Physical Gold Monthly Report | February

• Global demand for gold ETCs returned to a net positive position after 2 months of net selling[1]
• An LBMA survey of industry experts revealed the analysts predicted gold to average $1,973.80 in 2021, up 11.5% on 2020’s average gold price (based on LBMA PM prices)[2] ·     
• Gold held in London vaults hit a new all-time high of over 9,537 tonnes ($578.8bn) in December 2020[3] 

Gold Price Performance

Past performance is no guarantee of future performance. Source: LBMA, HANetf *12 Month figures based on 31.01.20 -31.01.21.

When you trade gold ETCs your capital is at risk. 

Performance Review

Breakdown of January Performance

Gold opened the year up almost 3% on the final LBMA PM fix of the year in USD, GBP and EUR as run-off elections in Georgia were set to shape the direction of US politics, handing control of both houses of Congress to the Democrats.

Following the Capitol riots on 6th January, Donald Trump finally conceded the election, lowering some of the safe-haven demand for gold, resulting in the gold price dropping below $1,850/oz.

Gold continued to slide in mid-January as the dollar strengthened on the back of reassurances from the US Federal Reserve that it was too early to talk about tapering its bond buying programme.

Gold rebounded back above $1,850/oz on 20th January as the issue of trade tensions between the US and China resurfaced. Trade tensions were a major driver of the gold price before the coronavirus crisis, with increased tensions often resulting in higher gold prices, but the issue had largely been overshadowed in 2020.

At the end of January, gold was trading at $1863.80/oz buoyed the prospect of increased government spending and debt as President Biden redoubled his efforts to get a $1.9trn stimulus package through Congress.

The Royal Mint Physical Gold ETC Performance Table

As of 31.01.21

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 31/01/21.

Industry News

The London Bullion Market Association (LBMA) have published their annual precious metals forecast survey that asked 32 gold market analysts to predict the average price of gold over the next year. The overall average forecast for gold in 2021 was $1,973.80, with 44% predicting a price of $2,000 or above.[4] According to those surveyed, the top 3 drivers for the gold price were expected to be negative or falling interest rates, a weaker USD and US monetary and fiscal policy. 

Data compiled by the World Gold Council revealed that October-December gold demand was the lowest of any quarter since 2008.[5] Coronavirus lockdowns and economic uncertainty are thought to have hit jewellery demand which usually accounts for around half of all gold demand, particularly in large Asian markets. Central bank demand was positive but weaker than usual after experiencing net selling in the previous quarter. 

Gold held in London vaults hit a new all-time high of over 9,537 tonnes ($578.8bn) in December 2020 despite some outflows from gold ETFs in November and December.[6] London vaults, operated by seven private firms (including JP Morgan and HSBC) as well as the Bank of England, store gold on behalf of institutions, central banks, ETFs and private investors and hold gold in both ‘allocated’ and ‘unallocated’ arrangements. Gold that backs The Royal Mint Physical Gold ETC is stored outside of this system, in The Royal Mint’s highly-secure vault in South Wales. 

Outlook

Precious metals market analysts responding to the LBMA’s annual price forecast survey deemed inflation and interest rates to be the most significant driver of the gold price over the course of 2021. While the experience of 2020 shows that we never know what the future might hold, gold has historically performed well during periods of inflation.[7] Coupled with large increases in government spending, it is easy to see why analyst might be feeling bullish about gold. The analysts’ $1,973.80 average price prediction would represent an 11.5% increase on 2020’s average price – one analyst even predicted that the gold price could hit $2,680 before 2022. 

However, if vaccine roll out of programmes succeed more quickly than expected, this may boost consumer optimism and help buoy equities while reducing some demand for gold, particularly for investors seeking safe-havens. It will be interesting to see how consumers in the large gold jewellery markets of India and China react to a greater degree of confidence in the economy. Gold demand in some of Asia’s largest markets has been hit by lockdowns restricting access to jewellery stores, while the high gold price and unemployment fears have further dampened demand – might a greater degree of economic optimism see retail investors in Asia flood back into the gold market, helping support demand (and prices) in 2021?

Product Details

The Royal Mint Physical Gold ETC (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 that are held on a segregated basis and sourced on a best endeavour basis from the LBMA’s Responsible Sourcing programme – a transparent audit process to assure investors that the gold is from conflict-free, legal sources.

Gold is held at The Royal Mint’s highly secure vault in the outskirts of Cardiff, Wales – a feature unique among gold ETCs. Operating outside of the London banking and clearance systems, RMAU provides an attractive option for investors seeking real diversification in their gold custody arrangements. RMAU investors are also able to redeem their ETCs for physical gold bars or bullion coins produced by The Royal Mint.

Visit the RMAU Fund Page for more information.