In a turbulent year like 2022, investors needed refuge, which was almost nowhere to find. Investments in oil showed outstanding performance, as one of the few areas in the financial markets. And then there were precious metals. Not all metals performed equally well though, and positive returns were mostly measured in euros.
In times of turmoil and when price signs turn red, gold or other precious metals can still sometimes serve as a safe haven for investors. And so it happened in 2022. The year when there were few hiding places for investors in a world dominated by war, geopolitical tensions, stagnant economic growth, rising inflation and interest rates. Almost everything fell in the past year, except oil (and oil-related stocks) and indeed precious metals.
In the case of precious metals, a caveat should be added. The positive returns were mainly due to a stronger dollar, rather than higher prices for the precious metals themselves, and not all precious metals showed a price increase.
Gold
Indeed, gold, the most important precious metal, saw its price remain more or less stable. At the end of 2021, it stood at US$1,816 per troy ounce and that had risen to US$1,827 per troy ounce 12 months later. Measured in euros, however, a return of almost 7% remained, which compares positively with, for example, a loss of almost 13% for the MSCI World index. Meanwhile, silver and platinum prices rose by almost 11% and 19% measured in euros, while palladium was a dissonant with a loss of just under 3%.
Investors today can easily gain exposure to precious metals through ETFs in particular. Consequently, this has become increasingly popular in recent years. For instance, total managed fund assets in Europe within the Morningstar Commodities - Precious Metals category were still €46.6 billion at the end of 2018. That has risen to almost 100 billion at the end of January 2023. Partly due to years with hefty inflows, including 2019 with more than 10 billion euros of net inflows and 2020 with more than 15 billion euros of new investor money.
Mining companies
Another, but less used way, is through mining companies with exposure to precious metals. After all, with rising prices, these companies will eventually benefit too. Here, too, investors have funnelled more money into them in recent years, but with just under EUR 18 billion in assets under management, the Morningstar Precious Metals Sector Equity category is considerably smaller.
Moreover, the performance of mining companies does not necessarily parallel the development of the aforementioned precious metals. For instance, funds in the Precious Metals Sector Equity category achieved an average return of -10.7% over 2022. As such, the loss was smaller than that of the MSCI World index, but by no means represented the shelter that precious metals themselves provided over the past year.
Top 5
In this week’s top five, we review the five best-performing funds (of which a distribution fee-free share class is available in the Netherlands) in the Morningstar Commodities - Precious Metals category based on their performance over the period from March 2022 to the end of February 2023.
UBS ETF Solactive Global Pure Gold Miners
UBS ETF Solactive Global Pure Gold Miners leads the rankings. The tracker tracks a Solactive index consisting of up to 30 companies that derive at least 90% of their revenues from gold mining. As of the end of February 2023, the index comprised 24 names and Perseus Mining, B2Gold and Centamin were the biggest weightings, each weighing in at around 5%. The stocks that performed best over 2022 were Alamos Gold (41.1%), Zhaojin Mining Industry (38.7%) and Capricorn Metals (34.5%).
R-co Thematic Gold Mining
R-co Thematic Gold Mining comes from the stable of French Rothschild & Co and occupies the second spot. The fund is owned by the duo Charles Edouard Bilbault and Yoann Ignatiew. They adopt an approach that allows them to invest in various financial instruments, including shares, preference shares and convertible bonds, of mining companies active in rare and precious metals. Although they mainly invest in large international miners (including Barrick Gold and Newmont), they also have an eye for smaller companies with attractive growth prospects. Filo Mining (80.8%), Teck Resources (42.3%) and Lundin Gold (28.6%) were among the positions with the highest returns in the portfolio in 2022.
Top 5 precious metal investment funds*:
*as measured by asset class for the Netherlands.
Ronald van Genderen is senior manager research analyst at Morningstar. Morningstar analyses and evaluates investment funds based on quantitative and qualitative research. Morningstar is one of Investment Officer’s knowledge partners and ranks five mutual funds or providers every Friday.