Gold Report Q1 2020 - Die Fondsplattform
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Gold Report Q1 2020 For professional investors / qualified investors / qualified clients only. Please do not redistribute.
Get interactive
When you see this icon, roll
over the content to interact
and explore further.
04 06 12
Introduction Macro factors Market performance
Gold is often used by all types of The gold price rose strongly in the first
investors for diversification purposes, quarter of 2020, driven by investors’
including as a hedge against flight to safety in the midst of the
uncertainty and volatility. Here, we look global pandemic. In this section of the
at how various macro-related factors report, we look at how gold performed
impacted the value and attraction of relative to other asset classes and
gold during the quarter. currencies as well as a review of
its longer-term performance on an
inflation-adjusted basis.
18 24
Supply and demand COVID-19’s
disruptive impact
The gold price is driven by more
than just investor fear. As with any
The pandemic had an unexpected
commodity, supply and demand can
Contents
impact on the global gold market.
play key roles and, here, we review how
In this part of the report, we look at
factors such as mining activity and
the dislocation between the typically
consumer buying were impacted by the
efficient futures and spot gold markets.
crisis during the quarter.
We address the reasons, market
behaviour and what has been done
to improve trading conditions.
02 Gold Report 03
Despite the coronavirus limiting
demand for gold from the jewellery
industry, the gold price rose strongly in
Q1 as investors flocked to the perceived
safety of the yellow metal as fears
around the global pandemic spread.
Michael Joynson
Head of Market Insights at Invesco
Gold has long been perceived as a “safe haven” commodity,
historically able to maintain its value without depreciating.
Virtually all the gold that has ever been mined still exists
today in one form or another. And while gold is not
perishable, it is a finite resource, and supply and demand
still come into play.
The gold price is driven by a number of other This quarterly report will focus on the
Introduction
factors as well, including Treasury yields, performance of the gold price, both in isolation
monetary policy, inflation expectations and and also relative to other assets. We’ll look
fear. The variety of influences help explain the primarily at the most recent quarter, but will
low correlation gold has demonstrated with also put it into a longer-term context. We’ll
other assets and, in turn, the attraction of gold analyse the various forces impacting gold and
for portfolio diversification. provide some insight for the future.
04 Gold Report 05
Figure 1 10 year TIPS yield Spot Gold (RHS)
Macro
Real yield and gold price
-2 1,800
1,700
Factors
0
1,600
1,500
USD per Fine Try ounce
2
Yield (%, inverted)
1,400
4 1,300
1,200
6
1,100
1,000
8
900
10 800
Mar 10 Mar 12 Mar 14 Mar 16 Mar 18 Mar 20
Source: Bloomberg to 31 March 2020
Data suggests the US economy entered Although real yields remain negative, the stock
The gold price increased through recession soon after the start of the lockdown of negative-yielding debt (largely sovereign debt
period. Negative real yields benefit non-yielding of the Eurozone and Japan) shrank considerably
the quarter as real yields assets such as gold, as it reduces the opportunity over the quarter to $10.5trillion from $11.3trillion
continued to fall (Fig.1) on the cost of holding the asset. (Fig.2). The close relationship between changes in
the stock of negative-yielding debt broke down during
back of unprecedented stimulus the quarter.
from the Federal Reserve to
combat the economic impact
of the pandemic. Figure 2 Negative Yielding Debt Spot Gold (RHS)
Negative yielding debt and gold price
Stock of negative-yielding debt
$10.5 trillion 18
16
1,700
1,600
14
1,500
USD per Fine Troy ounce
12
USD trillions
10 1400
8 1,300
6
1,200
4
1,100
2
0 1,000
Dec 14 Dec 15 Dec 16 Dec 17 Dec 18 Dec 19
Source: Bloomberg to 31 March 2020
06 Gold Report 07
Macro Factors
Figure 3 US Dollar Index Spot Gold (RHS) Figure 4 Global Economic Policy Uncertainty Index Spot Gold (RHS)
US Dollar and gold price Global economic uncertainty and gold returns
105 1,800 350 30%
103
1,700 300
20%
101
1,600
99 250
USD per Fine Troy ounce
10%
1500
3m rolling return
97
200
Index level
Index level
95 1,400
0%
93 150
1,300
91 -10%
1,200 100
89
87 1,100 50 -20%
85 1,000
0 -30%
Jun 17 Dec 17 Jun 18 Dec 18 Jun 19 Dec 19
Mar 12 Mar 14 Mar 16 Mar 18 Mar 20
Source: Bloomberg to 31 March 2020 Source: Bloomberg to 31 March 2020
Historically there has been an inverse relationship Over the quarter, gold increased by On the back of the coronavirus shock, global
between the strength of the US dollar and the price economic uncertainty picked up during the
of gold, which is universally measured in dollar
terms. Although we saw this pattern during the
quarter, for the three months overall the dollar index
rose 2.8% as gold increased 3.9% (Fig.3). Bloomberg
3.9% quarter (Fig.4), underpinning gold as a perceived
“safe haven” asset. Uncertainty is expected to
remain high as the wide-reaching impacts of the
pandemic dominate the economic outlook.
composite forecasts are for the dollar to weaken into
year-end.
08 Gold Report 09
Macro Factors
Figure 5 US money supply (M1) Figure 6 Conference Board US leading indicator index
US money supply and gold returns Spot gold return (RHS) US leading economic indicator and gold price Spot gold price (RHS)
25% 50% -2 1,800
40% 1,700
0
20% 1,600
30%
20% 2 1,500
USD per Fine Troy ounce
Indicator level, inverted
Growth, year-on-year
Return, annualised
15%
10% 1,400
4
0% 1,200
10%
-10% 6 1,100
-20% 1,000
5% 8
-30% 900
0% -40% 10 800
Mar 10 Mar 12 Mar 14 Mar 16 Mar 18 Mar 20 Mar 10 Mar 12 Mar 14 Mar 16 Mar 18 Mar 20
Source: Bloomberg to 31 March 2020 Source: Bloomberg to 31 March 2020
US money supply growth rose sharply during the The US leading indicator weakened during the
quarter (Fig.5) due to aggressive policy response quarter (Fig.6) as the impact of the rapid spread
from the Federal Reserve. It is expected to expand of the coronavirus sharply reduced economic
further in the near-term as monetary policy activity. Economic leading indicators are expected to
continues to support the economy. deteriorate further as more recent data points are
incorporated.
Central bank efforts to prop up the
economy amid increased fear and
uncertainty underpinned the gold
price during the quarter.
Emma McHugh
Investment Strategist at Invesco
10 Gold Report 11
Figure 7b % Change for the quarter
The first quarter of 2020 was Performance
positive for gold, as investors
sought “safe haven” assets amidst
the violent sell-off in equities and 22.03%
other risk assets.
13.91%
8.8%
2.5% 4.37%
David Scales 3.9% 0%
Senior ETF Content Strategist at Invesco -4.0% -13.1%
-7.45% -20.1%
-12.09% -23.5%
-23.71% -23.5%
-19.80%
US Treasury Gold spot USD US corps US High Yield MSCI World BBG MSCI EM
$/oz deposit Commodity
1 mo*
year
*Average yield for the quarter
Source: Bloomberg, to 31 March 2020, in USD terms unless stated otherwise.
The spot gold price returned 3.9% in USD terms For the 12 months to the end of March 2020, gold
for the quarter, as there was a general preference returned 22.0% in USD terms and delivered the
for risk-off assets demonstrated by the increase strongest returns of the major asset classes.
in return for US Treasuries and emerging market The chart of the past year’s returns is dominated by
equities seeing the greatest falls. assets with a lower-risk profile outperforming cash,
whilst risk-on assets have had negative returns.
Figure 8 Real Nominal
Inflation-adjusted gold price
2000
1800
1600
USD per Fine Troy ounce
1400
1200
1000
800
600
400
200
Market
0
1970 1974 1979 1984 1989 1994 1999 2004 2009 2014 2019
Performance
Source: Bloomberg, to 31 March 2020, showing changes in nominal gold price and changes adjusted for inflation.
Measured on an inflation-adjusted basis, gold Inflation-adjusted quarterly return for gold
returned 4.1% for the quarter, comfortably
increasing its purchasing power in a low-inflation
environment. (Fig.8)
4.1%
12 Gold Report 13
Market Performance
Figure 9 Gold spot price Moving Average 100 DayMoving Average 50 Day Moving Average 200 Day Figure 10 14-Day RSI
Market signals Market signals
1800 100
90
1700
80
70
1600
USD per Fine Troy ounce
Relative strength index
60
1500 50
40
1400
30
20
1300
10
1200 0
Apr 19 Jun 19 Aug 19 Oct 19 Dec 19 Feb 20 Apr 20 Apr 19 Jun 19 Aug 19 Oct 19 Dec 19 Feb 20 Apr 20
Source: Bloomberg, to 31 March 2020 Source: Bloomberg, to 31 March 2020
Reviewing the smoothed price data in the chart
(Fig.9), each period shows the trend for gold
clearly remained up and the moving average giving
support at these levels. Using the relative strength
index (Fig.10), the price moves in gold touched on
oversold territory for one day on the quarter, but
on the whole did not hit either signal.
14 Gold Report 15
Market Performance
Figure 11 CFTC speculative positions (‘000 contracts) Spot Gold (RHS) Figure 12
Gold speculative positions Performance relative to G10 currencies
400 1600
350 3.9%
1500
300 1.0% 0.6%
250
1400
USD per Fine Troy ounce
200 -1.6% -1.6%
Contracts ('000s)
150 1300
-5.5%
100 -6.3%
1200 -7.6%
50
0
1100 -11.6%
-12.7%
-50
-100 1000 -15.5%
2015 2016 2017 2018 2019 2020
Gold JPY CHF DKK EUR SEK GBP CAD NZD AUD NOK
Source: Bloomberg, to 31 March 2020. Source: Bloomberg, for the period 1 January to 31 March 2020.
Long speculative positions in gold futures hit record Again, the preference for “safe-haven” assets in
highs during the quarter (Fig.11), reaching 389,000 the latest quarter is highlighted in the charts. Gold
in mid-February as investors increased their exposure outperformed all G10 currencies in the quarter
to gold. Non-commercial positions have now been (Fig.12), but notably the Japanese yen and Swiss
consistently net long since September 2018. franc. These currencies, generally regarded as “safe
havens”, were the only G10 currencies to gain
against the US dollar in the quarter.
16 Gold Report 17
Supply and
The coronavirus had a significant impact on the demand
and supply schedules of gold in the first quarter of 2020
(Fig.13), although the effects were not necessarily obvious
at the aggregate levels. Despite the global lockdown
Demand
severely reducing the amount of gold consumers were
able to buy, and the high price of gold normally acting
as a limiting factor, demand for the metal actually grew
in the quarter. The contraction on the supply side was
possibly more predictable, given the impact of mine
closures in the quarter.
Figure 13
Demand for gold in Q1
Central Banks
Jewellery 13%
30%
The amount of gold held by
exchange-traded products listed
in Europe, as well as globally, rose
ETF
to all-time highs as economic
concerns intensified.
28%
Retail Investment
22%
Tech
7%
Chris Mellor
Head of EMEA Equity and Commodity
ETF Product Management at Invesco
Source: World Gold Council, April 2020, showing percentage of usage of gold in Q1.
18 Gold Report 19Supply and Demand
Figure 14 Figure 15 Other
Jewellery Demand ETF demand, monthly Asia
Europe
North America
800
200
700
150
600
100
Tonnes of gold
Tonnes of gold
500
50
400
0
300
-50
200
2013 2014 2015 2016 2017 2018 2019 -100
Jan 19 Apr 19 Jul 19 Oct 19 Jan 20 Mar 20
Source: Bloomberg to 31 March 2020 Source: Bloomberg to 31 March 2020
Quarter-on-quarter, the demand for gold by Gold purchased through ETFs in Q1 2020
Since 2010, the jewellery industry has accounted for physically backed ETFs and other exchange-traded
more than half of all the world’s demand for gold.
Demand collapsed in the first quarter to the lowest
level since the World Gold Council began recording
data (Fig.14). Global lockdown conditions, coupled
products increased by over 1,000% and by
over 300% year-on-year, as investors sought
out liquid investment products to gain exposure
to gold (Fig.15).
298 tonnes
with the rise in the price of gold through the quarter,
resulted in a 44.7% quarter-on-quarter drop in
demand from this sector.
Quarterly drop in demand by jewellery industry
44.7%
20 Gold Report 21Supply and Demand
Figure 16 Figure 17 Total
Central bank demand Gold supply Recycled gold
Producer hedging
Mine production
300
1400
250
1200
200 1000
800
150
Tonnes
Tonnes
600
100
400
50
200
0
0
2013 2014 2015 2016 2017 2018 2019 2020
Mar 13 Mar 14 Mar 15 Mar 16 Mar 17 Mar 18 Mar 19 Mar 20
Source: Bloomberg to 31 March 2020 Source: Bloomberg to 31 March 2020
Central banks increased their holdings of gold by Central banks increased holding of gold by Gold supply fell 10.7% in the quarter (Fig.17) as the
145 tonnes
145 tonnes during the quarter (Fig.16), down by coronavirus outbreak disrupted mine production.
8% compared to the amount purchased during Q1 With temporary shutdowns, the amount of gold
2019 but an increase of 34.4% compared to Q4 mined in the quarter was the lowest since 2015.
2019. Central banks have been net buyers of gold Restrictions also negatively affected recycled gold
every year since 2010. It is important to note that levels. Despite the increase in the gold price, supply
at the end of the quarter, the Central Bank of Russia was limited because of restrictions associated with
announced it was suspending its gold purchase the coronavirus. This situation can be expected to
programme. Russia had been using its reserves to continue into the next quarter.
prop up the rouble in the face of lower oil prices.
Gold supply in the quarter fell
10.7%
22 Gold Report 23COVID-19’s
The impact of the coronavirus have been wide-reaching and quite unexpected,
this includes the dislocation in global gold markets. The temporary closure of
mines and refineries due to lockdown has resulted in large reductions in both the
Disruption to
supply of gold and in the smelting capacity. This, coupled with the disruption to
transportation links between the major gold hubs (primarily London and
New York), has escalated uncertainties at a time when demand for gold is
at record highs.
Global Gold Ways to gain access to the gold price
Two of the most widely used instruments for gaining exposure
to the gold price are COMEX futures and physical gold
The unknown variables
The clearest evidence of this can be seen in the
Exchange for Physical (EFP) market, which enables
Markets
exchange-traded products. Normally, they are closely linked traders to switch between futures contracts and
with spot gold, as traders can efficiently arbitrage between physical gold. The EFP contract is effectively the
markets by shipping the physical metal and converting bullion difference between the futures and spot gold prices,
from one delivery standard to another. For instance, smelting generally in the region of US$2-3.
400 fine troy ounce bars used for good delivery in London
and creating 100-ounce bars that are acceptable for delivery EFP prices are driven by the number of days to
in New York. The shutdown to combat the spread of COVID-19 delivery, plus transport and refinery costs, and
disrupted the efficiency of this route. the uncertainty around those last two components
made it difficult for market-makers to quote prices.
Bid-offer spreads increased to more than 400 basis
points in the early stages of the dislocation in March
(Fig.18). And even though spreads came down after
the initial panic, they have remained at least twice as
wide as before the crisis.
X
LONDON GOOD DELIVERY CLOSED
400oz BARS
CLOSED
CLOSED
COMEX 100oz BARS CLOSED
A stressed market can also have a
significant impact on trading costs.
The spot and derivative markets for
gold have come under increased
pressure and spreads have widened
significantly. - 24 March 2020
For illustrative purposes only
Jim Goldie
EMEA Head of ETF Capital
Markets at Invesco
24 Gold Report 25COVID-19’s Disruption to Global Gold Markets
Figure 18 EFP Spread Our opinion
EFP spreads blew out in March and remain elevated Gold spot
Range of spreads in largest ETCs
This period of severe dislocation has been due primarily to logistical difficulties – or
more accurately, concerns over the possibility of logistical issues – rather than any
5.00% liquidity or structural issues with the gold market. The majority of futures contracts
4.50% in any commodity are closed prior to expiry, so the actual delivery of physical gold
is generally much smaller than the open interest might suggest. Physical gold
4.00%
exchange-traded products do not rely on the futures, or even spot gold. Although
3.50% the dislocation in those markets may hinder the ability of market-makers to hedge
positions taken in these products, liquidity can be accessed from a variety of sources.
3.00%
Bid/ask spreads
It is worth speaking to the capital markets team before trading any gold product
2.50% during this difficult period.
2.00%
1.50%
1.00%
0.50%
0.00%
20 Mar 24 Mar 25 Mar 27 Mar 31 Mar 03 Apr 07 Apr 09 Apr 15 Apr 17 Apr 21 Apr 23 Apr 27 Apr
Source: Bloomberg, showing bid-offer spreads of “Exchange for Physical” contract, spot gold and the five largest physical gold
exchange-traded commodities (ETCs) listed in Europe (shown as a range), for the period 20 March to 30 April 2020.
In addition, the gold futures and spot gold markets Conditions have improved
experienced a reduction in volume and liquidity, Spreads on many gold products have narrowed since
which together with the wider EFP spreads, made it the March extremes, although they have not yet
difficult for market-makers to hedge positions, which returned to pre-crisis levels. COMEX was quick to
had a knock-on effect on gold exchange-traded calm the panic by introducing futures contracts that
products listed in Europe. This all came at a time allow for delivery across both 100- and 400-ounce
when demand for gold was at an all-time high. standards. More recently, some refineries have re-
opened and gold is now being shipped via chartered
flights when necessary. Although industry reports
show the amount of gold vaulted in the US is well in
excess of the amount needed for delivery.
26 Gold Report 27Investment risks This document is marketing material and This document should not be
Investment strategies involve numerous is not intended as a recommendation considered financial advice. Persons
risks. Investors should note that the price to invest in any particular asset class, interested in acquiring the product
of your investment may go down as well security or strategy. Regulatory should inform themselves as to (i) the
as up. As a result, you may not get back requirements that require impartiality legal requirements in the countries of
the amount of capital you invest. of investment/investment strategy their nationality, residence, ordinary
recommendations are therefore not residence or domicile; (ii) any foreign
Instruments providing exposure to applicable nor are any prohibitions to exchange controls and (iii) any relevant
commodities are generally considered trade before publication. The information tax consequences.
to be high risk, which means there is a provided is for illustrative purposes
greater risk of large fluctuations in the only, it should not be relied upon as Any calculations and charts set out
value of the instrument. recommendations to buy or sell securities. herein are indicative only, make certain
assumptions and no guarantee is given
In Israel, this document may not be that future performance or results will
Important information reproduced or used for any other reflect the information herein.
purpose, nor be furnished to any
This document contains information other person other than those to whom Where individuals or the business have
that is for discussion purposes only, copies have been sent. Nothing in this expressed opinions, they are based on
and is intended only for professional document should be considered investment current market conditions, they may
investors in Austria, Belgium, Denmark, advice or investment marketing as differ from those of other investment
Finland, France, Germany, Ireland, Italy, defined in the Regulation of Investment professionals and are subject to change
Luxembourg, the Netherlands, Norway, Advice, Investment Marketing and without notice.
Portugal, Spain, Sweden and the UK, Portfolio Management Law, 1995
Qualified Clients in Israel, and Qualified (“the Investment Advice Law”). This document has been communicated
Investors in Switzerland. Marketing by Invesco Investment Management
materials may only be distributed in other Investors are encouraged to seek Limited, Central Quay, Riverside IV, Sir
jurisdictions in compliance with private competent investment advice from a John Rogerson’s Quay, Dublin 2, Ireland,
placement rules and local regulations. locally licensed investment advisor prior to Invesco Asset Management Limited,
making any investment. Neither Invesco Perpetual Park, Perpetual Park Drive,
Data as at 31 March 2020, unless Ltd nor its subsidiaries are licensed under Henley-on-Thames, Oxfordshire, RG9
otherwise stated. the Investment Advice Law, nor does 1HH, United Kingdom and Invesco Asset
it carry the insurance as required of a Management (Schweiz) AG, Talacker 34,
By accepting this document, you consent licensee thereunder. 8001 Zurich, Switzerland.
to communicating with us in English,
unless you inform us otherwise. EMEA4348/2020You can also read
