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.
The
Gold ETC Fund page