Bonds might have done well in the recent stock market sell-off but it’s another safe haven asset really gathering momentum this year. The gold price hit an all-time high this month, with specialists pointing to contributing factors such as falling interest rates, a weakening dollar and escalating geopolitical tensions. With many of these factors looking unlikely to go away, some believe the price could push even higher.
From a funds perspective, it has been easy enough to bank some of these gains: the Invesco Physical Gold ETC (SGLD), which sits in our Top 50 ETFs list was sitting on a hefty 19.1 per cent gain for 2024 as of 19 August. Much as gold prices could conceivably come down, this seems an easy way to get involved, what with its low fees and good liquidity.
But what of the other options? Physical gold exchange traded funds (ETFs) might give you simple exposure to the gold price, but active funds in the space tend to act as a racier play on the commodities space. That’s because they tend to buy shares in miners, meaning market sentiment and company idiosyncrasies can have a big bearing on performance, too.
Conditions where both the gold price and markets are up can often mean substantial returns for such funds. We saw that in 2020, and it’s similar now: standout examples include BlackRock Gold & General (GB00B5ZNJ896). It has made nearly 23 per cent this year, with Ruffer Gold (GB00B8510Q93) and Jupiter Gold & Silver (IE00BYVJRH94) not far behind. A passive option, the VanEck Gold Miners ETF (GDGB), is up by 21.3 per cent.
On the other end of the performance table, a few commodity plays have had a rough year, with uranium trust the Geiger Counter trust (GCL) down by nearly a quarter and BlackRock World Mining (BRWM) on a loss of nearly 4 per cent.
What of the winners then? BlackRock Gold & General has a mixture of exposure to gold (88.4 per cent of the portfolio) and silver (10.4 per cent), with the bulk of the portfolio in Canada and the US. It’s fairly concentrated, with the top 10 holdings making up more than half the fund and the three top positions (in Newmont Corporation (US:NEM), Agnico Eagle Mines (US:AEM) and Barrick Gold (US:GOLD)) each accounting for more than 7.5 per cent.
The BlackRock fund is not the only name in its field to also take exposure to other metals such as silver (Ruffer gold does, for example), but this is still a pretty narrow investment and going for this racy option does seem to invite an element of market timing.
The BlackRock fund took some hits in 2021 and 2022 and made just a modest gain last year, meaning it’s behind the physical gold exchange traded commodity (ETC) on a five-year view. Investors may instead be tempted by the ETC, at least if they’re looking for a diversifier rather than a tactical play on a commodity resurgence.
However, it’s worth noting that some of the more diversified commodity funds look pretty strong on a five-year view. CQS Natural Resources Growth and Income (CYN) shareholders are up to the tune of nearly 160 per cent, with BlackRock Energy Resources & Income (BERI) on a 115 per cent gain and BlackRock World Mining on 108 per cent. That’s well ahead of the 55 per cent gain from the Invesco Physical Gold ETC, which itself comfortably outpaces the active gold funds over the same period.