gabelli gold Fund, inc. shareholder commentary March 31, 2016

Transcription

1 gabelli gold Fund, inc. shareholder commentary March 31, 2016 To our shareholders, caesar M. p. Bryan portfolio Manager For the quarter ended March 31, 2016, the net asset value ( NAV ) per Class AAA Share of the Gabelli Gold Fund, Inc. increased 42.4% compared with an increase of 53.4% for the Philadelphia Gold & Silver ( XAU ) Index. See page 2 for additional performance information. During the first quarter gold buyers changed their focus from the frequency of projected interest rate hikes in the U.S., to further monetary ease in Japan and Europe. The former is probably bearish for gold while the latter is gold friendly. This abrupt change in investor sentiment led to considerable money flows into the gold bullion ETFs. During the quarter almost ten million ounces of gold were added to gold ETFs and by the end of March gold ETFs contained 56.7 million ounces of gold. Gold in ETFs are now back to a level last seen towards the end of For reference, gold in bullion ETFs peaked at 84.6 million ounces in December We believe this renewed western investor interest in gold is significant and may signal that the gold bear market is over. global allocation The accompanying chart presents the Fund s holdings by geographic region as of March 31, 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. Holdings By geographic region United Kingdom 23.0% Australia 6.7% North America 65.5% Africa 4.8%

2 comparative results average annual returns through March 31, 2016 (a) Since Inception Quarter 1 Year 5 Year 10 Year 15 Year (7/11/94) class aaa (goldx) % 19.63% (14.19)% (1.07)% % XAU Index (20.34) (6.87) 2.56 (2.21) Lipper Precious Metals Fund Classification (18.49) (3.11) Standard & Poor s ( S&P ) 500 Index class a (gldax) (14.15) (1.04) With sales charge (b) (15.16) (1.63) class c (gldcx) (14.81) (1.80) With contingent deferred sales charge (c) (14.81) (1.80) class i (gldix) (13.97) (0.86) in the current prospectuses dated april 29, 2016, the expense ratios for class aaa, a, c, and i shares are 1.62%, 1.62%, 2.37%, and 1.37%, 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. 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 commentary According to the World Gold Council there have been five bull and five bear markets in gold since the start of the 1970s. The average bull market has lasted 63 months with the gold price rising by 380%. The average gold bear market, excluding the period from September 2011 to December 2015, has lasted 47 months with the gold price declining by 47%. Assuming that the recent gold bear market ended in December 2015 it would have lasted 52 months and seen gold decline by 44.1%. Interestingly, this happens to be very near to the average bear market in both length of time and price decline. We find this encouraging. In past commentaries, we have suggested this bear market is similar to the gold bear market that began in January 1975 which lasted twenty months and saw gold fall by 46.4%. This interrupted the decade long gold bull market during the 1970s. The gold price rose by over 700% following the gold bear market as inflation gathered pace and markets lost confidence in central bank policies. We believe that during the past few years investors reduced their gold exposure as they feared bad consequences of zero short term interest rates and central asset purchases that never materialized. Rather economies expanded, albeit slowly, and asset markets performed well. There was little or no reason to own gold when there was so much opportunity for gain in financial markets. Indeed, there was an expensive opportunity cost. However, this view was based on the belief that central banks had largely done what was necessary and that their next move would be to normalize monetary policy. The Federal Reserve's (Fed) decision to raise interest rates in December 2015 supported this view. And markets believed that this was the start of a process of the Fed raising interest rates on a number of occasions this year and beyond. This has not turned out to be the case. During the first quarter of 2016 the Bank of Japan surprised markets by lowering interest rates into negative territory. Also, the European Central Bank further reduced deposit rates which were already negative and increased their program of asset purchases. Further, a combination of weaker equity markets and slower growth has caused the Fed to rethink their ideas about raising interest rates. Central banks, by their recent actions and statements, have confirmed that they will continue to tinker with unconventional measures rather than normalize policy. This, we believe, will continue to support the gold price. Negative interest rates represent a new and unprecedented tool that central banks have deployed. The most obvious result of negative interest rates has been to lower the yield on government bonds across the yield curve. By the middle of April 2016, a significant portion of the universe of sovereign debt carries a negative yield. According to Bloomberg, about $7 trillion of sovereign debt is yielding less than zero. The two year government debt of thirteen developed counties is negative and ten countries boast five year negative yields. Japan and Switzerland have negative ten year government bond yields. This is likely to result in all sorts of dislocations and prove to be highly disruptive. 3

4 The experience of the last seven years of unconventional monetary policies has helped raise asset prices but has not been particularly successful in spurring or raising the rate of economic growth. Negative interest rates may be viewed by investors as a somewhat desperate attempt by central banks to raise nominal rates of growth which will lessen the real debt burden. Negative interest rates reduces or eliminates the opportunity cost of holding gold. Savers may increasingly favor gold over negative yielding government bonds. investment scorecard Gold equities bounced hard during the quarter from extremely depressed levels. And as expected those companies with the highest costs and most financial leverage performed best. Companies with minimal debt levels and good assets, which often means low operating costs, tend to underperform in an initial upward move. It is this latter group of companies that we emphasize in the Fund. As the bull market develops, we expect the market will once again turn its focus to companies that have long life, low cost mines with little debt that will be able to return cash to shareholders rather than to debt holders and banks. Some of our holdings enjoyed a spectacular quarter. For example, Harmony Gold (1.0% of net assets as of March 31, 2016) rose by 291.8% and longtime holding Golden Queen (2.2%) appreciated by 182.4%. Some other notable performers were Barrick Gold (2.8%), the world's largest gold miner, which rallied by 85.4%; Alamos Gold (3.2%), which rose by 62.5%; and Detour Gold (4.1%), which was up by 52.5%. These are all large positions in the portfolio and contributed significantly to performance. As usual, some portfolio holdings disappointed. These included Osisko Gold Royalties (1.2%), Eldorado Gold (1.8%), Alacer Gold (0.4%), Centerra Gold (1.3%), and Comstock Mining (0.1%). The latter two companies declined slightly during the quarter and the others, although they posted positive returns, were left behind in what was a strong quarter for the sector. During the quarter we initiated one new position, Fortuna Silver (0.4%). The company owns and operates two silver mines, one is located in Mexico and the other is in Peru. Operating costs are declining which will improve profitability and the company has a strong balance sheet with a net cash position. Silver has significantly underperformed gold and we think that this underperformance has largely run its course and that silver will catch up in the coming months, especially if the gold price rallies further. As a result we added to our holdings of Hochschild Mining (1.0%) and Tahoe Resources (3.3%), who both produce silver as well gold. We also added to our holding in Mag Silver (1.9%), as well as a number of other portfolio holdings. We sold our holding in Sibanye Gold. This is a South African based gold mining company that was spun out of Gold Fields (1.7%) and contains most of Gold Fields South African mines. The company has been very active in terms of acquisitions in its young life and recently acquired some coal and platinum assets. We have no strong view on these moves but we prefer to focus our attention on gold and, to a lesser extent, silver. Otherwise we reduced our exposure to B2Gold (0.6%), Franco-Nevada (7.1%), and Randgold Resources (11.9%). The latter two companies remain large and core holdings in the Fund. 4

5 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 March 31, Agnico-Eagle (7.4% of net assets as of March 31, 2016) (AEM CN $36.18 $46.99 CAN 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 called El Barqueno 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. Alamos Gold (3.2%) (AGI CN $5.30 $6.88 CAN Toronto Stock Exchange) is a Canadian listed gold miner with two primary operating assets, the Young Davidson mine in northern Ontario and the Mulatos mine in the Mexican state of Sonora. Young Davidson is in the process of ramping up to a full productive capacity of 8000 metric tons of ore processed per day. Once at full productive capacity, Young Davidson will be one of the lowest cost mines in Canada, producing 225,000 ounces of gold per year at a cash cost below $600 per ounce. The Mulatos mine is an open-pit heap leach operation which has been in operation for eight years. The mine is currently processing lower grade material, causing production to be lower and costs to be higher than previous years. As higher grade material is processed, production should increase and unit costs should decline. Detour Gold (4.1%) (DGC CN $15.75 $20.45 CAN Toronto Stock Exchange), is a single asset company based in Toronto, with its sole operating mine in northern Ontario. The Detour Lake mine is a large, bulk tonnage open pit operation which is currently the biggest gold mine in Canada. The mine s cost base is largely fixed, with labor and electricity being large components, both are priced in Canadian dollars. As the Canadian dollar weakens relative to the U.S. dollar and the price of gold, the cost base of the Detour Lake mine declines, and shareholders should benefit from a more profitable mine. Northern Star Resources (1.4%) (NST $2.63 $3.43 AUD Australian Stock Exchange) is an Australian based mining company which underwent a dramatic transformation in The company acquired four mines in 2014 from Barrick Gold and Newmont Mining, the two largest gold mining companies in the world. Northern Star is now optimizing operations at each newly acquired mine and spending on exploration to expand the deposits. We expect the company to produce over 600,000 ounces of gold this year, while a weakened Australian dollar is helping to lower operating costs. 5

6 Oceana Gold (1.9%) (OGC CN $2.75 $3.57 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. On October 1, 2015, Oceana consummated the acquisition of Romarco Minerals. 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 results in a well capitalized, low cost multi asset producer with the potential to generate meaningful free cash flow once Haile is built. Randgold Resources (11.9%) (GOLD $90.81 Nasdaq) is an African based gold mining company. The company s production is expected to ramp 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 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. Saracen Mineral Holdings (1.7%) (SAR $0.74 $0.97 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 $1,000 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. Last year Saracen 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 project s construction through cash on its balance sheet and free cash generated from Carosue Dam. Tahoe Resources (3.3%) (THO $10.03 $13.02 CAD Toronto Stock Exchange) owns the Escobal mine in Guatemala, one of the largest primary silver mines in the world. Escobal recently achieved full commercial production and is meaningfully cash flow positive. Tahoe also owns two assets in Peru. One is an operating mine and one is a development project. The combined company will be cash flow generative, and be able to finance the build of its next project with free cash flow from its two producing assets and cash on its balance sheet. The company recently completed the acquisition of Ontario-based Lakeshore Gold. Tahoe aims to expand Lakeshore s mineral inventory through an aggressive exploration program. If successful, the company will likely expand plant capacity on site and grow production. Tahoe pays a dividend, and we expect this will increase as the prices of gold and silver rise. 6

7 Torex Gold (2.5%) (TXG CN $10.03 $13.02 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 Gold remains misunderstood and under owned by investors. Negative short term interest rates and negative long term government bond yields in many countries will result, we suggest, in a reappraisal of holding gold in a financial portfolio. Declining real interest rates and negative nominal rates largely eliminates the opportunity cost of holding gold. The cost in lost income of holding gold, an asset with no counter party risk, has slowly been eliminated in the recent past. It is not surprising that safe sales have been strong in countries like Japan as a shortage of bank notes has developed due to savers hoarding cash. This has resulted in talk about doing away with large denomination bank notes. Some are suggesting eliminating all cash. So maybe a little gold will find its way into some of those safes in Japan and elsewhere. Central bank policies remain hostile towards savers while favoring debtors and owners of financial assets. This is a consequence of their desire to lift the value of risk assets. This assault on savers will, we suggest, lead individuals and those responsible for managing central bank reserve assets to raise their exposure to gold. May 2, 2016 Top Ten Holdings March 31, 2016 Randgold Resources Ltd. 11.9% Agnico Eagle Mines Ltd. 7.4% Franco-Nevada Corp. 7.1% Fresnillo plc. 7.1% Goldcorp Inc. 4.4% Detour Gold Corp. 4.1% Royal Gold Inc. 3.6% Newmont Mining Corp. 3.5% Tahoe Resources Inc. 3.3% Alamos Gold Inc. 3.2% 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 7

8 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, closing prices, and other current news. We welcome your comments and questions via at info@gabelli.com. The Fund s daily NAVs are 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. 8

9 NIRP Short Spark? March 15, 2016 A GOLD Market Update from the Desk of Christopher Mancini, CFA I believe that the recent dramatic decline in non-commercial (speculative) short interest in the gold futures market and coincinding rise in the gold price might be reminiscent of the short covering spark which occurred in 1999 which marked the end of the last gold bear market. In 1999, speculative short interest was at extraordinary, multi-year high levels. Speculative short interest in gold futures from Starting in July 1999 speculative short interest declined by 40,000 contracts over the next two months, coinciding with a $60 per ounce increase in the gold price from $255 to $315 per ounce. Speculative short interest (bold white line) compared to the gold price (thin white line) September 1998 October

10 At the end of 2015 speculative shorts were similarly at an abnormally high level. Speculative short interest in gold futures from From December 2015 to last week, 70,000 contracts were covered and the gold price increased from $1,050 to $1,250 per ounce. In 1999, the spark which caused the shorts to cover was the Washington Agreement, signed on September 26, in which eleven central banks stated that gold will remain an important element of global monetary reserves, and also agreed to limit their sales of gold from reserves over the ensuing five year period. I believe that the January 28 announcement by the Bank of Japan that it would engage in a negative interest rate policy (NIRP) might have been the spark which caused speculative shorts in gold to cover their positions. Speculative short interest (bold white line) compared to the gold price (thin white line) March 2015 March 2016 I believe that the change in narrative surrounding gold in the years subsequent to the Washington Agreement, in which gold went from being considered a barbarous relic to an important element of the monetary system, meaningfully contributed to it price rise from $250 per ounce to $1,900 per ounce in If the narrative is changing now surrounding gold due currency debasement caused by global NIRPs, then gold might rise again from $1,050 per ounce to $ per ounce (you fill in the blank). From December 2015 to last week, 70,000 contracts were covered and the gold price increased from $1,050 to $1,250 per ounce. This report is not an offer to sell any security nor is it a solicitation of an offer to buy any security. 10

11 It s OK to be Lumpy November 24, 2015 A GOLD Market Update from the Desk of Christopher Mancini, CFA Gold miners are beginning to give lumpy production forecasts in which production varies on a year by year basis. I believe that this is a positive trend for the industry and a change from past practices. Capital is scarce and expensive now in the gold mining industry, and companies must therefore ration whatever capital is available. Risk adjusted returns on projects are paramount, and hurdle rates are high. Newly developed capital allocation discipline has meant that for some companies, production will decline for a period of time as older mines deplete and higher quality projects are being built. An example of this change in behavior is demosntrated in the actions of Agnico Eagle Mines (7.4% of net assets as of March 31, 2016), a core holding in the Gabelli Gold Fund. Agnico Eagle has historically been thought of by the market as a growth oriented company. Slide from 2010 Agnico Eagle presention which shows steady year over year production growth. 11

12 Although historically good allocators of capital, Agnico did stub its toe in the acquisition and development of the Meadowbank project in northern Nunavut, Canada near the Arctic Circle. Agnico acquired and built the project from during a phase in the company s (and industry s) history in which growth was being emphasized. The company eventually took a $600 million write down on its investment in Meadowbank as costs at the site were higher than had been anticipated. I believe that Agnico is now more disciplined in its growth endeavors. In recent production forecasts the company has said it will allow the Meadowbank mine to fully deplete in 2019 before production begins from a nearby deposit called Amaruq. There will be a one year period during which Agnico will realize no production from the region. When Amaruq is fully developed in 2020 ore from the deposit will be processed at the Meadowbank processing facility. Slide fron 2010 Agnico Eagle presention which shows steady year over year production growth. I expect total production should decline at Agnico from 1.55 million ounces in 2016 to 1.35 million ounces in 2019 as Meadowbank depletes. I expect production to then rebound to over 1.6 million ounces as Amaruq comes online in

13 Slide from a recent Agnico Eagle presentation demonstrating declining production This change in behavior for the gold mining industry relative to production forecasts should result in higher long term returns on equity and, I believe higher equity valuation multiples for the industry. I believe that Agnico s stock price has been rewarded with relative outperformance over the past two years as its management has exercised prudent capital allocation strategies. I believe that similar rewards await other industry participants which emphasize risk adjusted returns over production, and don t mind looking lumpy on the outside for a while as a result. Agnico stock price (blue) relative to the GDX (passive index) March 31 our affiliates beneficially own on behalf of their investment advisory clients or otherwise Agnico Eagle: 1%. The analyst who wrote this report does not receive commissions from our customers' transactions in the securities mentioned in this report. The analyst who wrote this report, or members of his household owns 50 shares of Agnico Eagle. This report is not an offer to sell any security nor is it a solicitation of an offer to buy any security. 13

14 gabelli/gamco Funds and your personal privacy Who are we? The Gabelli/GAMCO Funds are investment companies registered with the Securities and Exchange Commission under the Investment Company Act of We are managed by Gabelli Funds, LLC and GAMCO Asset Management Inc., which are affiliated with GAMCO Investors, Inc. GAMCO Investors, Inc. is a publicly held company that has subsidiaries and affiliates that provide investment advisory services for a variety of clients. What kind of non-public information do we collect about you if you become a fund shareholder? If you apply to open an account directly with us, you will be giving us some non-public information about yourself. The non-public information we collect about you is: Information you give us on your application form. This could include your name, address, telephone number, social security number, bank account number, and other information. Information about your transactions with us, any transactions with our affiliates, and transactions with the entities we hire to provide services to you. This would include information about the shares that you buy or redeem. If we hire someone else to provide services like a transfer agent we will also have information about the transactions that you conduct through them. What information do we disclose and to whom do we disclose it? We do not disclose any non-public personal information about our customers or former customers to anyone other than our affiliates, our service providers who need to know such information, and as otherwise permitted by law. If you want to find out what the law permits, you can read the privacy rules adopted by the Securities and Exchange Commission. They are in volume 17 of the Code of Federal Regulations, Part 248. The Commission often posts information about its regulations on its website, What do we do to protect your personal information? We restrict access to non-public personal information about you to the people who need to know that information in order to provide services to you or the fund and to ensure that we are complying with the laws governing the securities business. We maintain physical, electronic, and procedural safeguards to keep your personal information confidential. 14

15 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.

16 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. Chairman and Chief Executive Officer, Associated Capital Group 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 G A B E L L I G O L D F U N D, I N C. Shareholder Commentary March 31, 2016 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. GAB008Q116SC

17 Gabelli Gold Fund, Inc. First Quarter Report March 31, 2016 To Our Shareholders, Caesar M. P. Bryan Portfolio Manager For the quarter ended March 31, 2016, the net asset value ( NAV ) per Class AAA Share of the Gabelli Gold Fund, Inc. increased 42.4%, compared with an increase of 53.4% for the Philadelphia Gold & Silver ( XAU ) Index. See below for additional performance information. Enclosed is the schedule of investments, as of March 31, Comparative Results Average Annual Returns through March 31, 2016 (a) (Unaudited) Since Quarter 1 Year 5 Year 10 Year 15 Year Inception (7/11/94) Class AAA (GOLDX) % 19.63% (14.19)% (1.07)% 11.17% 4.14% XAUIndex (20.34) (6.87) 2.56 (2.21) Lipper Precious Metals Fund Classification (18.49) (3.11) Standard&Poor s( S&P )500Index Class A (GLDAX) (14.15) (1.04) With sales charge (b) (15.16) (1.63) Class C (GLDCX) (14.81) (1.80) Withcontingentdeferredsalescharge(c) (14.81) (1.80) Class I (GLDIX) (13.97) (0.86) In the current prospectuses dated April 29, 2016, the expense ratios for Class AAA, A, C, and I Shares are 1.62%, 1.62%, 2.37%, and 1.37%, 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.

18 Gabelli Gold Fund, Inc. Schedule of Investments March 31, 2016 (Unaudited) Market Shares Value COMMON STOCKS 98.2% Metals and Mining 98.2% Africa 4.8% 351,200 AngloGold Ashanti Ltd., ADR... $ 4,807,928 1,000,000 Gold Fields Ltd., ADR... 3,940, ,000 Harmony Gold Mining Co. Ltd., ADR... 2,184,000 10,931,928 Australia 6.7% 457,079 Newcrest Mining Ltd.... 5,923,744 1,176,227 Northern Star Resources Ltd.... 3,092,606 3,000,000 Perseus Mining Ltd , ,000 Regis Resources Ltd ,309,264 5,077,272 Saracen Mineral Holdings Ltd.... 3,775,213 15,020,684 North America 63.7% 140,246 Agnico Eagle Mines Ltd., New York... 5,071, ,186 Agnico-Eagle Mines Ltd., Toronto... 11,656, ,000 Alacer Gold Corp , ,675 Alamos Gold Inc., New York, Cl. A... 5,251, ,000 Alamos Gold Inc., Toronto, Cl. A... 1,854,090 5,500,000 Alexandria Minerals Corp. (a) ,394 1,050,000 Asanko Gold Inc., New York... 2,231, ,532 AuRico Metals Inc , ,650 B2Gold Corp.... 1,462, ,700 Barrick Gold Corp... 4,667, ,661 Barrick Gold Corp... 1,666, ,000 Centerra Gold Inc., New York... 3,017, ,000 Comstock Mining Inc , ,000 Continental Gold Inc.... 1,059, ,000 Dalradian Resources Inc , ,000 Detour Gold Corp.... 9,290,087 2,450,000 Eastmain Resources Inc , ,000 Eldorado Gold Corp., New York ,000 1,173,333 Eldorado Gold Corp., Toronto... 3,686, ,000 Fortuna Silver Mines Inc , ,700 Franco-Nevada Corp.(a)... 15,027,736 75,000 Goldcorp Inc., New York... 1,217, ,800 Goldcorp Inc., Toronto... 8,659, ,000 Golden Queen Mining Co. Ltd., New York ,121 3,027,000 Golden Queen Mining Co. Ltd., Toronto... 4,288, ,000 Klondex Mines Ltd , ,000 MAG Silver Corp.... 4,247,931 1,500,000 Mandalay Resources Corp.... 1,027,911 1,400,000 Merrex Gold Inc ,370 2,950,000 Midas Gold Corp , ,871 Newmont Mining Corp.... 7,864,251 1,545,850 OceanaGold Corp.... 4,249, ,860 Osisko Gold Royalties Ltd.... 2,636,341 4,450,000 Perseus Mining Ltd.... 1,370, ,000 Petaquilla Minerals Ltd., New York... 1,925 2,440,000 Petaquilla Minerals Ltd., Toronto (a)... 46,968 Market Shares Value 781,800 Premier Gold Mines Ltd $ 1,866,087 3,750,000 Redstar Gold Corp , ,000 Richmont Mines Inc ,536, ,000 Royal Gold Inc.... 8,206, ,000 SEMAFO Inc.... 2,138, ,000 Silver Wheaton Corp., New York ,818,600 30,000 Silver Wheaton Corp., Toronto , ,000 Tahoe Resources Inc., New York ,418,518 3,450,000 Torex Gold Resources Inc ,834, ,000 Torex Gold Resources Inc.(a) ,674 3,041,000 Wesdome Gold Mines Ltd ,957, ,392,164 United Kingdom 23.0% 925,000 Acacia Mining plc ,737,146 2,119,000 Centamin plc ,690,368 1,170,500 Fresnillo plc... 16,012,714 1,647,709 Hochschild Mining plc ,177,193 1,000,000 Hummingbird Resources plc , ,900 Randgold Resources Ltd., ADR ,870,679 51,775,349 TOTAL COMMON STOCKS ,120,125 WARRANTS 0.5% Metals and Mining 0.5% North America 0.5% 87,500 Franco-Nevada Corp., expire 06/16/ ,744 Principal Amount U.S. GOVERNMENT OBLIGATIONS 1.3% $ 3,018,000 U.S. Treasury Bills, 0.025% to 0.280%, 04/07/16 to 06/02/ ,017,784 (a) TOTAL INVESTMENTS 100.0% (Cost $189,225,574).... $225,131,653 Aggregate tax cost.... $189,727,629 Gross unrealized appreciation... $ 35,906,218 Gross unrealized depreciation... (502,194) Net unrealized appreciation/depreciation.... $ 35,404,024 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 March 31, 2016, the market value of Rule 144A securities amounted to $15,944,772 or 7.08% of total investments. See accompanying notes to schedule of investments. 2

19 Gabelli Gold Fund, Inc. Schedule of Investments (Continued) March 31, 2016 (Unaudited) Non-income producing security. Represents annualized yield at date of purchase. ADR American Depositary Receipt Geographic Diversification %of Market Value Market Value North America % $147,403,692 United Kingdom ,775,349 Australia ,020,684 Africa ,931, % $225,131,653 See accompanying notes to schedule of investments. 3

20 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

21 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 March 31, 2016 is as follows: Valuation Inputs Level 1 Quoted Prices Level 2 Other Significant Observable Inputs Level 3 Significant Unobservable Inputs Total Market Value at 3/31/16 INVESTMENTS IN SECURITIES: ASSETS (Market Value): Common Stocks: Metals and Mining Africa $ 10,931,928 $ 10,931,928 Australia 9,096,940 $ 5,923,744 15,020,684 North America 141,972,476 1,370,795 $48, ,392,164 United Kingdom 51,775,349 51,775,349 Total Common Stocks 213,776,693 7,294,539 48, ,120,125 Warrants: Metals and Mining North America 993, ,744 U.S. Government Obligations 3,017,784 3,017,784 TOTAL INVESTMENTS IN SECURITIES ASSETS $214,770,437 $10,312,323 $48,893 $225,131,653 The Fund did not have transfers among Level 1, Level 2, and Level 3 during the period ended March 31, The Fund s policy is to recognize transfers among Levels as of the beginning of the reporting period. 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. 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 5