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Investec GSF Global Gold Fund A Inc - News
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Investec GSF Global Gold comment - Dec 09
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Thursday, 25 March 2010
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Fund Manager Comment
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Market Background
The gold price fell by 7% in December 2009 ending the year at $1,090 per ounce. Gold hit a new all time high intra-month when it traded at just over $,1200 per ounce. Gold gained nearly 30% against the dollar in 2009 recording the tenth year of consecutive gains.
The correction in the gold market occurred as the dollar strengthened sharply against the euro, by 5%. Year end also discouraged bottom picking and we ended the year with much cleaner over the counter trade length in the macro fund community and amongst bank dealers. Speculative long positions on the commodities exchange from Commodity Trading Advisors have also lightened considerably, which we believe is healthy for the market.
Continued strength in the US dollar is likely to be painful for investors with long gold positions, as evidenced by December's move, and strategists contend that the potential for further dollar strengthening is possible. However, in spite of gold's vulnerability to a stronger dollar, we continue to believe that gold is well supported in the current environment:
· We believe that if the $150 per ounce rally in gold during November was not enough, the fall of around $50 an ounce on 4 December on the heels of a rebounding US dollar was sufficient to capture the market's attention.
· A below par recovery in the face of constrained consumer spending is more likely to continue to encourage gold investment, in our view, due to expectations that fiscal and monetary stimulus is likely to continue to fuel large government deficits and pose risks to the longer-term value of the US currency.
· Central banks have been supportive of the gold market. Central banks in India, Sri Lanka and Mauritius have purchased 212 tonnes of the International Monetary Fund's 403.3 tonnes of authorised sales. China, another possible buyer, has yet to participate.
· Since mid August alone, gold is up 25%.
The price at which the US dollar would be fully backed by gold (as it was during the peak of the 1970's mania) is $6,300 an ounce. So there is a case we believe for gold being "cheap." Moreover, the 1970?s bull market was facilitated by tight energy markets, overly accommodative central banks and nervousness that policymakers had lost their way. A familiar scenario perhaps?
In addition to this potential shift of central banks from being net sellers to net buyers of gold, the continued weakness in real interest rates we believe continues to provide strong support to gold prices over the medium term. The yield on the 10-year US Treasury Inflation-Protected Securities (TIPS) remains under 1.5%. When money is easy and demand moves much faster than supply, prices can explode. In the 18 months from July 1978, gold prices went from $185 to $850 per ounce (that's $2,400 in today?s dollars).
We believe that that gold has finally broken clear of the $700 to $1,000 per ounce range that dominated the last two years and that we are probably in the process of finding out where the new higher range will be established. We believe that the degree of investment demand is likely to force a peak that is nearer $1,300 per ounce over the next six months with $1,000 an ounce becoming the long term floor.
Fund Performance
The Fund returned -5.9% in December ("A? shares, net of fees, in US dollars) over the month, outperforming the HSBC Global Gold Index which returned -8.0%.
Portfolio Activity
Significant Purchases
Significant purchases included Newcrest and Agnico-Eagle.
Significant Sales
Significant Sells included Anglogold and Platinum ETF Barrick.
Market Outlook
Notwithstanding the growing chorus of bullish sentiment, debate remains as to how "real" the economic recovery is. With the fear of a significant financial crisis waning, debate is now turning again to how the recovery will play out. In almost all but a global soft-landing scenario, we believe gold is likely to rally. With a global recovery unlikely to be smooth, the two main risks to most asset values are inflation and a weak US dollar, both of which are positive for gold.
We therefore maintain our positive outlook for the gold price for the following reasons:
· Safe haven buying as an alternative currency. Gold is the only currency whose production is going down, not up in double digits.
· The eventual outcome of printing money is likely to be inflation. Gold is viewed as a hedge against inflation and soared ten-fold in the inflationary 1970?s.
· No supply response to high gold prices is anticipated. Mine production is on a declining trend of approximately -1% per year.
We also believe that gold shares still have significant upside for these reasons:
· The high and rising gold price.
· Costs have stabilised (energy and materials costs are falling).
· Weaker producing currencies, further widens margins
· Relative to the gold price and to their usual valuations, gold shares appear oversold.
The Investec Global Gold Fund is overweight pure gold producers, which have strong balance sheets and are exhibiting growing production profiles.
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Investec GS Global Gold comment - Sep 09
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Tuesday, 15 December 2009
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Fund Manager Comment
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Volatility in bond and equity markets and the decline of the US dollar over the past few years has encouraged investors to seek alternative global stores of value. More importantly, independent of movements in the US currency, demand from investors has been spurred by expected pressure on prices from tight supply and rising demand.
Over the longer term, we have a positive outlook for gold, based on a mix of macro and supply-demand drivers. As an asset with inherent value, gold is likely to appeal to investors concerned about uncertainty such as the risk of inflation, instability caused by fluctuating oil prices, global economic imbalances and geopolitical uncertainty.
There are however a number of factors that may adversely impact the gold price over the medium term, which include a stronger US dollar and falling inflation (and/or lower inflationary expectations). A more subdued outlook for global growth may also depress the gold price. If the price declined then it is likely that gold shares would fall. Major production difficulties at one of the portfolio's gold companies could also cause a fall in the Fund price.
This Fund will also be able to invest up to a third of its assets in companies which mine for other precious metals, minerals and other metals, including platinum, silver and diamonds.
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Investec GS Global Gold comment - Jun 09
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Sunday, 13 December 2009
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Fund Manager Comment
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Volatility in bond and equity markets and the decline of the US dollar over the past few years has encouraged investors to seek alternative global stores of value. More importantly, independent of movements in the US currency, demand from investors has been spurred by expected pressure on prices from tight supply and rising demand.
Over the longer term, we have a positive outlook for gold, based on a mix of macro and supply-demand drivers. As an asset with inherent value, gold is likely to appeal to investors concerned about uncertainty such as the risk of inflation, instability caused by fluctuating oil prices, global economic imbalances and geopolitical uncertainty.
There are however a number of factors that may adversely impact the gold price over the medium term, which include a stronger US dollar and falling inflation (and/or lower inflationary expectations). A more subdued outlook for global growth may also depress the gold price. If the price declined then it is likely that gold shares would fall. Major production difficulties at one of the portfolio's gold companies could also cause a fall in the Fund price.
This Fund will also be able to invest up to a third of its assets in companies which mine for other precious metals, minerals and other metals, including platinum, silver and diamonds.
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Investec GS Global Gold comment - Mar 09
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Tuesday, 9 June 2009
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Fund Manager Comment
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Volatility in bond and equity markets and the decline of the US dollar over the past few years has encouraged investors to seek alternative global stores of value. More importantly, independent of movements in the US currency, demand from investors has been spurred by expected pressure on prices from tight supply and rising demand.
Over the longer term, we have a positive outlook for gold, based on a mix of macro and supply-demand drivers. As an asset with inherent value, gold is likely to appeal to investors concerned about uncertainty such as the risk of inflation, instability caused by fluctuating oil prices, global economic imbalances and geopolitical uncertainty.
There are however a number of factors that may adversely impact the gold price over the medium term, which include a stronger US dollar and falling inflation (and/or lower inflationary expectations). A more subdued outlook for global growth may also depress the gold price. If the price declined then it is likely that gold shares would fall. Major production difficulties at one of the portfolio's gold companies could also cause a fall in the Fund price.
This Fund will also be able to invest up to a third of its assets in companies which mine for other precious metals, minerals and other metals, including platinum, silver and diamonds.
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Investec GS Global Gold comment - Dec 08
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Friday, 27 March 2009
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Fund Manager Comment
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Volatility in bond and equity markets and the decline of the US dollar over the past few years has encouraged investors to seek alternative global stores of value. More importantly, independent of movements in the US currency, demand from investors has been spurred by expected pressure on prices from tight supply and rising demand.
Over the longer term, we have a positive outlook for gold, based on a mix of macro and supply-demand drivers. As an asset with inherent value, gold is likely to appeal to investors concerned about uncertainty such as the risk of inflation, instability caused by fluctuating oil prices, global economic imbalances and geopolitical uncertainty.
There are however a number of factors that may adversely impact the gold price over the medium term, which include a stronger US dollar and falling inflation (and/or lower inflationary expectations). A more subdued outlook for global growth may also depress the gold price. If the price declined then it is likely that gold shares would fall. Major production difficulties at one of the portfolio's gold companies could also cause a fall in the Fund price.
This Fund will also be able to invest up to a third of its assets in companies which mine for other precious metals, minerals and other metals, including platinum, silver and diamonds.
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Investec GS Global Gold comment - Sep 08
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Thursday, 27 November 2008
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Fund Manager Comment
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Volatility in bond and equity markets and the decline of the US dollar over the past few years has encouraged investors to seek alternative global stores of value. More importantly, independent of movements in the US currency, demand from investors has been spurred by expected pressure on prices from tight supply and rising demand. This Fund will also be able to invest up to a third of its assets in companies which mine for other precious metals, minerals and other metals, including platinum, silver and diamonds.
While we expect the gold price to benefit from improving fundamentals, if the price declined, gold shares would probably fall. Major production difficulties at one of the portfolio's gold companies could also cause a fall in the Fund price. However, supply of mined gold has been flat for the past few years and we anticipate that this will continue as no major discoveries have been made in recent years. At the same time, demand from emerging markets has recently removed restrictions on its citizens owning gold, is rising. Gold's lack of correlation with other financial assets has also driven up investment flows. Finally, as an asset with inherent value, gold may appeal to investors concerned about uncertainty such as the risk of inflation, instability caused by high oil prices, global economic imbalances and geopolitical uncertainty.
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Investec GS Global Gold comment - June 08
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Monday, 15 September 2008
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Fund Manager Comment
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Volatility in bond and equity markets and the decline of the US dollar over the past few years has encouraged investors to seek alternative global stores of value. More importantly, independent of movements in the US currency, demand from investors has been spurred by expected pressure on prices from tight supply and rising demand. This Fund will also be able to invest up to a third of its assets in companies which mine for other precious metals, minerals and other metals, including platinum, silver and diamonds.
While we expect the gold price to benefit from improving fundamentals, if the price declined, gold shares would probably fall. Major production difficulties at one of the portfolio's gold companies could also cause a fall in the Fund price. However, supply of mined gold has been flat for the past few years and we anticipate that this will continue as no major discoveries have been made in recent years. At the same time, demand from emerging markets has recently removed restrictions on its citizens owning gold, is rising. Gold's lack of correlation with other financial assets has also driven up investment flows. Finally, as an asset with inherent value, gold may appeal to investors concerned about uncertainty such as the risk of inflation, instability caused by high oil prices, global economic imbalances and geopolitical uncertainty.
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Investec GS Global Gold comment - June 05
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Friday, 29 July 2005
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Fund Manager Comment
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Investors have rediscovered the value of gold shares, a traditional safe haven asset. Volatility in bond and equity markets and the decline of the US dollar over the past few years has encouraged investors to seek alternative global stores of value. The low absolute level of interest rates has also raised gold's appeal as a non-interest bearing asset by reducing its holding costs.
Demand for gold has slackened since the surge seen in 2003 as the threat of deflation has receded. However, gold is still likely to benefit from improving fundamentals. Industry consolidation is expected to continue. Terrorism remains a threat and enhances the appeal of assets with inherent value like gold. Concerns about rising inflation in the future and monetary debasement in the light of aggressive 'reflation' policies by major monetary authorities are also encouraging demand. In addition, Central Banks have committed to a disciplined sales agreement, which makes supply more predictable.
With few opportunities for undiluted access to the gold price, the Fund aims to offer investors a diverse exposure through its investment in hedged and unhedged gold producers throughout the world.
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Investec GS Global Gold comment - Mar 05
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Wednesday, 22 June 2005
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Fund Manager Comment
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Investors have rediscovered the value of gold shares, a traditional safe haven asset. Volatility in bond and equity markets and the decline of the US dollar over the past few years has encouraged investors to seek alternative global stores of value. The low absolute level of interest rates has also raised gold's appeal as a non-interest bearing asset by reducing its holding costs.
Demand for gold has slackened since the surge seen in 2003 as the threat of deflation has receded. However, gold is still likely to benefit from improving fundamentals. Industry consolidation is expected to continue. Terrorism remains a threat and enhances the appeal of assets with inherent value like gold. Concerns about rising inflation in the future and monetary debasement in the light of aggressive 'reflation' policies by major monetary authorities are also encouraging demand. In addition, Central Banks have committed to a disciplined sales agreement, which makes supply more predictable.
With few opportunities for undiluted access to the gold price, the Fund aims to offer investors a diverse exposure through its investment in hedged and unhedged gold producers throughout the world.
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Investec GS Global Gold comment - Mar 04
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Wednesday, 9 June 2004
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Fund Manager Comment
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Investors are rediscovering the value of gold shares, a traditional safe haven asset. Volatility in bond and equity markets and the decline of the US dollar has encouraged investors to seek alternative global stores of value. The low absolute level of interest rates has also raised gold's appeal as a non-interest bearing asset by reducing its holding costs.
The Fund has invested in unhedged gold producers, which have undiluted exposure to the rally in the gold price and to gold bullion securities, which offer a relatively pure exposure to the gold price. It is also participating in the growing consolidation of the fragmented gold production industry.
Demand for gold is likely to be sustained for several reasons. Industry consolidation is expected to continue. Terrorism remains a threat and enhances the appeal of assets with inherent value like gold. Concerns about rising inflation in the future and monetary debasement in the light of aggressive 'reflation' policies by major monetary authorities are also encouraging demand. The US dollar is expected to weaken further due to the burden of financing a 5% deficit in the Current Account and expectations that longer-term growth will be lower than in the recent past. Finally, Central Banks are storing their stocks of gold, which makes supply more predictable.
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Investec GS Global Gold comment - Dec 03
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Thursday, 12 February 2004
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Fund Manager Comment
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Investors are rediscovering the value of gold shares, a traditional safe haven asset. Volatility in bond and equity markets and the decline of the US dollar has encouraged investors to seek alternative global stores of value. The low absolute level of interest rates has also raised gold's appeal as a non-interest bearing asset by reducing its holding costs.
The Fund has invested in unhedged gold producers, which have undiluted exposure to the rally in the gold price. It is also participating in the growing consolidation of the fragmented gold production industry, most recently with its investment in Zimplats, currently the target of two buy-out offers.
Demand for gold is likely to be sustained for several reasons. Industry consolidation is expected to continue. Terrorism remains a threat and a enhances the appeal of assets with inherent value like gold. Concerns about rising inflation in the future and monetary debasement in the light of aggressive 'reflation' policies by major monetary authorities are also encouraging demand. The US dollar is expected to remain weak due to the burden of financing a 5% deficit in the Current Account and the current administration's need to restore growth before the 2004 election. Finally, Central Banks are storing their stocks of gold, which makes supply more predictable.
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Investec GS Global Gold comment - Sep 03
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Monday, 10 November 2003
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Fund Manager Comment
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Over the past two years, investors have rediscovered the value of gold shares. The decline of the US dollar, due to the growing current account deficit, has encouraged investors to seek alternative global stores of value. Gold remains a traditional safe haven asset that should continue to be in demand by investors concerned about terrorism, the weak dollar and uncertain global growth.
The fund has invested in unhedged gold producers, which have benefited from the volatility in the gold price. The fund is participating in the growing consolidation of gold producers, which has some way to go - the top 10 gold producers control less than 40% of the global supply. Dominant companies are making acquisitions at premium prices. The Fund has begun to diversify out of South African Gold producers, whose profits are being squeezed by the strong Rand, into relatively undervalued North American producers.
Industry consolidation is expected to continue. Terrorism remains a threat and, while global economic recovery remains fragile, monetary authorities are likely to cut interest rates or keep them on hold, which improves the appeal of gold as low rates reduce the holding (opportunity) cost of gold, a non-interest bearing investment. The US dollar is expected to remain weak due to the burden of financing a 5% deficit in the US Current Account, and the government's priority to restore growth before the 2004 election. Central Banks are storing their stocks of gold, which makes supply more predictable.
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Investec GS Global Gold comment - June 2003
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Tuesday, 12 August 2003
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Fund Manager Comment
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Over the past two years, investors have rediscovered the value of gold shares. The decline of the US dollar, due to the growing current account deficit, has encouraged investors to seek alternative global stores of value. Gold remains a traditional safe haven asset that should continue to be in demand by investors concerned about terrorism, the weak dollar and mixed global growth.
The Fund has invested in unhedged gold producers, which have benefited the volatility in the gold price. The fund is participating in the growing consolidation of gold producers, which has some way to go - the top 10 gold producers control less than 40% of the global supply. Dominant companies are making acquisitions at premium prices. The Fund has begun to diversify out of South African Gold producers, whose profits are being squeezed by the strong Rand, into undervalued North American producers.
Industry consolidation is expected to continue. Terrorism remains a threat and, while global economic recovery is uncertain, monetary authorities are likely to cut interest rates to address slowing growth. The US dollar is expected to remain weak due to the burden of financing a 5% deficit in the US Current Account, and the government's priority to restore growth before the 2004 election. Central Banks are storing their stocks of gold, which makes supply more predictable.
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Investec GS Global Gold comment - September 2002
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Wednesday, 20 November 2002
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Fund Manager Comment
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Gold represents a hedge against weakness in the US$. Both assets are widely seen as "safe havens", particularly when there are concerns about the global geopolitical environment or volatility in financial markets. However, a key development lately has been the clear move of the US$ into a downtrend relative to other major currencies. Given the imbalances in the US economy, the comparative softness of the US$ could persist for some time.
An investment in gold stocks should, we believe, boost the long-term returns, and/or reduce risk, in a properly diversified global portfolio. The price of gold bullion tends not to move in line with the world's stockmarkets. For this reason alone, gold stocks often perform reasonably well at times of volatility in financial markets. In addition, the movement in the price of bullion tends to have an exaggerated impact on the profitability of gold mining companies.
Additional opportunities come from the consolidation of the global gold industry. The proportion of world output that is accounted for by the five largest producers is far lower than it is for other metals. It is probable that there will be more mergers. Profit margins should improve as the largest companies combine: eventually this should cause gold stocks to be re-valued upwards.
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Investec GS Global Gold comment - June 2002
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Monday, 9 September 2002
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Fund Manager Comment
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The price of gold consolidated its recent gains during June and tracked sideways. It finished the month at around US$322/Oz. Sentiment towards bullion was helped by the continued weakness of the US$, which slipped by another 4-5% or so against other major currencies. Major gold stocks, in South Africa as in North America and Australasia, benefited from these factors.
The Fund has benefited from the rise in the stock prices of gold mining groups which do not hedge. Performance has also been helped by the Fund's orientation towards South African groups.
Your Adviser remains confident about the outlook for the Fund. There is typically low or negative correlation between the price of gold and global stockmarkets. In an environment where equities may well continue to be volatile, the attractions of gold as an investment should become more apparent. In addition, the gold price typically does well when the US$ is weakening. Meanwhile, the consolidation of the gold industry is at an early stage. The proportion of world output that is accounted for by the five largest producers is far lower than it is for other metals. Profit margins should improve as the largest companies combine.
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