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A gold bug is taking heart in prospects for higher inflation

John C. van Eck benefits from mismanagement of the economy. He is president of the nation's largest gold fund, International Investors, which has performed better than any other fund over the last 15 years. And his fund has been thriving, with net assets up nearly $300 million last year, to $743 million.

What would he do if the nation's economic managers did a better job?

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''We wouldn't be in gold,'' said Mr. van Eck in an interview here. ''As long as they follow inflationary policies, we are in gold.''

When he says ''in gold,'' he means investments in gold mining stocks, the bulk of these with mines in South Africa. International Investors does not invest in bullion. ''Shares have been better than gold itself,'' he says.

Right now, Mr. van Eck is ''bullish on inflation.'' That's because the Federal Reserve System increased the nation's basic money supply - the fuel for economic growth - by more than 10 percent last year.

Since gold over the long run tends to follow inflation, it is regarded as an investment hedge against rising prices. ''A lot of people realize it is good to have a part of your portfolio in gold,'' he says with a touch of salesmanship.

Knowing how the price of gold can bounce about in the short run, van Eck was somewhat reluctant to predict its price. (Early last year he talked of gold prices going up to $700 by the end of the year, and instead they went down 15 percent.) At first he said only, ''The long trend is up.'' But pressed, he added , ''My guess is at least $500 an ounce by the end of the year.'' Recently the price of gold has been running somewhat over $400.

Despite the decline in gold prices last year, International Investors' shares achieved a handsome gain of 8.87 percent, better than any of the other nine ''gold oriented'' funds tracked by Lipper Analytical Services.

Earlier in 1983, Mr. van Eck figured gold shares were overpriced. So, as new money poured into the fund, he built up cash reserves. But by December the fund was nearly fully invested. He also had a portion of the fund - some 7.9 percent at the end of the year - invested in foreign stocks, particularly West German and Japanese companies. ''They did well,'' he noted.

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Mr. van Eck started International Investors in 1955 with original assets of $ 100,000. He was an analyst of foreign securities then. Figuring that the rest of the world was in the process of catching up with the United States, he felt foreign economies - and their leading corporate shares - would do better than those of the United States.

But in 1967-68, he saw that the US and other leading industrial nations were following inflationary policies and switched his tiny fund heavily into gold shares. ''I thought gold shares were going to do better,'' he said, which certainly proved correct.

With the breakup of the Bretton Woods international monetary system, the quadrupling of oil prices by OPEC, and the permission given Americans to own gold bullion, gold shares soared in price during the early 1970s. So did shares of International Investors, which were up 1,316 percent in the 15 years to the end of 1983.

But it took a long time for the fund to become profitable to its management after its creation. ''I didn't make any money for 15 years,'' said van Eck. ''I just believed in it.'' He made his living as a consultant on foreign stocks, starting to take a salary from the fund only in 1973.

At the end of 1970, the fund had only 800 shareholders and $3.3 million in assets. By the end of 1974, it had 19,000 shareholders and $112 million in assets and was providing a profitable management fee of about $700,000. As of March 5, 1984, the fund had $940 million in assets. Gold shares had been performing well in early March.

International Investors has a maximum sales load of 8.5 percent. It is sold by major brokerage houses, financial planners, and more recently some insurance companies.

At the end of last year the fund had 63 percent of its assets invested in South Africa. Some universities have been criticized for investing a portion of their portfolios in apartheid-practicing South Africa. But such investments do not trouble Mr. van Eck.

He visits South Africa about once every two years, and his chief stock analyst, William A. Trebilcock, travels there more frequently. Van Eck maintains that South Africa is making progress in dealing with its race relations problem and says he expects further ''gradual evolution'' in this regard.

''The perception of risk is much greater than the reality,'' he says.

With the South African gold shares yielding something like 9 percent, he predicts that some American pension funds will be putting a small portion of their portfolios - 1 percent, perhaps - into them.

Another 12.5 percent of the International Investors portfolio is in Canadian shares, 9.6 percent in US shares, and smaller proportions in Japan, the Netherlands, West Germany, Australia, the United Kingdom, and Norway.

Among gold shares, he recommends Campbell Red Lake Mines Ltd., Elandsrand Gold Mining Company, Kloof Gold Mining Company, Randfontein Estates Gold Mining Company, Western Deep Levels Ltd., and Southvaal Holdings Ltd., all in the fund's portfolio. He also recommends two platinum mining shares, Impala Platinum Holdings Ltd. and Rustenberg Platinum Holdings Ltd., also from South Africa.

''South Africa is the country which has the rich mines,'' he says.

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