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Executive
Summary: In September, the fund rose by 22.1% following
a 1.7% rise in August and a 3.4% advance in July taking the quarter performance to +28.7%. Over the past month the FTSE Gold
Mines Index rose by 20.4%, gold bullion rose by 7.8%, silver
rose by 9.1% and palladium rose by 7.3%. Since
inception over 2 years ago the fund is up by 92.4%,
with a Compound Annual Growth Rate (CAGR) of 28.9% p.a.
Over the past quarter gold has advanced by 7.8%
while the fund advanced by 28.7%.
In
September, the fund significantly outperformed both gold and the gold mines index over both the month and the quarter. The gold mines index continues to be volatile and geared to the gold price. The fund has a large weighting in mid-cap stocks which are more geared to gold than the large capitalisation stocks and also have company specific research based reasons for inclusion in the portfolio. The portfolio remains concentrated with the number of names steady at 50.
Company
News. Bema has secured finance for its Russian gold project Kupol. Banro announced that it has raised additional equity to finance its exploration efforts in the DRC. Emperor Mines has confirmed that it is considering a proposal from DRD Gold regarding the acquisition of some of DRD's non-South African assets. Placer Dome approved the expansion of its projects in Nevada. Rangold Resources poured its first gold at its Loulo mine in Mali.
Macro
News. The month has seen confusion on the significance of the hurricanes in the USA and their effect upon US deficits and oil prices. Initial huge estimates of needed spending for reconstruction have been scaled back so what was once considered a negative for the dollar is now considered a large positive for construction spending. Inflation is back in the news with higher than expected numbers in the US and in the UK. The dollar has been strong on growth differentials yet gold has also been strong indicating that purchases are on expectation of gold advancing and not a dollar hedge.
Outlook.
Central bank selling has been muted during recent months further helping gold. We are now in Ramadan and expect large gold purchases for the Eid celebrations to take place in early November. With such a strong gold company performance compared to gold over the past month there could be some pause in the outperformance. Gold companies in the portfolio are geared to the gold price but not as much as September would indicate.
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