Old Mutual Gold comment - Sep 19 - Fund Manager Comment23 Oct 2019
The gold price closed the quarter at US$1 485 per ounce, adding to last quarter’s gain by climbing 5%. The trade war actions taken between the US and China, a drone strike on Saudi crude production facilities and the ongoing Brexit negotiations have created a climate of heightened geopolitical uncertainty, causing a fl ight to safety into gold. As US growth started to slow, the US Federal Reserve has wavered in its rate hiking path. Strong investment demand has prevailed, which makes a short-term correction in the gold price more likely.
The Old Mutual Gold Fund has a composite benchmark weighted 70% to the FTSE/JSE Gold Mining Index and 30% to the FTSE Gold Mines Index, which is comprised of global gold stocks. The FTSE/JSE Gold Mining Index gained 30% over the quarter while the FTSE Gold Mines Index rose 14% in rand terms.
The most marginal producers, Harmony Gold and Sibanye Stillwater, were the strongest performers on the local front this quarter, rising 36% and 25% respectively. The fund has held these names in relatively small positions given concerns about the long-term sustainability of their assets. On the international front, the relative outperformer was Eldorado Gold.
AngloGold Ashanti remains the fund’s largest holding. With Randgold merging with Barrick, a void has been left for a mid-sized gold company with a strong balance sheet, high quality assets and a strict capital allocation framework. AngloGold is on its way to fi lling this void. Given the risk that the gold price has run too hard too fast, allocation of some funds into metal rather than stocks is under consideration.
Mandate Overview26 Aug 2019
The fund aims to offer superior returns over the medium to longer term through investment in the shares of companies involved in gold and other precious metals.