Joseph Wickwire, co-manager of the best-performing U.S. precious-metals mutual fund, increased returns for his investors by purchasing gold-mining stocks earlier this year as the price of bullion fell.

He and co-manager Gilman C. Gunn had 92 percent of their Evergreen Precious Metals Fund in shares of gold mining companies, including Goldcorp Inc. and Meridian Gold Inc., at the end of June, up from 83 percent in April.

The $389 million Evergreen fund rose 27 percent from June 1, when the price of gold touched a low for the year, to Oct. 12, when the metal reached a 17-year high of $483.10 an ounce.

"We put ourselves in a position to catch the rebound," said Wickwire, 40, in an interview from his Boston office at Evergreen Investments, a unit of Wachovia Corp., the fourth- biggest U.S. bank.

The Evergreen fund climbed at an average annual rate of 33 percent in the past five years, the best among 16 U.S.-based gold funds tracked by Bloomberg. The fund is up 12 percent this year, trailing four funds led by the 27 percent gain of the Vanguard Precious Metals and Mining Fund. Graham E. French manages the $2 billion Vanguard fund.

Investing in gold after the run-up in prices is a risk, said Karen Wallace, an analyst at Morningstar Inc. in Chicago. Gold rose 7.8 percent in September, the biggest monthly gain since March 2004, as investors sought to hedge themselves against inflation. Energy prices rose following Hurricanes Katrina and Rita.

"Going forward, gold probably wouldn't be able to keep pace with what it's done in the past," Wallace said.

Investors who buy gold-related stocks are paying almost 38 times earnings, data compiled by Bloomberg show. That's about twice the average of companies on the Standard & Poor's 500-stock index. Wickwire's performance is beating the 13-member Philadelphia Stock Exchange Gold and Silver Index, which is up 7.7 percent this year. The S&P 500 has declined 2.6 percent.

Wickwire and Gunn focus on mining companies that produce gold at low costs. "I like companies that stack the deck in their favor," Wickwire said.

One of the fund's top performers is Vancouver, B.C.-based Goldcorp, which has risen 22 percent this year and closed Friday at $18.53 a share. Canada's fourth-largest gold producer aims to double annual bullion output to 2 million ounces by 2008 through acquisitions. The company bought Wheaton River Minerals Ltd. earlier this year for $1.91 billion.

Wickwire said he supported Goldcorp's purchase of rival Wheaton River because of the potential to reduce the company's costs. Goldcorp, which accounts for 6 percent of the fund's assets, expects to produce more than 1.1 million ounces of gold this year at a cost of less than $60 an ounce. By contrast, Johannesburg-based AngloGold Ashanti Ltd. estimated it cost $279 an ounce for its third-quarter production.

AngloGold's production costs are below average relative to rival companies in South Africa, Wickwire said.

The Evergreen fund's other holdings include Newcrest Mining Ltd., the biggest Australian gold producer; Toronto-based Barrick Gold Corp.; Placer Dome Inc. of Vancouver; Denver-based Newmont Mining Corp., the world's largest gold producer; and AngloGold, the second-biggest producer.

Wickwire, a graduate of Boston College who received a master of business administration from Bentley College in Waltham, Mass., has worked at Evergreen Investments or one of its subsidiaries since 1987.

Gunn, 59, joined Evergreen in 1991. He previously ran Citigroup Inc.'s private-client department. The fund manager has a bachelor's degree from Florida State University and an MBA from New York University.

In the past year, Wickwire and Gunn increased their holdings of Meridian, a Reno, Nev.-based gold producer with mines in Chile. The company produced gold for $47 an ounce in the second quarter.

"They probably have one of the best growth profiles, and the growth they're adding is low-cost," Wickwire said. "They happen to do a lot of exploration on their existing property. It doesn't get any cheaper than that."

Shares of Meridian are up 8.2 percent this year, exceeding the gain of the Philadelphia Stock Exchange Gold and Silver Index. The stock ended the week at $20.04 a share.

"Gold does well in times of financial asset uncertainty," and the odds of a rally in stocks, bonds and the dollar are slim. It's unlikely that "we're headed for global kumbaya," he said.

"You don't wish for bad things to happen, but my job is to provide our shareholders with diversification should bad things happen," Wickwire said.