Insights

Last week, I was delighted to be asked to speak at the inaugural Responsible Asset Owners Global Symposium in London . More and more investors are – quite rightly – thinking about how to incorporate environmental, social and governance (ESG) factors into their investment choices. But there is still a lot of uncertainty about what this means, and in particular, what framework investors should use to assess ESG performance

Yesterday, the International Monetary Fund released their updated World Economic Outlook. And, if investors were looking for any seeds of optimism, may I suggest reading The Art of Happiness by the Dalai Lama instead?

The US Federal Reserve has cut rates twice in recent months and the market expects more of the same, as economic conditions become increasingly uncertain in the US and across the globe. Gold has already benefited from the shift in sentiment and Harry Tchilinguirian, head of commodity research at BNP Paribas, believes it will continue to do so.

Today we have published our latest central bank data for August. As usual, I’ll be summarising the key highlights. But if you want to dig a little deeper, you can find our central bank data set here.

• Inflation is on the rise in China, reaching 2.8% in August 2019, the highest in 18 months; leading economists expect it to rise further by the end of the year
• African swine flu has wiped out a third of China’s pig livestock since last August, contributing substantially to the rising inflation
• Looking back at history, when inflation rose above 3% the nominal return of the local gold price has averaged 17%

• The domestic gold price was 10.3% higher in August compared to July, outpacing the LBMA gold price which rose by 7%
• Indian gold imports reached just 28.2t in August 2019 – 70% lower than the same month last year and lowest level since January 2018
• With elevated domestic gold prices and a higher custom duty, the discount in the local gold market widened out as far as US$55/oz in August
• Monsoon rainfall is 5% above Long Period Average (LPA) with Kharif sowing just 0.2% lower than last year; normal monsoon and healthy sowing bodes well for rural gold demand in Q4 2019.

I was in Shenzhen earlier this month attending various events held by major jewellers and industry bodies such as the Shenzhen Gold and Jewellery Association.

Attracting around 2,300 Chinese jewellers, the Shenzhen International Jewellery Fair 2019 is China’s leading jewellery conference and exhibition, showcasing cutting-edge innovations and exciting developments in China’s jewellery market.

Gold rallied on Friday following the LBMA fix which left the fix price flat on the week and XAU higher (XAU +2%, LBMA -0.1%) as yields fell following the Fed rate cut which left the market thinking the ‘organic growth’ Powell discussed could represent future QE.

• In August, Shanghai Gold Benchmark (PM) rose 11% to 355 yuan/gram and the local gold premium peaked at a six-year high.
• While Au(T+D)’s trading volume in August surged to a new all-time high, gold withdrawals from the Shanghai Gold Exchange (SGE) declined again last month.
• Gold imports dropped to 44t in July, the lowest since 2017.
• The People’s Bank of China (PBoC) added another 6t to its gold reserves in August.

On 17 September, independent asset management firm First Eagle outlined the benefits that it believes gold and gold mining stocks can bring to an investment portfolio. Today, First Eagle discusses gold’s role in detail and assesses the current drivers for performance.

First Eagle Investment Management is an independent firm with more than US$100 billion (bn) of assets under management and a heritage dating to 1864. Committed to prudent stewardship of clients’ assets, First Eagle believes that gold and gold-mining stocks can play a unique role as a potential hedge in investment portfolios. Thomas Kertsos, co-portfolio manager of the First Eagle Gold Fund, explains why in part one of a two-part interview; part two of this interview will be published 18 September.

In our recently published report Gold: the most effective commodity investment, we looked at how gold is under-represented in the commodity indices investors often use to gain exposure. This can have unintended consequences on portfolio performance, especially when other commodities – such as oil – can have significantly different characteristics than gold.

While the gold market is a complex place, full of interesting dynamics and uses, nothing quite gets people's attention like the gold price.

Today, we released a report on gold and commodities, covering key themes including:

• Why gold is not a typical commodity
• Why gold is under-represented in commodity indices (ranging from 3% to 12%) despite its clear differentiating benefits
• Why gold is the most effective commodity investment