Your Basket
Your Basket
There are no funds in your basket. To add funds to your basket use the Green Plus Icon wherever you see it next to a fund.
Fund name
Aberdeen American Growth  
Fidelity American  
Schroder UK Mid 250  
M&G Recovery  
Jupiter Merlin UK Growth  
Close Basket Open basket

Login

Login

Register

It's look like you're leaving us

What would you like us to do with the funds you've selected

Show me all my options Forget them Save them
Customise this table
 

Is the rebound in gold funds already underway?

There has been no worse place to be invested than gold equities in recent times, but there could be light at the end of the tunnel.

By Joshua Ausden, Editor, FE Trustnet Follow
Monday July 29, 2013


Gold equities have been in the middle of a perfect storm for the past 18 months or so, sending share prices – and valuations – to historic lows in some cases.

Issues over costs led to a significant disconnect between gold and gold miners in 2011 and 2012, so when bullion itself took a spectacular tumble earlier this year, gold funds fell from already depressed levels.

This, combined with the waning sentiment towards natural resources in general, has seen the HSBC Global Gold index fall more than 46 per cent since the beginning of 2012, with many gold funds not too far behind.

Performance of funds and index since Jan 2012

ALT_TAG

Source: FE Analytics


In recent weeks a number of industry commentators have pointed to gold equities as one of the only genuine value plays available to investors at the moment.

The likes of FE Alpha Manager Iain Stewart, who runs the Newton Real Return fund, have increased their exposure recently, and Troy’s Sebastian Lyon said he remains optimistic about their prospects in the longer term.

While gold funds remain in the red over every significant cumulative period, in the past month there has been a significant uptick in performance, with the HSBC Global Gold index up 20.13 per cent. Smith & Williamson Global Gold & Resources and BlackRock Gold & General are up just short of 20 per cent over the period.

The lesser-known Way Charteris Gold Portfolio is up more than 27 per cent over this timeframe.

Performance of funds and index over 1month

ALT_TAG

Source: FE Analytics



Martin Arnold (pictured), analyst at ETF Securities, says that valuations in gold equities were so low that a rebound became inevitable.

ALT_TAG He points out that valuations remain at historic lows and expects the upward surge to continue as sentiment improves.

"Gold miners have historically tended to trade at a premium to the equity market and their valuations have not fallen substantially below those of most other sectors," he explained.

"There have been a lot of write-offs from gold miners because of the slump in bullion, including Newcrest. Further write-downs may still occur, but it seems that a lot of the downside has been factored into valuations."

Arnold says it has got to the point when gold miners do not even need good news in order to see their share prices rise, because valuations have fallen so low. Gold mining shares are currently trading at an 8 per cent discount to book value, according to ETF Securities.

However, Arnold points out there is improving sentiment surrounding gold equities, which could further help the asset class.

"In the last week or so, we’ve seen our gold mining ETF rally by around 10 per cent, which is a huge amount," he said.

"Gold bullion has stabilised and I think investors are a little more comfortable with valuations of miners following the write-downs."

"There’s also been a lot of turnover at the top of the major gold miners, which has helped matters, as they seemed to have breathed new life into these companies."

The likes of Barrick Gold, Newcrest and Goldcorp have all seen changes in management in recent months.

"With all these factors, I think there is a lot of upside from here. Gold equities are still down around 38 per cent since the beginning of the year, and with the optimism surrounding gold bullion stabilising, I think these factors bode well," Arnold added.

There are currently seven gold-focused funds available in the IMA universe, the highest profile of which is Evy Hambro’s £1.6bn BlackRock Gold & General.

The Smith & Williamson Global Gold & Resources fund is another established option, which puts more of an emphasis on small and mid cap companies.

For anyone who is particularly bullish on the asset class, the CF Ruffer Baker Steel Gold fund is another possibility. It has suffered worse than most in the recent downturn, but has tended to lead the way when sentiment surrounding gold equities has been high and improving.

Performance of funds and index over 5yrs


ALT_TAG

Source: FE Analytics


Managers David Baker and Trevor Steel also run the Baker Steel Resources Trust, which has a major gold and gold equity content. It is currently on a discount of around 35 per cent.

ALT_TAG



 
Add your comment
Step 1: Tell us what you think...
 

Step 2: Prove you're not a robot...
You don't have to do this every time you submit a comment.

Login or register free and you won't see it again.
Enter the words above:
Step 3: Submit your comment...
Submit
 
johno Jul 30th, 2013 at 06:42 PM

Lot of rubbish. I have Avocet down -94% and African Barrick Gold down -80%. Even if they both go up 100% I will still be down -88% and -60% respectively.

Reply
ferve wingtag Jul 30th, 2013 at 11:50 AM

"gold funds remain in the red over every significant cumulative period"

Anyone still in denial about gold's merit, or lack of, as a "store of value"?

Reply
Vinnie Jul 30th, 2013 at 11:53 AM

Gold and gold equities are two very different things.

Reply
bot Jul 29th, 2013 at 10:12 PM

I am a robot, your humanoid tests don't fool me!

Reply
pedantic Jul 29th, 2013 at 05:17 PM

While gold funds remain in the red over every significant cumulative period, in the past SIX MONTHS there has been a significant uptick in performance, with the HSBC Global Gold index up 20.13 per cent. Smith & Williamson Global Gold & Resources and BlackRock Gold & General are up just short of 20 per cent OVER THE PERIOD.

Actually Smith and Will down by over 30%

Reply
The FE Trustnet team Jul 29th, 2013 at 05:26 PM

Apologies, that was meant to read one month. The error has now been changed.

Many thanks,

The FE Trustnet team.

Reply
 

Back to top of page

 

Follow FE Trustnet

Video Headlines

More Videos

Slowdown in China is good for investors, says Zhang

GMT 19:00 | 17-Apr-2014

Matthews Asia: Why you need Japan for income

GMT 19:00 | 16-Apr-2014

 
Poll

At what age do you expect to be able to retire/were able to retire?

Younger than 60

60 to 70

Older than 70

Never

Vote

 
 
  • Stay connected with FE trustnet
  • Authorised and Regulated by the
    Financial Conduct Authority
  • © Trustnet Limited . All Rights Reserved.
  • Please read our Terms of Use / Disclaimer
    and Privacy and Cookie Policy.
  • Data supplied in conjunction with Thomson Financial Limited,
    London Stock Exchange Plc, StructuredRetailProducts.com
    and ManorPark.com