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Gold Miners Monthly Report | September

Learn more about our Gold Miners ETF

  • Continued high levels of fiscal and central bank stimulus. The Fed is currently purchasing bonds at a rate of 120 billion USD a month [1]
  • There is a bottoming sentiment in the market for precious metals, which historically acts as a good support for prices when sentiment shifts into a rising trend
  • Precious metals miners are at the current prices very profitable and we, at AuAg Funds, see a trend of rising dividends [2]

 

Why AuAg ESG Gold Mining UCITS ETF?

Return potential: The equal-weighted design gives more exposure towards mid-cap, hence a higher return potential than peers.

Lower risk: No concentration risk in comparison to liquid/market-weighted ETFs.

Active ESG screening: Tracks 25 best-in-class ESG Risk companies in the sector.

The possible underweighting of a few dominant mega-companies may provide a beneficial return profile for the ETF in a bull market for gold and gold miners.

The equal-weighted design helps to avoid concentration risks. The probability of having, for example, two companies with a combined weighting of 25-35% is relatively high in a market/liquid weighted index for a single sector. 

Our Gold Miners ETF is a unique opportunity to access the theme via an ESG conscious mandate. The ESG Risk data is provided by Sustainalytics and is active, external as well as independent. 

When you trade ETFs your capital is at risk. For professional investors only. 

 

Megatrend - Transformation to a Green World

Responsible Mining: Precious Metals mining companies assume responsibility for managing a site long after a mine has closed and been dismantled – typically for a period of five to ten years or more. Over this time, the land is rehabilitated – cleansed and revegetated – and the mining company will ensure that the mine reclamation and return to long-term environmental stability are successful. [3]

 

AuAg ESG Gold Mining UCITS ETF Performance (Table As of 31.08.21)


1M

3M

6M

YTD

12M

SI

AuAg ESG Gold Mining UCITS ETF (ESGO)

-6.97%

NA

NA

-5.03%

NA

-5.03%

Solactive AuAg ESG Gold Mining Index

-7.01%

-15.66%

3.67%

-5.02%

-22.37%

-5.02%

Performance before inception is based on back-tested data. Backtesting is the process of evaluating an investment strategy by applying it to historical data to simulate what the performance of such a strategy would have been. Back-tested data does not represent actual performance and should not be interpreted as an indication of actual or future performance. Past performance for the index is in USD. 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 31/08/2021. Please note that all performance figures are showing net data.

 

Gold, Silver and Fiat Currencies

Demand for gold from consumers has seen a substantial recovery in Q2 2021. There have also been increased inflows into gold ETFs compared with the previous year.[4]

 

Price

August 2021

2021

12M

Gold USD

1813,75

-0,02%

-4,46%

-8,13%

Silver USD

23,89

-6,28%

-9,51%

-1,69%

USD / EUR

0,8468

0,49%

3,43%

-0,26%

USD / GBP

0,7269

1,07%

-0,59%

-4,84%

Past performance is no guarantee of future performance. Source of all data: AuAg Funds. Please note that all performance figures are showing net data.

 

Megatrend – Monetary Inflation

Central Banks: At the end of the month, the annual FOMC meeting was held in Jackson Hole, where the chair of the Federal Reserve, Jerome Powell, spoke about the macro situation. He pointed out that they have seen increased inflation but still see it as temporary. He also said that the Fed possibly could reduce monthly bond purchases (tapering) later this year. The presentation resulted in the stock market rising and the US dollar weakening slightly against other currencies. [5]

Global Debt: Global debt continues to rise as a result of the actions we see from governments and central banks. [6]

 

Producers – A Golden Opportunity 

In AuAg’s opinion, gold Miners are well-positioned to profit from higher gold prices as many have cleaned their balance sheets during gold’s last bear market. We see a “lean & mean” sector with a growing number of M&As as it is hard to find new deposits. We also see more buybacks as well as a trend of higher and higher dividends.[7]

The price of gold may, over time, reflect the megatrend of unabated money printing and growing debt. When the price of gold rises in a bull market, it can have a dramatic impact on the profitability of a gold mining company.

Precious Metals are a part of the solution in the transformation to a green world. However, as the mining sector is a part of the global greenhouse gas emissions, it is important to be conscious of ESG aspects when investing. Modern Gold Miners now go on the grid, use solar energy, and use fuel-cell mining trucks. This is needed to be in line with the Paris Agreement.

 

Outlook

Our view is that the investment case for precious metals is becoming stronger by the day. The latest developments have created a good entry point to invest or top up existing positions. Here are the most important factors that will impact the investment environment for precious metals going forward:

  • Continued high levels of fiscal and central bank stimulus. The Fed is currently purchasing bonds at a rate of 120 billion USD a month [8]
  • The Fed has been talking about "tapering" for some time without being able to execute on it.
  • In 13 years (since the financial crisis in 2008), the Fed's balance sheet has gone from 1 trillion USD to over 8 trillion USD, which has lifted the market during all these years. It is noteworthy that "tapering" that makes the market so anxious does not even mean that you want to reduce and normalize the balance sheet but just stop increasing it [9]
  • The Fed also needs to be ready to step out with additional support measures as there is a high risk that negotiations on a higher debt ceiling in the US will be messy in the coming months [10]
  • We see a very favourable positioning structure for precious metals on the US Commodity Exchange (COMEX)
  • At the moment, there is also a bottoming sentiment in the market for precious metals, which historically acts as a good support for prices when sentiment shifts into a rising trend [11]
  • Precious metals miners are at the current prices very profitable, and we see a trend of rising dividends. For example, Newmont now has a dividend yield of 3.5%, $0.55 quarterly (Q2 2020 $0.25) [12]

 

Constituent News

In the ordinary rebalance, the following composition will be implemented over a period starting on 25.06.2021 (cob) and ending on 30.06.2021 (cob). The new composition and target weights will be fully reflected in the index open 01.07.2021:

  • New constitutes (light green)
  • Top 5 performing equities since last rebalance (drawn out & dotted)

           

Source of all data: AuAg Funds/ Bloomberg. Data as of 31.08.2021

 

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