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Physical Gold Monthly Report | November

 

  • 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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