How to profit from the boom in medal metals
FE Research shows the investments that have done the best from the sharp rise in the prices of the Olympic metals gold and silver.
The prices of gold and silver have boomed since the last Olympics in Beijing, leaving copper-alloy bronze trailing, according to the latest FE research, which details how investors can access these safe-haven investments.
The S&P GSCI Gold Spot Index climbed 87.64 per cent in US dollar terms from 8 August 2008 through to 27 July 2012 – the date of the London opening ceremony - while the S&P GSCI Silver Spot Index rose 78.74 per cent.
Rob Gleeson, head of FE research, explains that gold’s bull run is due to fear and anxiety about other assets.
“Investors should remember that gold is primarily a crisis asset; it produces no income and is not demanded in sufficient quantities as a raw material to drive prices. What it does do well is to make people feel better when other assets seem uncertain,” he said.
Exchange Traded Funds (ETFs) outperformed gold funds in the period, with FE Research picking out three strong performers.
Investors in ETF Securities Physical Gold, ETF Securities Gold Bullion and iShares Gold Trust would have more than doubled their money since the last Olympics. The investments returned 127.58 per cent, 127.63 per cent and 127.13 per cent in sterling terms, according to FE Analytics.
There are several options for those seeking exposure to gold through a fund. Investec Global Gold has 87 per cent of its assets in Gold, BlackRock Gold & General has 77.2 per cent exposure, while Smith & Williamson Global Gold & Resources has 61.30 per cent in the metal, according to FE Analytics.
They returned 31.40 per cent, 34.98 per cent and 57.67 per cent respectively, with high FE Risk Scores of 176, 160 and 183.
Performance of fund versus ETFs
Source: FE Analytics
Gleeson said: “ETFs providing exposure to Gold bullion outperformed managed funds by such a large extent over the past four years because the funds invest in equities, such as gold mining companies and producers like Goldcorp. In times of market uncertainty physical Gold usually performs better than equities, which suffer from a flight to safety.”
For exposure to silver, the easiest and best-performing way is also through an ETF, with ETF Securities Physical Silver returning 115.88 per cent between the games.
Among funds, BlackRock Gold & General has considerable exposure to the metal through a 6.7 per cent stake in miner Fresnillo, its second largest holding.
Fresnillo is also a significant holding for Elite Charteris Premium Income and Smith & Williamson Global Gold & Resources – 5.7 per cent 2.6 per cent respectively. SF Webb Capital Smaller Companies Gold holds 4.14 per cent of its assets in Great Panther Silver, according to FE Analytics.
Copper (bronze is a copper alloy) has lagged behind the two precious metals; the S&P GSCI Copper Spot returned just 1.56 per cent for the four-year period.
Copper miners feature among the top 10 holdings of at least five funds. JPMorgan Global Mining has 4.2 per cent in Freeport-McMoran Copper & Gold, while JPMorgan Natural Resources and CF Richmond Core each hold 2.6 per cent of their assets in the company.
Meanwhile Oceanic Australian Natural Resources and Lazard Global Equity Income hold 3.4 per cent and 2.7 per cent, respectively, in Southern Copper Corp.