ESG-Screened Gold Miners ETF Report | Jun 2024

ESG Gold ETF Macro Outlook

In May, the turmoil and wars in the world have continued, with little hope of improvement. At the same time, we have witnessed how the political circus in the US continues to reach new heights. In this month’s newsletter, however, we focus on something else: China, silver and gold.

China and silver

In our Outlook for 2024, we saw the gold price reaching 2475 and the Gold:Silver Ratio (GSR) moving downwards during the year, from 87:1 to 70:1. Such a move would give us a silver price of USD 35 per troy ounce. This could be seen as a bold statement at the beginning of the year, but we have already come a long way. The silver price is now around USD 30 and was, for a few days, above USD 32. An increase of 28 per cent after five months makes our outlook for the silver price, which would give +48 per cent for the year, clearly relevant. The strong silver price has given silver mining companies real upward momentum since March, as we have seen in AuAg Gold Mining’s returns.

Silver is an element with unique properties and is particularly important in the electrification of our world. This is because silver is the metal that conducts electricity and heat the best of all metals. For several years, we have had a silver market with an ‘artificially’ low price for the commodity, inhibiting the incentives to start new projects and mines. At the same time, industrial demand for silver has increased. We now see that this has led to a structural deficit, and it looks like all available silver reserves (above ground) will soon be depleted.

Silver is the only metal with simultaneous strong demand from industry and investors. In the event of a physical shortage, this unique dual-demand situation can lead to explosive price increases. With only 30 per cent of all silver mined coming from so-called ‘primary silver mining companies’, these companies may be in a very strong position in the coming years. Mining companies always extract several metals, and the companies focusing on silver are called ‘primary silver mining companies’. We want to own as many of these mining companies as possible in the AuAg Silver Bullet fund.

China is also buying gold, lots of gold

China has been rapidly selling off US fixed-income securities to buy more and more gold. Many central banks worldwide, led by China, are increasing their gold reserves. In a world where we are going towards increased de-globalisation, more countries are gradually trying to reduce their dependence on the US dollar.

In China, many investors have also increased their gold and silver purchases after a long period in which other assets with exposure to the Chinese stock and property markets performed poorly. A possible devaluation of the Chinese currency has also increased investors’ willingness to buy gold and silver.

China has shown a strong interest in increasing its gold reserves, especially in the last two years. Record gold purchases by global central banks in recent years have been fuelled by China’s massive appetite for gold. Regarding silver as an investment, India and its population have also been among the top buyers.

Sources available upon request.

ESG Gold ETF Performance
As of 31.05.2024

1M3M6MYTD12M3YSI
AuAg ESG Gold Mining UCITS ETF (ESGO)8.62%37.88%9.19%8.67%8.96%N/A-0.20%
Solactive AuAg ESG Gold Mining Index8.69%38.25%9.60%9.03%9.68%-9.77%1.62%

Please note that all performance figures are showing net data. Source: Bloomberg / HANetf. Data as of 31/05/2024

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 (“Prospectus”) before investing and should refer to the section of the Prospectus entitled ‘Risk Factors’ 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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