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Physical Gold Monthly Report | April

Learn more about the Gold ETC

  • Rising bond yields and economic confidence presented challenges for gold       
  • In a sign of confidence, The Royal Mint Physical Gold ETC grew in terms of ounces against a landscape of net outflows       
  • Bar, coin and jewellery demand increased, particularly in key Asian markets

 

Gold Price Performance

March

12 Month*

-2.97%

5.10%

Past performance is no guarantee of future performance. Source: LBMA, HANetf *12 Month figures based on 01.04.20 -31.03.21.

 

Performance Review

Breakdown of March Performance

Gold began March facing the familiar headwinds created by rising bond yields and a strengthening USD. Both are symptoms of growing confidence in the ability of Western economies to bounce back to health in a reasonable timeframe as vaccination programmes progress – particularly in the UK and USA.

These headwinds were enough to see gold fall below $1,700/oz for the first time since June 2020, early in the month. However, falling below $1,700/oz gave price sensitive Asian markets an opportunity to buy. Precious metals businesses in the ETF, jewellery and bar and coin markets were widely reported to have increased sales in China and East Asia particularly. This helped reverse gold’s downwards trend.  

Past performance is no guarantee of future performance.

Fresh concerns about a ‘third-wave’ of coronavirus in Europe, and the prospect of Germany’s governing CDU/CSU party not forming part of a potential coalition when German’s head to the polls in September, helped boost demand for gold as a safe-haven

A combination of the blocking of the Suez Canal (an important trade route for oil, which impacts inflation) by a stuck container ship and increasing EU-China tensions helped gold sustain its upward trajectory before giving up its gains at the end of the month as bond yields continued to rise.

 

The Royal Mint Physical Gold ETC Performance Table

As of 31.03.21

 

 

1M

3M

6M

YTD

12M

SI

The Royal Mint Physical Gold ETC Securities

-2.99%

-10.46%

-10.48%

-10.46%

4.87%

6.67%

London 3pm LBMA Gold

-2.97%

-10.41%

-10.38%

-10.41%

5.10%

6.93%

The performance calculation is based on USD. If the currency in which the past performance is shown differs from the currency of the country in which you reside, you should be aware that due to exchange rate fluctuations, the performance shown may increase or decrease if converted into your local currency. 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 31/03/2021

 

Industry News

While The Royal Mint Physical Gold ETC grew in terms of ounces in March, the overall picture for North American and European gold funds was very different. North American gold-backed ETFs lost 6.7% of their total AUM while European equivalents lost 2.6% on average. Encouragingly however, Asian investors appear to have seen the recent price dip as an opportunity to buy, and AUMs of gold funds listed in China, India, Japan and Hong Kong grew considerably. At the same time, jewellery and bullion retailers in these countries reported a return to healthy sales after price-sensitive consumers were temporarily priced out of the market. Historically gold demand in Asia has been broadly positively correlated with economic growth, and Asian gold consumers/investors have tended to slow their purchases when the price surges before returning to the market when the price dips below a certain level.

 

Outlook

Gold’s dual nature as both a safe-haven investment asset and a luxury consumer good, and its drivers of demand in different regions of the world – economic uncertainty for Western investors, economic confidence for Asian consumers – may help stem or reverse gold’s recent losses.

March’s rebounding of key Asian gold markets may be an encouraging sign for the coming months. Key Asian and Western gold markets have tended to operate quite differently in recent history. When coronavirus emerged in the West, queues formed in Germany to buy gold bars and coins as a safe-haven asset and a hedge against the falling values of many portfolios. In key Asian markets like Thailand and China however, queues formed outside jewellery stores as people rushed to sell gold to take advantage of the rising price or raise capital following job losses.

In 2019, pre-COVID, four key Asian gold markets accounted for 57% of total consumer demand for gold jewellery, bars and coins (China, India, Vietnam and Thailand) while Europe and the Americas accounted for just 14%. As the pandemic swept the globe, gold demand in those large Asian markets fell by at least 28% as Western demand grew significantly, a 72% increase in Germany for example. A rebound in gold sales as consumer confidence increases in East Asia has the potential to off-set any declines in Western demand.

In terms of ETF demand in Europe and North America, a lot of attention has been focused on bond yields in recent months, but concerns about the potential impact of inflation may resurface in the months ahead. Analysis from the World Gold Council suggests gold has historically ‘underperformed to commodities in the initial stage of a reflationary period but has generally tended to catch up and outperform in the longer term.’ This may help reverse recent gold ETF outflows and further support the price in the months ahead.

 

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