Monthly Gold Miners Report | January

17 January 2022

 

Gold Mining ETF Monthly Report: Key Highlights

  • Tapering still means growing the balance sheet just slightly slower than before. Beginning in January, FED will increase its holdings of Treasury securities by at least 40 billion USD per month and agency mortgageā€‘backed securities by at least 20 billion USD per month. [1]
  • A US default was avoided as US lawmakers voted to raise the national debt limit. The “one-time-only” bill increases the US borrowing limit to $31.4tr from $28.9tr. The increased limit is needed to pay off the $7.85tr in additional debt added during the Covid crisis. [2]
  • Inflation is running hot in almost all countries, and energy prices are hurting, predominantly in Europe. Workers in Europe are now demanding significant salary increases, especially as many companies have shown strong results and profits. [3]

Please note that all performance figures show net data.

 

Macro Outlook

Here are some important factors that will impact the investment environment for precious metals going forward:

  • The Fed has acknowledged that inflation is more substantial and persistent than expected. Again, new announcements were made, but will we really see faster tapering and meaningful rate hikes? Inflation will probably rise more than upcoming rate hikes, making real rates even more negative. A negative real rate trend is a long-term environment where gold and precious metals thrive. [4]
  • Precious Metals like gold and silver are historically cheap in relation to S&P 500, and their miners are historically cheap in relation to the precious metals. Resulting in a significant risk/reward opportunity to invest for a long-term portfolio, or for any contrarian investor. [5]
  • The positionings at COMEX still tell us that the Commercials are stuck with significant short positions, which puts them in a vulnerable and challenging situation. Will they buy back and let the prices run to the upside, or will they try to find a way to buy back at lower prices? [6]
  • New findings in the latest OCC report suggest that Bank of America has been leasing silver and then sold it in the market. It is a very unsecure trade as they have no physical silver to cover their position on higher prices. [7]

 

Gold Mining ETF Performance (As of 31.12.21)

 

1M

3M

6M

YTD

12M

SI

AuAg ESG Gold Mining UCITS ETF (ESGO)

3.38%

14.18%

NA

-3.79%

NA

-3.79%

Solactive AuAg ESG Gold Mining Index

3.53%

14.38%

-1.88%

-3.61%

-10.93%

-3.61%

Performance before inception is based on back-tested data. Backtesting is the process of evaluating an investment strategy by applying it to historical data to simulate what the performance of such a strategy would have been. Back-tested data does not represent actual performance and should not be interpreted as an indication of actual or future performance. Past performance for the index is in USD. Past performance is not an indicator for future results and should not be the sole factor of consideration when selecting a product. Investors should read the prospectus of the Issuer (“Prospectus”) before investing and should refer to the section of the Prospectus entitled ‘Risk Factors’ for further details of risks associated with an investment in this product.
Source: Bloomberg / HANetf. Data as of 31/12/2021. Please note that all performance figures show net data.

 

Composition / Holdings

In the ordinary rebalance, the new composition will be implemented over a period starting on 04.01.2022 (cob) and ending on 07.01.2022 (cob). The new composition and target weights will be fully reflected in the index open 10.01.2022:

  • New constitutes (green and bold)
  • Deletions (red and drawn out)
  • Constitutes with over 85% participation from all 28 quarterly rebalances since the start of the index (dark)
  • ESGO, ESG Risk Score – average: 25,39 / highest: 32,28 (Endeavour)
  • Universe, ESG Risk Score – average: 36,07 / highest: 61,49 (on inception start date 02.07.2021)
  • Index value as of 31.12.2021: 2254,01 / +125,40% (index start date 27.03.2015, at 1000)

Source of all data: AuAg Funds / Bloomberg / Sustainalytics / Solactive. Data as of 31.12.2021.

 

Weighting & Rebalancing

On each selection day, each index component is assigned an equal weight. The index is rebalanced quarterly with a four-day Asian rebalancing.

 

SFDR & ESG Risk Rating Methodology

The ETF is classified as Article 8 under the Sustainable Finance Disclosure Regulation (SFDR). The ESG Risk data is provided by Sustainalytics and is active, external, and independent.

The ESG Risk Ratings measure the degree to which a company’s economic value is at risk driven by ESG factors or, more technically speaking, the magnitude of a company’s unmanaged ESG risks. To calculate the ESG risk rating of each company, the Data Provider considers the corporate governance and material ESG issues.

Corporate governance is a foundational element in the ESG Risk Ratings and reflects our conviction that poor Corporate Governance poses material risks for companies. Corporate governance is based on six pillars and 15 indicator weights. Material ESG Issues (MEIs) contribute to the ESG risk rating. A company can have up to ten pre-selected, industry-specific MEIs plus any additional company-specific issues.

 

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