- Ongoing negotiations over the US coronavirus stimulus package, and the
effect on the USD, appear to have caused much of the gold price volatility in
October
- Physically-backed gold ETFs and ETCs now hold a record $235bn of gold[1]
- The
LBMA reported record levels of gold held in loco-London vaults, valued at
$550bn at the end of September[2]
Performance Review
- The London Bullion Market Association (LBMA) PM gold price ranged
between $1,925.50 per troy ounce on 12th October and $1,869.95 on 28th
October
- USD volatility, caused by coronavirus-related issues, led to a volatile
month for gold
-
The majority of physically-backed gold ETF inflows came from European funds, while US gold-backed ETFs saw
net inflows of $166m[3]
Gold Performance
|
October
|
12 Month*
|
|
-0.27%
|
24.24%
|
|
Current performance is no guarantee of future performance.
Source:
LBMA / HANetf
Performance based on London 3pm LBMA Gold price.
*12 Month figures based on 31.10.19 -31.10.20
What Has Driven This Performance?
In October, gold began
climbing to $1,913.40 (£1,476.00) buoyed by a variety of factors serving to
weaken the US Dollar, including hopes of a deal on the US coronavirus fiscal
stimulus package, with initial polls indicating that Joe Biden and the
Democrats might sweep the election in a “Blue Wave”, increasing risk-appetite
and reduced ‘safe-haven’ demand for the USD.
By 7th
October, Trump had called off negotiations over the fiscal stimulus, triggering
an equities sell-off and driving investors into US Treasuries. The impact of
this was to strengthen the USD, pushing the price of gold down. Two days later,
hopes for the stimulus deal were reignited as talks between House Speaker Nancy
Pelosi and Treasury Secretary Steven Mnuchin resumed. Gold returned to its
former upward course.
It was the IMF’s World
Economic Outlook on Tuesday 13th October that likely caused the
price to fall from $1,925.50 to $1,891.30. The data and accompanying commentary
stressed that ‘the challenges are daunting’ and urged governments to do more to
prevent company insolvencies and unemployment.4 Money flowed back
into US Treasuries, strengthening the dollar, and causing the USD gold price to
fall.
After stalling again,
fresh hopes of a US coronavirus stimulus deal finally being reached fuelled a
gold price rise to $1,924.15 on 21st October. The failure to reach a
stimulus agreement and other coronavirus-related concerns sent stocks tumbling
on 28th October and gold came under pressure as investors looked to
meet margin calls.
London Bullion Market
Association (LBMA) PM Gold Price (01.10.20
– 30.10.20)
Total Return NAV to Date (31/10/2020)
|
|
1M
|
3M
|
6M
|
YTD
|
12M
|
Since Inception
|
|
The Royal Mint Physical Gold ETC Securities
|
-0.29%
|
-4.28%
|
10.40%
|
18.82%
|
-
|
18.82%
|
|
London 3pm LBMA Gold
|
-0.27%
|
-4.23%
|
10.52%
|
24.24%
|
24.55%
|
19.00%
|
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: LBMA / HANetf, data as of 02/11/20
Industry News
Gold
Coin and Bar Investment Up
Data published by the World Gold Council found that net gold bar and coin
investment between July and September was up 49% year-on-year, with the large
gold markets of China, India, the US and Turkey experiencing particularly high
demand.[5] While some of the demand in Asia may be attributable to
pent-up demand and the reopening of stores following coronavirus-related
restrictions, other issues appear to have driven Turkish and US demand.
In Turkey demand has been driven by a slump in the value of the Turkish
Lira, while economic and political concerns in the US are thought to be behind
the increased demand in the US. Data published by the US Mint shows that in
October month-on-month sales of US Mint gold bullion coins were up 245% in
terms of ounces as US investors appear to have taken advantage of the price
decrease ahead of the elections in November.
Record
Levels of Gold Held in London Vaults
The LBMA declared that gold held in London vaults had reached the
highest ever level, valued at $550bn at the end of September 2020.[6] This equates to over 725,000 gold bars held by the eight ‘loco-London’ vaults
inside the M25. Most gold-backed ETCs listed on the London Stock Exchange store
their gold in one of these vaults, with vaults operated by HSBC and JP Morgan
accounting for the majority. Gold backing The Royal Mint Physical Gold ETC Securities is held outside of this system, at The Royal Mint’s
highly-secure vault in South Wales.
Outlook
In October all eyes were on the upcoming US elections but gold
market analysts have spent the month arguing that the case for gold may be
broadly bullish regardless of who wins as monetary and fiscal policy and
geopolitical concerns continue to drive the gold price. However, fluctuations
this month show that fiscal policy and the coronavirus crisis have significant
potential to move gold in either direction.
The World Gold Council noted that gold ETF demand remains
strong and stated that ‘given the recent uptick in global COVID-19 cases,
geopolitical and market uncertainty, and the expected long term, low-rate
environment that improves gold’s opportunity cost, we do not see this scenario
changing in the coming months.’[7]
Product Details
The Royal Mint Physical Gold ETC Securities (RMAU) is designed to offer investors
an effective way to access the gold market as it tracks the spot price of
physical gold.
It
is the first financial product to be sponsored by The Royal Mint and the first
gold ETC custodied with a European Sovereign Mint.
The
ETC is backed by London Bullion Market Association (LBMA) Good Delivery bars
held on a segregated basis. The gold
will be stored and guarded in The Royal Mint's highly secure vault in
Llantrisant, Cardiff.
The
value of your investment may go down as well as up and past performance is no
indication of future performance. Your capital is at risk.
| Exchange |
Bloomberg CODE |
RIC |
ISIN |
SEDOL |
Currency |
TER |
| London Stock Exchange |
RMAU LN |
RMAU.L |
XS2115336336 |
BKT7175 |
USD |
0.22% |
| London Stock Exchange |
RMAP LN |
RMAP.L |
XS2115336336 |
BKT7197 |
GBP |
0.22% |
| Deutsche Boerse Xetra |
RM8U GY |
RM8U.DE |
XS2115336336 |
BKT71G4 |
EUR |
0.22% |
| Borsa Italiana |
RMAU IM |
RMAU.MI |
XS2115336336 |
BKT71B9 |
EUR |
0.22% |
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