Factors That Favor Gold In The Current Environment by Sprott Asset Management
Negative interest rates have historically been supportive of the price of gold. In Q1 2016, there was $7.9 trillion of negative interest rate-bearing bonds.
In August, Mohnish Pabrai took part in Brown University's Value Investing Speaker Series, answering a series of questions from students. Q3 2021 hedge fund letters, conferences and more One of the topics he covered was the issue of finding cheap equities, a process the value investor has plenty of experience with. Cheap Stocks In the Read More
In response, there has been a significant sentiment shift in favor of gold. ETFs posted significant increase in fund flows, 11.4 million ounces YTD.
Historically, in gold bull markets gold equities have outperformed gold bullion. The ratio of gold equities to gold today is less than half of its historical average.
During the recent gold bear market, gold companies have reduced their operating costs and capital expenditures. All-in sustaining cash costs have declined by 26%, from $1,265 per oz. in Q3 2012 to $936 per oz. in Q4 in 2015.
Despite the rally in 2016, valuations of gold miners relative to the price of gold are at the lowest they’ve been in 15 years. Compared to their gold reserves, miners are 19% cheaper than a year ago.
The average 24 month return of gold equities following the market bottom of the last 7 bear markets was 117%.
Sprott ETFs provide investors with access to innovative and unique indexes that are designed to outperform passive market cap-weighted offerings. Each Index is designed using specific factors that matter™ for a particular strategy. These customized factors are selected because they have historically shown correlation to stock performance.
- Seeks to outperform purely passive representations of the gold and silver mining industry
- Uses transparent, rules-based methodology designed to overweight gold stocks with attractive investment merits relative to the other stocks in the index
- The stock selection and index weighting criteria were co-developed by Sprott Asset Management, a leading, long-time gold sector investor, and Zacks Index Services
- Reconstituted quarterly
- Stocks weighted in the index based on quarterly revenue growth and long-term debt to equity
- Reconstituted semi-annually
- Stocks weighted in the index based on revenue growth and price momentum
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