SGX Market Updates

Gold Grabs Spotlight on Recent Economic Outlook


PUBLISHED ON |

03 April 2019

  • In its January report, the World Gold Council said it expects increased market uncertainty, expansion of protectionist policies, and the Fed's more neutral monetary policy stance to make gold increasingly attractive to investors as an effective portfolio diversifier and hedge against systemic risk.

  • In late February, spot gold surged past the US$1,346/oz level to a 10M high, buoyed by uncertainty over the outlook for global economic growth and trade. Bullion prices have since pulled back, ending the March quarter at US$1,292.38/oz, up 0.8% since the start of the year.

  • SGX offers investors opportunities to participate in the gold sector through 3 mining stocks – CNMC Goldmine, Wilton Resources and Anchor Resources – and the SPDR Gold Shares ETF. For 1Q 2019, the ETF generated a 4.6% and 4.8% YoY increase in volume and turnover respectively. Volume and turnover for the ETF also nearly doubled in March from the previous month.




SGX offers investors opportunities to participate in the gold sector through 3 mining stocks – CNMC Goldmine, Wilton Resources and Anchor Resources – and the SPDR Gold Shares ETF.



Bullion’s Diversification Role

The World Gold Council (WGC) has consistently flagged the diversification role of gold, noting that bullion is a classic haven asset. It has suggested that when investors add risky assets to their portfolios, gold should make up 2%-10% of the portfolio, and more specifically, for portfolios that comprise 60% equities and 40% debt, a 5%-6% allocation to gold is recommended. This is because the metal has a history of maintaining low correlations to most other asset classes, and including assets with a low correlation to each other helps reduce overall portfolio risk.



Gold’s Bright Outlook

In a report published in January 2019, the World Gold Council said it expects increased market uncertainty and the expansion of protectionist economic policies to make gold increasingly attractive as a hedge. While gold may face headwinds from higher interest rates and US dollar strength, these effects are expected to be limited after the US Federal Reserve signalled a more neutral monetary policy stance. Structural economic reforms in key gold markets will also continue to support demand for gold in jewellery, technology and as means of savings, it added.

“We believe that in 2019, global investors will continue to favour gold as an effective diversifier and hedge against systemic risk,” it noted, adding that levels of risk and uncertainty are increasing. It cited expensive equity valuations, higher global market volatility, political and economic instability in Europe, and the increased likelihood of a global recession as factors.



Spot Gold Prices

In late February, spot gold surged past the US$1,346/oz level to a 10-month high, buoyed by uncertainty over the outlook for global economic growth and trade, equity market volatility, as well as signs of a slower rate hike cycle by the Fed. Lower rates boost the appeal of bullion as it is a non-interest-bearing asset.

In recent weeks, investor appetite for riskier assets have returned, causing gold to retreat below the US$1,300/oz mark. It closed at US$1,292.38/oz on 29 March 2019, gaining 0.8% since the start of the year.



Gold Price



SGX’s Gold Mining Trio

SGX’s 3 gold mining plays – CNMC Goldmine, Wilton Resources and Anchor Resources – are in different stages of the gold exploration, development and production cycle. The trio, with a combined market capitalisation of about S$180 million, have averaged a total return of -12.7% in the first three months of 2019. This is an improvement over average total returns of -31.9% over the last 12 months.

While gold stocks have a high correlation to physical gold, they are typically considered leveraged plays on the metal. In addition to bullion prices, there are also many other factors – such as corporate activity, currency, gold discovery, earnings power, operating efficiencies – that impact the price of gold stocks. Mining companies may also often take up to 10 years or longer to develop their mining projects and bring them to production. While there are no upstream gold mining activities in Singapore, the city-state is home to downstream international gold refineries and bullion product manufacturing plants, with significant storage capacity through Singapore Freeport.


The table below details the three gold mining plays, sorted by market capitalisation.

Name SGX
Code
Market
Cap
S$m
Total
Return
YTD
(%)
Total
Return
1Y
(%)
Total
Return
3Y
(%)
P/E
(x)
P/B
(x)
Div Yld
(%)
CNMC GOLDMINE 5TP 90 2.3 -13.1 11.1 40.0 1.6 0.9
WILTON RESOURCES 5F7 73 -14.3 -45.5 -55.9 NA 3.9 NA
ANCHOR RESOURCES 43E 19 -26.1 -37.0 -86.8 NA 4.7 NA

Source: Bloomberg & StockFacts (data as of 29 March 2019)



SPDR® Gold Shares ETF  

SPDR® Gold Shares ETF offers an innovative, relatively cost-efficient and secure way to access the gold market. The exchange traded fund (ETF) aims to lower many barriers that prevent some investors from investing in bullion, including the logistics of buying, storing and insuring the commodity. In addition, certain pension funds and mutual funds do not or cannot hold physical commodities or the derivatives. The ETF is set up to reflect the performance of bullion, less the fund’s expenses. It tracks the London Bullion Market Association PM Gold Price, and the physical bullion is kept in the form of London Good Delivery bars.

For the first three months of 2019, SPDR® Gold Shares ETF saw a year-on-year rise in investor participation – it generated an increase of 4.6% and 4.8% in volume traded and turnover respectively from the year-ago quarter. In March, volume and turnover for the ETF also nearly doubled from the previous month.


The tables below detail the volume and trading turnover for SPDR® Gold Shares ETF for the months of January to March 2019 and 1Q 2019.

Jan-19 Feb-19 Mar-19
Volume Traded (S$) 354,530 118,000 234,505
Turnover (S$) 59,049,710 19,991,401 38,897,556

1Q 2018 1Q 2019 YoY Chg (%)
Volume Traded (S$) 675,790 707,035 4.6
Turnover (S$) 112,579,605 117,938,667 4.8

Source: SGX data



SPDR® Gold Shares is designated as a non-Specified Investment Product, and is thus an Excluded Investment Product (EIP), accessible to anyone without pre-qualification. Investors should refer to the fund prospectus for more information, including product risks.



ETFs

ETFs are investment funds listed and traded intraday on a stock exchange. The majority aim to track the performance of an index and provide access to a wide variety of markets and asset classes, including local stocks, international securities, bonds, commodities or money markets. Each ETF gives investors access to the performance of the asset that comprises the underlying index. Investing in the ETF is also less costly if one was to build a similar portfolio by buying the individual stocks. It also provides exposure to international markets and asset classes that may be inaccessible to individual investors.







This article is provided by SGX My Gateway.



SGX My Gateway

SGX's investor education portal with market, product and investment information and events. Sign up now at sgx.com/mygateway to receive our investment updates and economic calendar.

This document is not intended for distribution to, or for use by or to be acted on by any person or entity located in any jurisdiction where such distribution, use or action would be contrary to applicable laws or regulations or would subject Singapore Exchange Limited (“SGX”) to any registration or licensing requirement. This document is not an offer or solicitation to buy or sell, nor financial advice or recommendation for any investment product. This document is for general circulation only. It does not address the specific investment objectives, financial situation or particular needs of any person. Advice should be sought from a financial adviser regarding the suitability of any investment product before investing or adopting any investment strategies. Use of and/or reliance on this document is entirely at the reader’s own risk. Further information on this investment product may be obtained from www.sgx.com. Investment products are subject to significant investment risks, including the possible loss of the principal amount invested. Past performance of investment products is not indicative of their future performance. Examples provided are for illustrative purposes only. While each of SGX and its affiliates (collectively, the SGX Group Companies) have taken reasonable care to ensure the accuracy and completeness of the information provided, each of the SGX Group Companies disclaims any and all guarantees, representations and warranties, expressed or implied, in relation to this document and shall not be responsible or liable (whether under contract, tort (including negligence) or otherwise) for any loss or damage of any kind (whether direct, indirect or consequential losses or other economic loss of any kind, including without limitation loss of profit, loss of reputation and loss of opportunity) suffered or incurred by any person due to any omission, error, inaccuracy, incompleteness, or otherwise, any reliance on such information, or arising from and/or in connection with this document. The information in this document may have been obtained via third party sources and which have not been independently verified by any SGX Group Company. No SGX Group Company endorses or shall be liable for the content of information provided by third parties. The SGX Group Companies may deal in investment products in the usual course of their business, and may be on the opposite side of any trades. SGX is an exempt financial adviser under the Financial Advisers Act (Cap. 110) of Singapore. The information in this document is subject to change without notice. This document shall not be reproduced, republished, uploaded, linked, posted, transmitted, adapted, copied, translated, modified, edited or otherwise displayed or distributed in any manner without SGX’s prior written consent.












Stock / REIT Search

Advertisement

Advertisement