ESG Gold Mining ETF Monthly Report | February 2024

Gold Mining ETF Macro Outlook | February

  • Gold and silver mining companies could be poised to become particularly appealing to European investors in 2024 due to the 2x/FX effect. If mining stocks are twice as leveraged to the price of gold which we expect to rise by 20 per cent this will translate to a 40 per cent gain for mining stocks. In combination with a weaker USD say a 10 per cent drop compared to the EUR/GBP the net return for a European investor in gold would be a 10 per cent increase and a 30 per cent net return in mining stocks. This would result in a threefold return not merely double.
  • Gold miners are historically undervalued relative to gold a trend likely to reverse and overshoot during the forthcoming secular gold bull market.
  • Generally gold miners have significantly reduced their debt levels in the past decade unlike other sectors which have accumulated more.
  • Since 2021 companies in the commodity sector have mostly sustained robust cash flows with precious metal producers boasting the highest margins.
  • Gold miners have become more shareholder-friendly and are more cautious with new costly projects.
  • Merger and acquisition activity in the mining sector is vigorous driving up premiums.
  • Gold miners have been conducting record share buybacks over the past two years and they have made the buybacks without financing it with debt as with most other sectors.
  • There is a strong trend of increasing dividends among gold miners.
  • Smaller large caps and larger mid-caps are expected to outperform the mega-caps within the sector.
  • Institutional investment will particularly propel the share prices of ESG-friendly companies and gold mining funds/ETFs with the strongest sustainability credentials.
  • Gold miners have a very low correlation with the broader stock market and should become more appealing to large investors seeking alternative sources of return. This should lead to strong capital inflows and subsequently higher equity prices.
  • Gold miners are also historically undervalued compared to the S&P 500 presenting a unique and attractive entry point.
  • Should gold appreciate by 20 per cent it would end the year at USD 2475 and with a gold-to-silver ratio of 70:1 silver would close at USD 35 equating to a 48 per cent return.

Sources available upon request.

Gold Mining ETFPerformance
As of 31.01.2024

1M3M6MYTD12M2YSI
AuAg ESG Gold Mining UCITS ETF (ESGO)-12.43%-1.09%-12.74%-12.43%-14.72%-9.80%-19.58%
Solactive AuAg ESG Gold Mining Index-12.41%-0.97%-12.55%-12.41%-14.17%-8.65%-18.37%

Please note that all performance figures are showing net data.Source: Bloomberg / HANetf. Data as of 31/01/2024

Performance before inception is based on back-tested data. Backtesting is the process of evaluating an investment strategy by applying it to historical data to simulate what the performance of such a strategy would have been. Back-tested data does not represent actual performance and should not be interpreted as an indication of actual or future performance. Past performance for the index is in USD. Past performance is not an indicator for future results and should not be the sole factor of consideration when selecting a product. Investors should read the prospectus of the Issuer (&ldquoProspectus&rdquo) before investing and should refer to the section of the Prospectus entitled &lsquoRisk Factors&rsquo for further details of risks associated with an investment in this product. When you invest in ETFs your capital is at risk.

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