Investors’ golden treat
IN 2023: GOLD FUNDS AND SHARES FARED WELL
➳ From coins to shares, the solid increase in the price and weaker exchange rate give the best returns.
Gold has had a good run over the past few months – increasing from $1 820 (about R34 000) per ounce in October 2023 to touch $2 080, before declining to the current price of just shy of $2 040 per ounce.
Ironically, the spurt from $1 820 to $2 080 per ounce mirrors the performance of the gold price from January 2023 to the end of December – an increase of nearly 11% for 2023.
More importantly, the gold price spent most of 2023 above $1 900 per ounce and happily above $2 000 for several weeks, compared to its range of around $1 800 for most of 2022 (with a couple of months below $1 700 that year).
That the gold price was consistently higher during 2023 means that investors in gold, gold funds and gold shares fared very well during the year. In fact, the best share on the Johannesburg Stock Exchange (JSE) during 2023 was Harmony Gold, which chalked up a gain of 93%.
The JSE Overall Index delivered only 5.3% in 2023.
Investing in physical gold in the form of gold bars or Krugerrands, or by way of an exchange-traded fund (ETF) delivered better returns than a balanced portfolio of JSE shares, bonds and property over any investment term during the past few years. For instance, Absa’s NewGold ETF rewarded investors with a massive 23% return during 2023, 11% per annum over three years and 15.4% per annum over five years.
The NewGold ETF boasts a return of 14.6% per annum since its inception in November 2004. This ETF invests only in physical gold, owning 12.5 tons of gold on behalf of investors at the end of December 2023.
Gold coins, such as Krugerrands, obviously mirrored the gold price too, as well as the exchange rate.
According to figures published by Cape Gold Coin Exchange, the price of a Krugerrand increased by 21% from R33 000 for a one-ounce Krugerrand at the end of 2022 to about R40 000 by the end of 2023. The price doubled in less than six years.
Gold shares shine
Because the return on investment in coins, bars and gold ETFs is solely driven by the price of gold at a given date, while that of gold shares is driven by the average gold price over the years, gold shares outperformed physical gold during 2023.
As mentioned, the gold price was consistently higher during 2023 than in 2022. In addition, the rand was consistently weaker. Thus, Harmony Gold nearly doubled from January to December 2023, while Gold Fields increased by 59%. AngloGold Ashanti increased by only 5.3% because it had a good run during 2022 and started 2023 quite high.
DRDGold (the old Durban Roodepoort Deep) increased by 28% in 2023.
Unfortunately, the low platinum price was a drag on gold and platinum producer Sibanye-Stillwater. The share fell by 44%.
This is, however, less than the decline in Impala Platinum, which fell nearly 60% in 2023.
Gold shares vs balanced fund
The better fortunes of gold producers are evident when comparing a portfolio of gold shares with a balanced fund.
The Old Mutual Gold Fund achieved a return of 36% during 2023, according to the fund’s fact sheet as at end December 2023. The fund’s two largest investments comprise AngloGold Ashanti and Gold Fields. It also holds a sizeable stake in Harmony Gold, with international gold mining companies making up the rest.
It is interesting to note that gold funds are solid performers overall.
As such, the Old Mutual Gold Fund outperformed its stable mate, the Old Mutual Balanced Fund, over every different investment term.