iShares MSCI Global Gold Miners ETF boosted by weak US dollar

This year has seen the iShares MSCI Global Gold Miners ETF struggle as persistent inflation has struck fear among investors across the globe. Despite this, last week saw the fund reverse some of its losses as gold prices rose amid cooling US inflation figures.

Last week saw a 13.5% hike in the iShares MSCI Global Gold Miners ETF [RING] after US inflation figures came in below expectations. However, despite this impressive rise, the fund has seen its share price fall by 18.1% in the year so far. Across the last 12 months, the fund has fallen by a further 25.6%.

The rise comes off the back of a weaker US dollar, which was knocked by US inflation figures for October. Inflation has been on a global surge, fuelled somewhat by the war in Ukraine that commenced earlier this year. However, with inflation coming in at 7.7%, a fall from the 8.2% seen for September, last week saw investors regain confidence in the potential performance of the fund.

Spot gold hit its highest levels since early October last week, closing at $1,771.23 per ounce on 11 November. This follows a period of decline for the commodity in recent weeks and months as macroeconomic pressures have weighed it down. Since rising above $2,000 on 8 March, it has failed to reach this level since.

Top holdings see growth

The iShares MSCI Global Gold Miners ETF tracks the performance of the MSCI ACWI Select Gold Miners Investable Market Index, which is composed of a variety of global equities engaged in the gold mining industry. As of 14 November, the fund has 40 holdings, with its net assets totalling nearly $338m as of 11 November.

Of these, Newmont [NEM] (18.54%), Barrick Gold Corp [ABX] (14.44%) and Agnico Eagle Mines [AEM] (10.48%) make up the top three, with its top five holdings making up over 50% of the fund’s portfolio.

Based in North America, Newmont is the world’s leading gold mining company with bases across the world. The stock, like the iShares MSCI Global Gold Miners ETF, has struggled this year, falling 21.09% year-to-date. However, following the news emerging from the US, last week saw its share price jump 12.60%.

The business recently updated investors with its Q3 performance, in which it highlighted that it remains on track to achieve its full-year guidance. Speaking on its performance, CEO Tom Palmer stated that “Newmont remains well-positioned to respond to the challenging market environment that our industry faces today.”

Elsewhere, the fund’s other top holdings also experienced a rise last week, with Barrick Gold Corp’s share price jumping 13% and Agnico Eagle Mines’ rising 10%.

Gold prices pressured at $1,500

With global economic headwinds continuing to persist, the direction of where gold goes next hinges largely on the US Federal Reserve’s interest rate hike. With inflation beating expectations, this created uncertainty surrounding the predicted 75 bps hike.

However, despite rumours of just a 50-bps jump, US Federal Reserve governor Christopher Waller has said that the Fed was not slowing down on its fight against inflation. As such, UBS analyst Giovanni Staunovo said in a note that investors should “expect lower gold prices going into year-end,” as the fight continues against surging rates.

With it likely that interest rates will continue to rise in 2023, gold miners have voiced their concern surrounding falling prices. The sector has already been fighting against rising costs. And with some projections that prices could fall as low as $1,500, Mark Bristow, CEO of Barrick Gold, has stated that prices swooping this low would “put the [gold] mining industry out of business”.  

Kathleen Kelley, CEO of Queen Anne’s Gate Capital, has also predicted that gold prices could drop as low as $1,300 due to the fact investors were likely to withdraw from ETFs that track gold prices.