781,800 Premier Gold Mines Ltd.... $ 1,318,134 3,750,000 Redstar Gold Corp , ,000 Richmont Mines Inc.... 1,257,774 3,850,000 Romarco Minerals Inc.... 1,355, ,000 Royal Gold Inc.... 6,906, ,000 SEMAFO Inc.... 1,299, ,000 Silver Wheaton Corp., New York... 2,041,700 30,000 Silver Wheaton Corp., Toronto , ,000 Tahoe Resources Inc... 2,240,465 2,250,000 Torex Gold Resources Inc.... 2,107, ,000 Torex Gold Resources Inc.(a) ,340 3,041,000 Wesdome Gold Mines Ltd.... 2,210,393 92,462,037 United Kingdom 23.0% 250,000 Acacia Mining plc ,902 2,119,000 Centamin plc... 1,955,359 1,170,500 Fresnillo plc... 10,473,500 25,000,000 G-Resources Group Ltd , ,152 Hochschild Mining plc ,335 1,000,000 Hummingbird Resources plc , ,900 Randgold Resources Ltd., ADR... 18,075,631 33,071,951 TOTAL COMMON STOCKS ,336,887 WARRANTS 0.4% Metals and Mining 0.4% North America 0.4% 87,500 Franco-Nevada Corp., expire 06/16/ ,541 United Kingdom 0.0% 288,345 Hummingbird Resources plc, expire 10/16/ TOTAL METALS AND MINING ,541 TOTAL WARRANTS ,541 Principal Amount U.S. GOVERNMENT OBLIGATIONS 3.3% $ 4,715,000 U.S. Treasury Bills, 0.000% to 0.240%, 11/12/15 to 03/17/ ,714,951 TOTAL INVESTMENTS 100.0% (Cost $179,337,611)... $143,576,379 See accompanying notes to schedule of investments. 2

15 Gabelli Gold Fund, Inc. Schedule of Investments (Continued) September 30, 2015 (Unaudited) Value Aggregate tax cost.... $179,839,666 Gross unrealized appreciation... $ 40,010,469 Gross unrealized depreciation... (76,273,756) Net unrealized appreciation/depreciation... $(36,263,287) (a) Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At September 30, 2015, the market value of Rule 144A securities amounted to $12,302,740 or 8.57% of total investments. Non-income producing security. Represents annualized yield at date of purchase. ADR American Depositary Receipt Geographic Diversification %of Market Value Market Value North America % $ 97,701,529 United Kingdom ,071,951 Australia ,017,391 Africa ,785, % $143,576,379 See accompanying notes to schedule of investments. 3

16 Gabelli Gold Fund, Inc. Notes to Schedule of Investments (Unaudited) As an investment company, the Fund follows the investment company accounting and reporting guidance, which is part of U.S. generally accepted accounting principles ( GAAP ) that may require the use of management estimates and assumptions in the preparation of its schedule of investments. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Fund in the preparation of its schedule of investments. Security Valuation. Portfolio securities listed or traded on a nationally recognized securities exchange or traded in the U.S. over-the-counter market for which market quotations are readily available are valued at the last quoted sale price or a market s official closing price as of the close of business on the day the securities are being valued. If there were no sales that day, the security is valued at the average of the closing bid and asked prices or, if there were no asked prices quoted on that day, then the security is valued at the closing bid price on that day. If no bid or asked prices are quoted on such day, the security is valued at the most recently available price or, if the Board of Directors (the Board ) so determines, by such other method as the Board shall determine in good faith to reflect its fair market value. Portfolio securities traded on more than one national securities exchange or market are valued according to the broadest and most representative market, as determined by Gabelli Funds, LLC (the Adviser ). Portfolio securities primarily traded on a foreign market are generally valued at the preceding closing values of such securities on the relevant market, but may be fair valued pursuant to procedures established by the Board if market conditions change significantly after the close of the foreign market, but prior to the close of business on the day the securities are being valued. Debt instruments with remaining maturities of sixty days or less that are not credit impaired are valued at amortized cost, unless the Board determines such amount does not reflect the securities fair value, in which case these securities will be fair valued as determined by the Board. Debt instruments having a maturity greater than sixty days for which market quotations are readily available are valued at the average of the latest bid and asked prices. If there were no asked prices quoted on such day, the security is valued using the closing bid price. U.S. government obligations with maturities greater than sixty days are normally valued using a model that incorporates market observable data such as reported sales of similar securities, broker quotes, yields, bids, offers, and reference data. Certain securities are valued principally using dealer quotations. Securities and assets for which market quotations are not readily available are fair valued as determined by the Board. Fair valuation methodologies and procedures may include, but are not limited to: analysis and review of available financial and non-financial information about the company; comparisons with the valuation and changes in valuation of similar securities, including a comparison of foreign securities with the equivalent U.S. dollar value American Depositary Receipt securities at the close of the U.S. exchange; and evaluation of any other information that could be indicative of the value of the security. The Fund employs a fair value model to adjust prices to reflect events affecting the values of certain portfolio securities which occur between the close of trading on the principal market for such securities (foreign exchanges and over-the-counter markets) at the time when net asset value of the Fund is determined. If the Fund s valuation committee believes that a particular event would materially affect net asset value, further adjustment is considered. 4

17 Gabelli Gold Fund, Inc. Notes to Schedule of Investments (Unaudited) (Continued) The inputs and valuation techniques used to measure fair value of the Fund s investments are summarized into three levels as described in the hierarchy below: Level 1 quoted prices in active markets for identical securities; Level 2 other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.); and Level 3 significant unobservable inputs (including the Board s determinations as to the fair value of investments). A financial instrument s level within the fair value hierarchy is based on the lowest level of any input both individually and in the aggregate that is significant to the fair value measurement. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The summary of the Fund s investments in securities by inputs used to value the Fund s investments as of September 30, 2015 is as follows: Level 1 Quoted Prices Valuation Inputs Level 2 Other Significant Observable Inputs Level 3 Significant Unobservable Inputs Total Market Value at 9/30/15 INVESTMENTS IN SECURITIES: ASSETS (Market Value): Common Stocks: Metals and Mining Africa $ 3,785,508 $ 3,785,508 Australia 5,616,888 $3,400,503 9,017,391 North America 91,595, ,235 $47,583 92,462,037 United Kingdom 33,071,951 33,071,951 Total Common Stocks 134,069,566 4,219,738 47, ,336,887 Warrants: Metals and Mining North America 524, ,541 United Kingdom 0 U.S. Government Obligations 4,714,951 4,714,951 TOTAL INVESTMENTS IN SECURITIES ASSETS $134,594,107 $8,934,689 $47,583 $143,576,379 The Fund did not have material transfers among Level 1, Level 2, and Level 3 during the period ended September 30, The Fund s policy is to recognize transfers among Levels as of the beginning of the reporting period. The Fund did not have Level 3 investments at December 31, Additional Information to Evaluate Qualitative Information. General. The Fund uses recognized industry pricing services approved by the Board and unaffiliated with the Adviser to value most of its securities, and uses broker quotes provided by market makers of securities not valued by these and other recognized pricing sources. Several different pricing feeds are received to value domestic equity securities, international equity securities, preferred equity securities, and fixed income securities. The data within these feeds is ultimately sourced from major stock exchanges and trading systems where these securities trade. The prices supplied by external sources are checked by obtaining quotations or actual transaction prices from market participants. If a price obtained from the pricing source is deemed unreliable, prices will be sought from another pricing service or from a broker/dealer that trades that security or similar securities. 5

18 Gabelli Gold Fund, Inc. Notes to Schedule of Investments (Unaudited) (Continued) Fair Valuation. Fair valued securities may be common and preferred equities, warrants, options, rights, and fixed income obligations. Where appropriate, Level 3 securities are those for which market quotations are not available, such as securities not traded for several days, or for which current bids are not available, or which are restricted as to transfer. Among the factors to be considered to fair value a security are recent prices of comparable securities that are publicly traded, reliable prices of securities not publicly traded, the use of valuation models, current analyst reports, valuing the income or cash flow of the issuer, or cost if the preceding factors do not apply. A significant change in the unobservable inputs could result in a lower or higher value in Level 3 securities. The circumstances of Level 3 securities are frequently monitored to determine if fair valuation measures continue to apply. The Adviser reports quarterly to the Board the results of the application of fair valuation policies and procedures. These include back testing the prices realized in subsequent trades of these fair valued securities to fair values previously recognized. Foreign Currency Translations. The books and records of the Fund are maintained in U.S. dollars. Foreign currencies, investments, and other assets and liabilities are translated into U.S. dollars at current exchange rates. Purchases and sales of investment securities, income, and expenses are translated at the exchange rate prevailing on the respective dates of such transactions. Unrealized gains and losses that result from changes in foreign exchange rates and/or changes in market prices of securities have been included in unrealized appreciation/depreciation on investments and foreign currency translations. Net realized foreign currency gains and losses resulting from changes in exchange rates include foreign currency gains and losses between trade date and settlement date on investment securities transactions, foreign currency transactions, and the difference between the amounts of interest and dividends recorded on the books of the Fund and the amounts actually received. The portion of foreign currency gains and losses related to fluctuation in exchange rates between the initial purchase trade date and subsequent sale trade date is included in realized gain/(loss) on investments. Foreign Securities. The Fund may directly purchase securities of foreign issuers. Investing in securities of foreign issuers involves special risks not typically associated with investing in securities of U.S. issuers. The risks include possible revaluation of currencies, the inability to repatriate funds, less complete financial information about companies, and possible future adverse political and economic developments. Moreover, securities of many foreign issuers and their markets may be less liquid and their prices more volatile than securities of comparable U.S. issuers. Foreign Taxes. The Fund may be subject to foreign taxes on income, gains on investments, or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries as applicable, based upon its current interpretation of tax rules and regulations that exist in the markets in which it invests. Restricted Securities. The Fund may invest up to 15% of its net assets in securities for which the markets are restricted. Restricted securities include securities whose disposition is subject to substantial legal or contractual restrictions. The sale of illiquid securities often requires more time and results in higher brokerage charges or dealer discounts and other selling expenses than does the sale of securities eligible for trading on national securities exchanges or in the over-the-counter markets. Restricted securities may sell at a price lower than similar securities that are not subject to restrictions on resale. Securities freely saleable among qualified institutional 6