• Gold ETF aims to provide investment results which closely track the performance of the LBMA Gold Price AM
• Amid continued global economic uncertainties in 2019, investors are likely to use gold as a hedge against these risks
• There would still be some downward pressure arising from the steady US$ but as fear rises (assuming if trade war tension escalates) gold would be a strong beneficiary

The Fund and Its Objective

As at 8th February 2019, the NAV per Unit was RM1.7482, an increase of 0.5% since end December 2018. However, in dollar terms, the NAV per Unit was US$0.4229, increased by 0.4% since our initiation on 6th June 2018 and a rise of 2.2% since the start of the year. The Fund’s NAV was RM44.754mn as of 8th February 2019, which is tracking similarly to the benchmark at 2.3% YTD. Over the 3-month period the fund has returned 6.8% compared to a 7.2% return on the benchmark over the same period.

Recall that the TradePlus Shariah Gold Tracker, which is managed by Affin Hwang Asset Management, aims to provide investors with investment results which closely track the performance of Gold price where its benchmark is the LBMA Gold Price AM. The Fund will invest a minimum of 95% of its NAV in physical gold bars, while the balance is to be invested in Islamic money market instruments and/or Islamic deposits.

Weak Performance of Gold in 2018

In 2018, gold prices in US$ declined by 2.1% to end at US$1,281.30 per troy ounce as at end-December 2018, following an increase of 13.7% or US$1,309.30 per troy ounce in 2017. This was also its first yearly decline since 2015. Meanwhile, in Ringgit terms, gold prices rose slightly by 0.2% in 2018 compared to the 2.4% rise in 2017. Despite the presence of global economic uncertainties, partly attributed to US-China trade tensions, gold prices failed to show gain from these events due to the stronger US Dollar seen throughout the year. In 2018, the US Dollar Index had appreciated by 4.2% compared to a decline of 6.2% in the previous year.

A Shift in Demand and Strong Growth Outlook

However, the demand for gold was notably robust in the second half of 2018, growing by 12.8% yoy to 2,336 tonnes, compared to a decline of 3.8% yoy and 2,009 tonnes in the first half of 2018. This was seen with the large increase in demand for gold by central banks and other institutions due to heightened geopolitical and economic uncertainty present throughout the year. Higher demand was also recorded for investment while jewellery demand slowed in 2H18. As for gold-backed ETFs, according to data by the World Gold Council (WGC), we observed that total global inflows had slowed to 68.9 tonnes in 2018, due to outflows from North American-listed funds as well as Asian-listed funds. For example, outflows from North America were stemmed from the strong performance of US equities, healthy domestic US economy, where GDP had expanded by 3% yoy in 3Q18, its fastest growth since 2Q15. As for Asian-listed funds, the outflow in 2018, mainly registered in 2H18, had been driven by investors possibly taking profit after the fall in China’s stock market and the weaker yuan against the USD. Meanwhile, European-listed gold ETF funds were the only ones to register an inflow in 2018, which may be attributed to political uncertainty in the region, negative yields on sovereign debt and highly-rated corporate bonds. Similarly, the rise in gold prices towards the end of 2018 and uncertainty amid the US-China trade war tension also fuelled demand.

Source: Affin Hwang Research - 12 Feb 2019