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A trio of gold trades which gave this fund a summer shimmer
by Robert St George on Sep 20, 2013 at 12:08
‘We are generally negative on the gold price and gold equities,’ Pflugi told Wealth Manager. ‘But we built a short-term position towards the end of July and beginning of August for two reasons: the wedding season in southeast Asia and the Syria situation.’
The manager noted that demand for gold from India typically peaked on price falls and ahead of the country’s traditional autumn wedding period. In late July, Pflugi observed, ‘we had those two at the same time’.
Nevertheless, Pflugi recognised that the investment rationale was not the strongest. 'I wouldn’t have moved as heavily into gold if it weren’t for the things happening in Syria and the uncertainty created by quantitative easing (QE) tapering discussions,' she said.
'People worry that QE tapering is too early and in this case people tend to go to safety. And at these prices, gold could be the kind of safety they buy.’
Pflugi therefore bought stakes in three gold miners: Randgold, because of its strong asset base, low-cost production, and the cash on its balance sheet; Yamana, for the same reasons but with the added advantage of its copper exposure; and Goldcorp, on account of its high free cash flow and greater leverage than the other two.
Shares in all, despite being down by around a third since January, bounced from late July onwards, gaining between 5% and 10% in August before plunging again in September.
Pflugi confirmed the fund was now underweight in gold equities, having sold out of ‘most’ of those positions in early September, but would continue to take advantage of such ‘short-term opportunistic trades’.
The trades gave Cominotto and Pflugi some respite in what has been a difficult spell for their asset class. Over the last three years the fund sits 45th out of the 116 funds tracked by Citywire in its peer group with a return on -1.3%.
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On the road
by Danielle Levy on Dec 06, 2013 at 07:46