Outlook still bright for gold and gold stocks

After strong gains this year, gold and gold stocks paused in September. Where next? We think the factors supporting these asset classes remain in place.

14 Oct 2020

5 Minutes

The Fast View

  • Gold gained 24% in the first nine months of 2020 due to coronavirus-related uncertainty, a weakening US dollar and low interest rates.
  • Gold equities are attracting a broad spread of investors partly due to gold producers’ potential to pay and even increase dividends when many other sectors are having to cut payouts.
  • We expect the current gold price to remain supported, and we maintain our view that gold equities have significant potential even after their gains so far this year.

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Specific risks:
Commodity-related investment: Commodity prices can be extremely volatile and significant losses may be made. Concentrated portfolio: The portfolio invests in a relatively small number of individual holdings. This may mean wider fluctuations in value than more broadly invested portfolios. Currency exchange: Changes in the relative values of different currencies may adversely affect the value of investments and any related income. Derivatives: The use of derivatives is not intended to increase the overall level of risk. However, the use of derivatives may still lead to large changes in value and includes the potential for large financial loss. A counterparty to a derivative transaction may fail to meet its obligations which may also lead to a financial loss. Emerging market: These markets carry a higher risk of financial loss than more developed markets as they may have less developed legal, political, economic or other systems. Equity investment: The value of equities (e.g. shares) and equity-related investments may vary according to company profits and future prospects as well as more general market factors. In the event of a company default (e.g. insolvency), the owners of their equity rank last in terms of any financial payment from that company. Geographic / Sector: Investments may be primarily concentrated in specific countries, geographical regions and/or industry sectors. This may mean that the resulting value may decrease whilst portfolios more broadly invested might grow.

General risks:
All investments carry the risk of capital loss. The value of investments, and any income generated from them, can fall as well as rise and will be affected by changes in interest rates, currency fluctuations, general market conditions and other political, social and economic developments, as well as by specific matters relating to the assets in which the investment strategy invests. If any currency differs from the investor’s home currency, returns may increase or decrease as a result of currency fluctuations. Past performance is not a reliable indicator of future results.

Authored by

George Cheveley
Portfolio Manager

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This communication is provided for general information only should not be construed as advice.

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