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Weaker U.S. Dollar, Investment Demand Sustains Gold’s Momentum in April

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Weaker US Dollar, Investment Demand Sustains Gold’s Momentum in April by Joe Foster, Gold Strategist

Weaker US Dollar, Investment Demand Sustains Gold’s Momentum in April by Joe Foster, Gold Strategist

Gold’s positive momentum continued in April. Bullion traded as high as $1,289.60 per ounce on April 18, driven primarily by weaker than expected U.S. economic data. Most notably, figures released in the jobs report were below expectations and additionally, U.S. factory output surprised on the downside. Gold also gained support from comments by President Trump during an interview on April 12, in which he stated that the U.S. dollar was getting too strong and that he would prefer that the Federal Reserve keep interest rates low. The U.S. dollar (DXY Index 1) weakened 1.30% during the month. By April 18, markets were not pricing in another Fed rate hike in June, with the implied probability at only 43.7%. However, markets perceived the outcome of the first round of the French presidential elections positively, fueling risk-on sentiment, and pushing down the price of gold in the last week of April. As of May 1, markets were attaching approximately a 70% probability to a June Fed rate hike and a 72% probability to a July hike. Gold ended April at $1,264 per ounce, up $18.94 per ounce or 1.52%.

Demand for gold bullion backed exchange traded products (ETPs) picked up again in April with holdings up approximately 1.4% for the month and 4.6% year to date. We track flows into the gold bullion ETPs as we think investments in those products typically represent longer-term, strategic investment demand for gold and as such, provide an excellent proxy for the direction of the gold market.

Gold Stocks Display Rare Behavior Relative to Bullion

Gold stocks underperformed the metal, which is atypical for a period in which the price of gold increased. The NYSE Arca Gold Miners Index 2 (GDMNTR) fell 1.9% and the MVIS Global Junior Gold Miners Index 3 (MVGDXJTR) dropped 10.8% during the month.

With regards to small cap companies, we believe the underperformance of the group is related to trading activity following an index announcement on April 12, 2017 indicating an upcoming rule change for the MVIS Global Junior Gold Miners Index. This upcoming rule change expands the universe of companies eligible for inclusion in the Index effective June 17, 2017. It appears to us that the market’s reaction was to sell, ahead of the Index rebalance date, those companies that are expected to be reduced to make room for the new companies that will be added to the Index, resulting in significant selling pressure. We expect some volatility in the share price of the junior companies making up the Index to continue until the June Index effective date. However, we view this share price action as temporary, and expect a return to more normal trading activity, with the fundamental aspects of the stocks driving their price in the longer term.

In the case of larger market cap equities, the underperformance was driven by a 12% drop in the share price of Barrick Gold (1.9% of net assets). On April 24, Barrick reported 1Q 2017 results that missed expectations, due primarily to operational issues that the company expects to resolve shortly. However, this was received very negatively by markets, which have become accustomed to Barrick consistently meeting or exceeding expectations during the past couple of years. Although there were a few other negative surprises, overall, the seniors and mid-tier companies reported 1Q results that met or exceeded expectations.

Gold equities should outperform gold bullion during rising gold prices and underperform if gold prices fall. Although this expected relative performance may not hold during certain periods (as was the case in April), gold equities have consistently demonstrated their effectiveness as leverage plays on gold during the past several years (see the chart below).

(click to enlarge)

Gold Market in April Provides Insight for 2017 and Beyond

It’s conceivable that the gold market for the year 2017 may end up looking like it did in April; i.e., characterized by short rallies followed by pullbacks, as the market’s assessment of the health and prospects of the U.S. economy and the Fed’s rate outlook lifts or depresses the gold price. We see the gold price well supported within a range centered on the $1,250 level in 2017, as it establishes a new base that started forming in 2016. There is potentially significant risk and uncertainty that could drive the gold price higher, and it certainly seems possible that the geopolitical or financial outlook could turn negative rather quickly. Beyond 2017, adverse events, we believe, become increasingly likely as the post-crisis expansion ages and if the bull market in stocks and bonds loses steam. These are the types of “risk-off” events that we believe will likely compel investors to seek protection by investing in gold and gold equities.

Gold Stocks Typically Provide Leverage to Gold and Current Valuations Remain Attractive

Gold mining equities offer leveraged exposure to gold. The leverage comes from earnings leverage; as the gold price increases, the change in the company’s profitability significantly outpaces the change in the gold price. In addition, at higher gold prices, in-the-ground resources have a higher value, and the company’s exploration efforts, project expansions, operational improvements, and potential acquisitions also become more valuable. This explains why gold stocks trade at premium valuation multiples. Looking at historical valuation levels, as illustrated by the price-to-cash flow chart below, we see that stocks are currently trading at multiples that are below the long-term average, and well below the multiples reached during the peak of the last bull market.

(click to enlarge)

Agnico-Eagle Mines: What Makes a Premium Rated Gold Stock

We look at relative valuations among our coverage universe to identify undervalued and overvalued stocks. Stocks that trade at above average multiples may be too expensive, or they may be deserving of a higher multiple derived from their higher growth potential (as measured, for example, in free cash flow per share and not just in ounces) and lower risk profile. A look into one of our top holdings, Agnico-Eagle Mines (5.5% of net assets), is helpful in understanding what it takes to be a premium rated stock in the gold market.

Listed below are some of the primary reasons we believe the Agnico-Eagle Mines stock deserves a premium rating:

  • A track record of consistently meeting or beating expectations in recent years. Agnico’s 1Q 2017 results released at the end of April once again exceeded estimates for earnings, production, and costs. In addition, the company increased its production guidance for 2017.
  • A strong, experienced management team. Sean Boyd has been Agnico’s CEO since 1998 and has been with the company since 1985. He was one of the few CEOs to survive the sector-wide management changeover that occurred a few years ago. Many members of Agnico’s management team have been with the company for more than a decade. This continuity, we believe, is tightly linked to the company’s success. Agnico has by no means escaped the perils of the gold mining industry. In 2011, its Goldex mine (now back in production) had to be shut down due to rock failure that led to ground subsidence and stability issues, and the write off of the company’s investment in Goldex. Travails in Finland, during the start-up of its Kittila mine in 2009, are also part of the company’s recent history. In our view, this diversity of experiences, combined with key management continuity, has shaped Agnico into the industry leader it is today.
  • Unmatched growth potential among the senior gold producers. We estimate Agnico’s five-year production growth at more than 25%, leading to a corresponding growth in operating cash flow. In contrast, most other seniors are struggling to sustain production.
  • The right number of operations in the right places. Agnico operates five mines in Canada, one in Finland, and two in Mexico. This is right about the maximum number of operations and regions we like to see gold companies managing, and they are all in mining friendly jurisdictions.
  • Potential for further discoveries. Agnico has had a successful strategy of finding or acquiring new projects by combining a consistent focus on exploration with investment in early-stage opportunities/companies. Agnico is currently developing the high-grade Meliadine project in Nunavut, Canada, with reserves of 3.4 million ounces, and the Amaruq deposit, a satellite deposit to the existing Meadowbank operation.

We have written extensively about the positive, post bull market transformation of the gold sector into a healthy, cash flow generating business, offering attractive returns. A re-rating of the entire sector to reflect this transformation is justifiable in our view. Companies need to continue to demonstrate that they are deserving of the premium valuation multiples they have historically enjoyed. The formula, although complex, is not too complicated: Increase the potential and ability to develop gold deposits into profitable and sustainable mines while reducing the risks associated with those developments, and the company should enjoy a re-rating by the market.

1 U.S. Dollar Index (DXY) indicates the general international value of the U.S. dollar. The DXY does this by averaging the exchange rates between the U.S. dollar and six major world currencies: Euro, Japanese yen, Pound sterling, Canadian dollar, Swedish kroner, and Swiss franc.

2 NYSE Arca Gold Miners Index (GDMNTR) is a modified market capitalization-weighted index comprised of publicly traded companies involved primarily in the mining for gold.

3 MVIS™ Global Junior Gold Miners Index (MVGDXJTR) is a rules-based, modified market capitalization-weighted, float-adjusted index comprised of a global universe of publicly traded small- and medium-capitalization companies that generate at least 50% of their revenues from gold and/or silver mining, hold real property that has the potential to produce at least 50% of the company’s revenue from gold or silver mining when developed, or primarily invest in gold or silver.

by Joe Foster, Portfolio Manager and Strategist

With more than 30 years of gold industry experience, Foster began his gold career as a boots on the ground geologist, evaluating mining exploration and development projects. Foster is Portfolio Manager and Strategist for the Gold and Precious Metals strategy..

Please note that the information herein represents the opinion of the author and these opinions may change at any time and from time to time.

Important Disclosures

This commentary originates from VanEck Associates Corporation (“VanEck”) and does not constitute an offer to sell or solicitation to buy any security.

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SCWX ETF är en globalfond helt utan kostnad

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Scalable MSCI AC World Xtrackers UCITS ETF 1C (SCWX ETF) med ISIN LU2903252349, försöker spåra MSCI All Country World (ACWI)-index. MSCI All Country World Index (ACWI) spårar stora och medelstora aktier från 23 utvecklade och 24 tillväxtmarknader världen över.

Scalable MSCI AC World Xtrackers UCITS ETF 1C (SCWX ETF) med ISIN LU2903252349, försöker spåra MSCI All Country World (ACWI)-index. MSCI All Country World Index (ACWI) spårar stora och medelstora aktier från 23 utvecklade och 24 tillväxtmarknader världen över.

Den börshandlade fondens TER (total cost ratio) uppgår till 0,00 % p.a. det första året och 0,17 % p.a. efteråt. Scalable MSCI AC World Xtrackers UCITS ETF 1C är den billigaste ETF som följer MSCI All Country World (ACWI)-index. Utdelningarna i ETFen ackumuleras och återinvesteras.

Scalable MSCI AC World Xtrackers UCITS ETF 1C är en mycket liten ETF med 9 miljoner euro tillgångar under förvaltning. Denna ETF lanserades den 11 december 2024 och har sin hemvist i Luxemburg.

Referensindex nyckelfunktioner

Syftet med MSCI ACWI-indexet är att återspegla följande marknadsresultat:

· Stora företag och medelstora börsnoterade företag från globala utvecklade marknader

· Täcker cirka 85 % av marknadsvärdet för fritt rörligt kapital

· Viktat med justerat börsvärde för fritt rörligt kapital

· Granskas kvartalsvis

Handla SCWX ETF

Scalable MSCI AC World Xtrackers UCITS ETF 1C (SCWX ETF) är en europeisk börshandlad fond. Denna fond handlas på flera olika börser, till exempel Deutsche Boerse Xetra.

Det betyder att det går att handla andelar i denna ETF genom de flesta svenska banker och Internetmäklare, till exempel DEGIRONordnet, Aktieinvest och Avanza.

Börsnoteringar

BörsValutaKortnamn
XETRAEURSCWX
gettexEURSCWX

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ISINNamnVikt%MarknadsvärdeLandBranschTillgångsslag
LU20091477571D18,08%1,67 Mio. USDUnknownShare Class
LU22638035331D18,06%1,67 Mio. USDUnknownShare Class
LU25813750731D18,05%1,67 Mio. USDUnknownShare Class
IE0002W8NB38ISHARES MSCI USA SWAP UCITS ET16,32%1,51 Mio. USDIrlandUnknownMutual Fund
LU26752919131D9,96%0,92 Mio. USDUnknownShare Class
DK0062498333NOVO NORDISK CLASS B0,39%0,04 Mio. USDDanmarkConsumer, Non-cyclicalEquity
NL0010273215ASML HOLDING NV0,34%0,03 Mio. USDNederländernaTechnologyEquity
DE0007164600SAP0,30%0,03 Mio. USDTysklandTechnologyEquity
CH0012032048ROCHE HOLDING PAR AG0,23%0,02 Mio. USDSchweizUnknownEquity
GB0009895292ASTRAZENECA PLC0,23%0,02 Mio. USDStorbritannienUnknownEquity
CH0038863350NESTLE SA0,23%0,02 Mio. USDSchweizUnknownEquity
CH0012005267NOVARTIS AG0,22%0,02 Mio. USDSchweizUnknownEquity
FR0000121014LVMH0,21%0,02 Mio. USDFrankrikeConsumer, CyclicalEquity
JP3633400001TOYOTA MOTOR CORP0,21%0,02 Mio. USDJapanUnknownEquity
GB00BP6MXD84SHELL PLC0,19%0,02 Mio. USDStorbritannienEnergyEquity

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AI, datacenter och Uranium Bull Market

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Sprott Direktör för ETF Product Management Steve Schoffstall träffade Steve Darling från Proactive för att diskutera den förändrade dynamiken på kärnenergi- och uranmarknaderna mitt i stigande elbehov som drivs av AI och datacenter. När teknikföretag söker pålitliga och hållbara energilösningar lyfte Schoffstall fram de växande partnerskapen mellan teknikjättar och kärnenergileverantörer.

Sprott Direktör för ETF Product Management Steve Schoffstall träffade Steve Darling från Proactive för att diskutera den förändrade dynamiken på kärnenergi- och uranmarknaderna mitt i stigande elbehov som drivs av AI och datacenter. När teknikföretag söker pålitliga och hållbara energilösningar lyfte Schoffstall fram de växande partnerskapen mellan teknikjättar och kärnenergileverantörer.

Han noterade exempel som Amazons avtal med Talen Energy som en signal om sektorns potential. ”Kärnenergi växer fram som en nyckellösning för ren, pålitlig kraft,” anmärkte Schoffstall och betonade sin avgörande roll för att möta de energiintensiva behoven av AI-utveckling och storskaliga datacenter. Trots den senaste tidens volatilitet,

Schoffstall uttryckte optimism om uranmarknaden och beskrev den som en ”fortsatt tjurmarknad som drivs av en långsiktig efterfrågan på kärnkraft. Han diskuterade de geopolitiska faktorerna som formar uranproduktionen, såsom Kazakstans växande band med Kina, och de utmaningar detta innebär för västerländska marknader.

Schoffstall delade också förväntningar på ytterligare inhemskt stöd för kärnenergi under den kommande Trump-administrationen, särskilt politik som gynnar USA-baserad energiproduktion och investeringar i uranbrytning. Samtalet utforskade också internationella åtaganden som gjordes vid COP29, där nationer lovade att tredubbla kärnkraftskapaciteten i mitten av seklet.

Schoffstall påpekade att västerländska företag sannolikt kommer att säkra långsiktiga urankontrakt som en del av ansträngningarna att stärka energioberoendet och minska beroendet av utländska leveranskedjor. När världen övergår till renare energilösningar ser Schoffstall att kärnkraft spelar en allt viktigare roll, driven av både den privata sektorns efterfrågan och statliga initiativ. Med en hausseartad uranmarknad och växande kärnkraftskapacitet är sektorn redo för betydande tillväxt under de kommande åren.

Handla U3O8 ETF

HANetf Sprott Uranium Miners UCITS ETF Acc (U3O8 ETF) är en europeisk börshandlad fond. Denna fond handlas på flera olika börser, till exempel Borsa Italiana, Deutsche Boerse Xetra och London Stock Exchange. Av den anledningen förekommer olika kortnamn på samma börshandlade fond.

Det betyder att det går att handla andelar i denna ETF genom de flesta svenska banker och Internetmäklare, till exempel DEGIRONordnetAktieinvest och Avanza.

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JRZD ETF, företag från Eurozonen med höga ESG-betyg

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JPMorgan Eurozone Research Enhanced Index Equity (ESG) UCITS ETF EUR (dist) (JRZD ETF), med ISIN IE000783LRG9, är en aktivt förvaltad ETF.

JPMorgan Eurozone Research Enhanced Index Equity (ESG) UCITS ETF EUR (dist) (JRZD ETF), med ISIN IE000783LRG9, är en aktivt förvaltad ETF.

JP Morgans strategi för Eurozone Research Enhanced Index Equity (ESG) investerar i företag från länder i euroområdet. Denna fond strävar efter att generera en högre avkastning än MSCI EMU. Dessutom undviker fondförvaltningen företag vars ESG-prestation har en negativ inverkan på verksamheten eller vars affärspraxis inte överensstämmer med fondförvaltningens standarder.

Den börshandlade fondens TER (total cost ratio) uppgår till 0,25 % p.a. JPMorgan Eurozone Research Enhanced Index Equity (ESG) UCITS ETF EUR (dist) är den billigaste ETF som följer JP Morgan Eurozone Research Enhanced Index Equity (ESG) index. ETFen replikerar det underliggande indexets prestanda genom fullständig replikering (köper alla indexbeståndsdelar). Utdelningarna i denna ETF delas ut till investerarna (kvartalsvis).

JPMorgan Eurozone Research Enhanced Index Equity (ESG) UCITS ETF EUR (dist) är en mycket liten ETF med 2 miljoner euro tillgångar under förvaltning. Denna ETF lanserades den 26 april 2022 och har sin hemvist i Irland.

Investeringsmål

Delfonden strävar efter att uppnå en långsiktig avkastning som överstiger MSCI EMU Index (Total Return Net) genom att aktivt investera i huvudsak i en portfölj av företag i euroområdet.

Handla JRZD ETF

JPMorgan Eurozone Research Enhanced Index Equity (ESG) UCITS ETF EUR (dist) (JRZD ETF) är en europeisk börshandlad fond. Denna fond handlas på flera olika börser, till exempel Deutsche Boerse Xetra och London Stock Exchange.

Det betyder att det går att handla andelar i denna ETF genom de flesta svenska banker och Internetmäklare, till exempel DEGIRONordnet, Aktieinvest och Avanza.

Börsnoteringar

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NamnISINLandVikt%
ASML HOLDING NV /EUR/NL0010273215Netherlands7,20%
LVMH MOET HENNESSY LOUIS /EUR/FR0000121014France4,49%
TOTALENERGIES SE /EUR/FR0000120271France3,56%
SIEMENS AG-REG /EUR/DE0007236101Germany3,32%
SCHNEIDER ELEC SA /EUR/FR0000121972United States3,08%
SAP SE /EUR/DE0007164600Germany3,04%
ALLIANZ SE REGISTERED /EUR/DE0008404005Germany2,78%
AIR LIQUIDE SA /EUR/FR0000120073France2,55%
SANOFI /EUR/FR0000120578United States2,34%
BANCO SANTANDER SA /EUR/ES0113900J37Spain2,18%

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